Arthur Nadel, the Florida money manager accused of defrauding investors of $168 million, was sentenced today to 14 years in prison.
Nadel, the 77-year-old founder of Scoop Management Inc. in Sarasota, Florida, pleaded guilty in February to a 15-count indictment filed by U.S. prosecutors in New York. The charges included securities fraud, wire fraud and mail fraud.
“This was a massive fraud perpetrated on vulnerable victims who rightly deserve the protection of the law,” U.S. District Judge John Koeltl said before imposing the sentence.
Koeltl rejected a defense request for a five-year sentence as too low. He cited Nadel’s age and fragile health in sentencing him to less than the 19 1/2 years sought by prosecutors.
“Arthur, you are an evil person,” Michael Sullivan, an Illinois man who was one of Nadel’s 390 victims, said while addressing the court during the hearing. “Only an imbecile or a sociopath would do something this egregious.”
In addition to the prison sentence, Koeltl imposed three years of supervised release and ordered Nadel to forfeit $162 million in proceeds from the crime. Koeltl said he will determine later how much to order Nadel to pay in restitution to his victims.
Nadel has been in custody since surrendering to federal authorities in Tampa, Florida, in January 2009. He disappeared for two weeks as state authorities began investigating investor complaints about missing money.
Nadel said today he has spent his time in jail thinking about the harm he caused his victims and read the letters they sent to the court.
“Recently I read their letters over and over again until their anger and outrage became my own against myself,” Nadel told Koeltl.
Nadel’s court-appointed attorney, Mark Gombiner, told the judge his client is an “old, frail human being who doesn’t have very much longer to live.” He asked for a sentence that would leave “some hope that he won’t die in a prison cell.”
“Mr. Nadel feels very, very remorseful for what has happened to the people he betrayed,” Gombiner said.
At his February guilty plea, Nadel said he invented net asset values for the hedge funds he once ran and illegally transferred money from them. The government alleged he operated the Ponzi scheme for 10 years beginning in 1999, covering withdrawals with money from new investors.
Prosecutors suggested in court papers that Nadel should receive a term of between 19 1/2 and 24 years “to reflect the seriousness of his offenses.”
Nadel falsely told existing and potential investors that his funds were yielding from 11 percent to 55 percent a year, when in fact the returns were usually negative, according to court documents.
“We’re talking about people who scraped together, through hard work over decades, money that they put in Mr. Nadel’s hands,” Assistant U.S. Attorney Reed Brodsky said in today’s hearing.
Investors were told the funds’ accounts had more than $360 million, although less than $125,000 was available when the scheme collapsed, according to prosecutors. Nadel took in $63.9 million in fees and trading profits, including $45 million from 2005 to 2007, they said.
The money supported Nadel’s lavish lifestyle and allowed him to invest in businesses including a real-estate project in North Carolina and his wife’s flower shop, prosecutors said.
At the request of Nadel’s attorney, Koeltl said he will recommend that Nadel be sentenced to the federal medical center in Butner, North Carolina, which is part of the prison complex where Bernard L. Madoff is serving a 150-year sentence for history’s biggest Ponzi scheme.
The case is U.S. v. Nadel, 1:09-cr-00433, U.S. District Court, Southern District of New York (Manhattan).