Ex-Xinhua Finance CEO Gets Month in Prison for Tax Crime

Xinhua Finance Ltd. (XSELY)’s former chief executive officer, Loretta Fredy Bush, was sentenced to one month in prison for conspiring to obstruct the Internal Revenue Service, resolving U.S. accusations that she joined a $50 million fraud scheme.

Bush, 54, was sentenced today by U.S. District Judge Royce Lamberth in Washington after pleading guilty in February to one count of conspiracy for hiding more than $2.1 million in forgiven debt from the IRS. The conspiracy allowed Bush to avoid paying the U.S. government about $24,500 in taxes.

Bush, who argued for probation, held her lawyer’s hand as Lamberth issued her punishment, which includes an additional 150 days of home confinement, three years supervision and a $20,000 fine. She declined to comment as she left the courtroom. Her lawyer, Charles Leeper, said a statement would be issued later today.

The sentencing ends a federal prosecution that began almost two years ago with allegations of a $50 million insider-trading operation. Bush, who was also vice-chairman, and two other directors were indicted on May 10, 2011, for allegedly using various entities to disguise the sale of shares in Shanghai- based Xinhua Finance from investors and the Securities and Exchange Commission, and conspiring to engage in insider trading. They were also accused of manipulating the company’s balance sheet to avoid taking so-called impairment charges.

Tokyo Listing

Xinhua Finance, the first Chinese company listed on the Tokyo stock exchange, provides information products focused on Chinese and international financial markets.

The two other ex-board members, Shelly Singhal and Dennis Pelino, pleaded guilty to the same conspiracy charge and were each ordered to prison for nine months.

Under the indictment, all three defendants faced four charges of mail fraud, each carrying a maximum penalty of 20 years in prison. In 2011, the three pleaded not guilty to the charges. As part of the plea agreements, prosecutors agreed to drop charges in the indictment.

Lamberth didn’t explain why Bush received less time than Pelino and Singhal. Prosecutors sought a sentence of six months to a year for all three.

Bush co-founded Xinhua Finance with Pelino in 1999. She was the CEO and a board member until January 2009, according to the indictment. She lives in San Francisco, prosecutors said.

Pelino, who lived in Miami Beach, Florida, when he pled guilty, was chairman of the compensation committee and a member of the audit and investment committees, according to the indictment.

Singhal, of Newport Beach, California, was chairman of Xinhua Finance’s audit committee and a member of its compensation and investment committees.

The lead case is U.S. v. Singhal, 11-cr-00142, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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