January 19, 2017 / 11:27 PM / 3 years ago

Ex-Sentinel chief loses bid to void conviction, 14-year prison term

Jan 19 (Reuters) - A federal appeals court rejected former Sentinel Management Group Inc chief Eric Bloom’s bid to void his conviction and 14-year prison sentence over an estimated $666 million fraud that led to the demise of his suburban Chicago firm and a big writedown for Bank of New York Mellon Corp .

The 7th U.S. Circuit Court of Appeals in Chicago on Thursday disagreed with Bloom’s contentions that a lack of evidence, prosecutorial misconduct and errors by the trial judge tainted the conviction, and that the sentence was too long because the judge miscalculated the alleged loss.

“We are extremely disappointed by the opinion and plan to seek rehearing,” Bloom’s lawyer Len Goodman said in an email.

Bloom, 51, had been appealing his March 2014 jury conviction on 19 fraud counts.

Prosecutors said Bloom misappropriated assets belonging to dozens of clients, including futures commission merchants, commodity pools and hedge funds, to fund a risky “house” trading portfolio, and concealed mounting liquidity problems that culminated in Sentinel’s August 2007 bankruptcy.

Sentinel was founded in 1979 by Bloom’s father, and the Northbrook, Illinois-based firm once oversaw $2 billion of assets.

Writing for a three-judge appeals court panel, Circuit Judge David Hamilton said prosecutors provided “ample” evidence that Bloom schemed to misuse customer funds, and accepted new funds while concealing how Sentinel was “on the brink of bankruptcy.”

Hamilton said the trial judge’s refusal to instruct the jury as Bloom had requested on a federal regulation governing some trading practices “does give us pause,” but did not deprive the defendant of a fair trial.

Bank of New York Mellon spent eight years litigating against Sentinel’s bankruptcy trustee to recoup $312 million it had lent Bloom, hoping to be treated as a secured creditor of Sentinel.

But it took a $106 million after-tax writedown last January after 7th U.S. Circuit Judge Richard Posner said it deserved to be a lower priority unsecured creditor, having been aware of facts that should have led it to probe Bloom’s activity.

Bank of New York Mellon shortly thereafter agreed to unsecured creditor status in a settlement with the trustee.

Bloom is not eligible for release until September 2027, federal prison records show.

The case is U.S. v. Bloom, 7th U.S. Circuit Court of Appeals, No. 15-1445. (Reporting by Jonathan Stempel in New York; Editing by Jonathan Oatis)

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