NY fund manager sentenced to 40 years for fraud

Date: Monday, November 1, 2010
Author: Grant McCool, Reuters

James Nicholson, a former fund manager who admitted stealing as much as $140 million from hundreds of average investors who trusted him with their life savings, was sentenced to 40 years in prison on Friday.

The courtroom in New York was filled with scores of victims, many of whom Nicholson, 44, personally knew, including some members of his own extended family who were swindled in a fraud that began in 2000 and ended with Nicholson's arrest in February 2009.

Schoolteacher Stephanie Chamberlin told the court that her children's college funds had been stolen by Nicholson and that his crimes "affected generations" of people. She said Nicholson "had less time" as a criminal than epic swindler Bernard Madoff, whose decades-long fraud amounted to as much as $65 billion, but "it's the crime that matters."

Nicholson, who pleaded guilty last December in U.S. District Court in Manhattan and never made bail, sat stiffly in his seat in the courtroom listening to statements by nine victims and the judge.

"I look at you and I don't know what to make of this," U.S. District Judge Richard Sullivan told Nicholson during the two-hour long sentencing proceeding. Sullivan said he was "heartbroken" to read letters sent to him by Nicholson's three young sons and hearing a statement read in court by his mother, Pat Nicholson.

James Nicholson was former president of Westgate Capital Management LLC in New York. He pleaded guilty to securities fraud, investment adviser fraud and wire fraud charges. Most of his investors live in the suburbs of New Jersey and New York near Manhattan.

Prosecutors have said the scheme was partly exposed when investors made requests for redemptions from Westgate after the December 2008 disclosure of financier Madoff's multibillion dollar Ponzi scheme. A Ponzi scheme is one in which early investors are paid with the money of new clients.

Madoff's unprecedented fraud drew a sentence of 150 years imprisonment.

Around the same time, a series of frauds were prosecuted in New York, contributing to a decline in market confidence during the financial crisis.

Marc Dreier, 60, a prominent New York lawyer who defrauded hedge funds, was sentenced to 20 years and Arthur Nadel, a 77-year-old Florida fund manager was sentenced to 14 years in prison.

Also on Friday, Nicholas Cosmo, a former Agape World president and owner from New York's Long Island, pleaded guilty to mail fraud and wire fraud charges for running a scheme that caused losses of more than $195 million to average investors. Cosmo faces a possible maximum prison sentence of 40 years.

The case is USA v Nicholson, U.S. District Court for the Southern District of New York, No. 09-CR-00414. The following firms represented Nicholson: Dickstein Shapiro; Stillman, Friedman & Shechtman; and the Law Office of Vino P. Varghese.