Former Sentinel Management Group Inc. portfolio manager Charles K. Mosley pleaded guilty to two counts of investment-adviser fraud before a federal judge in Chicago and faces as long as 10 years in prison.
Mosley and the cash-management firm’s chief executive officer, Eric A. Bloom, were indicted last year on charges they misled Sentinel clients about how their money was being handled. They allegedly defrauded at least 70 customers of more than $500 million. Sentinel filed for bankruptcy in 2007.
While each man initially faced 20 criminal counts, Mosley, 49, of Vernon Hills, Illinois, agreed to plead guilty to just two and to cooperate with prosecutors. He entered his plea today before U.S. District Judge Ronald A. Guzman after Assistant U.S. Attorney Clifford Histed summarized the charges.
“How do you now plead to counts one and two, guilty or not guilty?” Guzman asked Mosley.
“Guilty, your honor,” Mosley replied.
He and Bloom pleaded not guilty last year. Bloom’s trial is scheduled for Feb. 24. Guzman said he would delay Mosley’s sentencing until after then.
Mosley and lawyer Charles L. Nesbit left the courthouse without speaking to reporters. While Bloom’s lawyers, Theodore Poulos and Terence Campbell, attended today’s hearing, Campbell said afterward that they wouldn’t comment.
A futures commission merchant, Northbrook, Illinois-based Sentinel managed short-term investments for commodity pools, hedge funds, a pension fund and other customers, prosecutors said in announcing the charges last year.
Bloom and Mosley were accused of misappropriating client securities and using them as collateral for money borrowed from Bank of New York Mellon Corp., the U.S. said.
Those proceeds were used partly to buy millions of dollars in high-risk and illiquid investments for a portfolio maintained for Sentinel officers, including the defendants, prosecutors said.
Mosley today admitted to sending at least one Sentinel client a false daily account statement to cover up the executives’ actions.
“Sentinel Management Group wanted its rates of return to be above those of its competitors,” to be more attractive to customers, Histed told the judge today.
Statements sent to those customers were based on interest income rates calculated by Bloom and Mosley, not the performance of the customers’ investment portfolios, according to Mosley’s plea agreement.
Bloom faces 18 wire fraud counts, each punishable by as long as 20 years in prison, and one count each of securities fraud and making false statements to an employee pension plan.
A U.S. appeals court in Chicago ruled in August that BNY Mellon must defend against a lawsuit challenging its $312 million lien on Sentinel’s assets.
The case is U.S. v. Bloom, 12-cr-00409, U.S. District Court, Northern District of Illinois, Eastern Division (Chicago).
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