UPDATE 2-Ex-Sentinel CEO found guilty over $500 million fraud
(Adds comment from Bloom's lawyer)
By Jonathan Stempel
March 26 (Reuters) - The former chief executive officer of Sentinel Management Group Inc was found guilty on Tuesday of defrauding customers out of more than $500 million before the suburban Chicago firm collapsed in August 2007, federal prosecutors said.
Jurors deliberated less than two hours in Chicago federal court before finding Eric Bloom, 49, of Northbrook, Illinois, guilty on 18 counts of wire fraud and one count of investment adviser fraud, following a four-week trial, the office of U.S. Attorney Zachary Fardon said.
Each wire fraud count carries a maximum 20-year prison term plus a fine. The government is also seeking a forfeiture of more than $500 million. Bloom is free on bond pending sentencing.
"I believe wholeheartedly that the evidence clearly demonstrated that Eric Bloom acted in good faith -- he did not intend to defraud anyone. We intend to ask the trial judge to overturn the jury's decision because it does not comport with the evidence, and if necessary we will pursue an appeal," said Terence Campbell, who represented Bloom.
The case had originally been brought by then-U.S. Attorney Patrick Fitzgerald, who called it one of the largest fraud cases ever brought in Chicago federal court.
Sentinel had managed short-term cash belonging to futures commission merchants, commodity pools, hedge funds and others, and according to prosecutors once oversaw more than $1 billion.
Bloom had been accused of defrauding more than 70 customers in a scheme that ran from January 2003 to Aug. 17, 2007, when his Northbrook-based firm filed for bankruptcy.
Prosecutors said Bloom falsely represented to customers the risks of investing with Sentinel, including by concealing its use of leverage and exposure to many illiquid securities.
Bloom and co-defendant Charles Mosley, Sentinel's head trader, were also accused of pledging customer money as collateral for a Bank of New York Mellon Corp credit line, which grew to more than $415 million, that funded a "house" trading portfolio to benefit them and Bloom's family.
Prosecutors said Bloom took in more than $100 million in the scheme's final weeks despite knowing a default on the credit line was possible, and on Aug. 13, 2007 misled customers by blaming Sentinel's inability to honor redemptions on a "liquidity crisis" and "investor fear and panic."
Assistant U.S. Attorney Clifford Histed told jurors during closing arguments not that Sentinel was a victim of the credit crisis, but rather that the crisis "exposed" its long-running fraud, Fardon's office said.
Bank of New York Mellon was not charged with wrongdoing. Mosley, 50, who lives in Vernon Hills, Illinois, pleaded guilty in October to two counts of investment adviser fraud and is awaiting sentencing, court records show.
The case is U.S. v. Bloom, U.S. District Court, Northern District of Illinois, No. 12-cr-00409. (Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker, Bernard Orr)
- Obama says beheading 'shocked the conscience' of the world |
- Gaza war rages on, Hamas says Israel tried to kill its military chief |
- Four beheaded corpses found in Egypt's Sinai: security sources
- Father of Texas 'affluenza' teen arrested for impersonating police officer
- U.S. attorney general visits racially charged St. Louis suburb