March 26 (Bloomberg) -- Eric A. Bloom, chief executive officer of failed investment firm Sentinel Management Group Inc., which once had $2 billion under management, was found guilty of misleading clients in what prosecutors called a $500 million fraud scheme.
A jury of eight men and four women returned the verdict yesterday after just three hours of deliberations in a trial that started a month ago in federal court in Chicago. Bloom was convicted of 18 counts of wire fraud and one count of investment adviser fraud.
Sentinel filed for bankruptcy in August 2007, days after telling clients it was freezing their funds because of market volatility. Since then, financiers Bernard L. Madoff and R. Allen Stanford have been charged and sentenced in multimillion-dollar fraud schemes, as has Peregrine Financial Group Inc. founder Russell Wasendorf Sr.
On their first written ballot, the jurors agreed the CEO was guilty on all counts, jury foreman Richard Yule told reporters before leaving the courthouse yesterday.
“We arrived at the same decision,” said Yule, a 68-year-old retired educator from suburban Naperville, Illinois. He said the jury determined Bloom was guilty in part because he was the man in charge.
Bloom and the firm’s head trader, Charles Mosley, were indicted in 2012 on charges they cheated at least 70 investors of more than $500 million through Sentinel, a suburban Chicago firm that managed short-term investments for commodity pools, hedge funds, a pension fund and other customers.
Bloom, 49, sat impassively as the jury’s verdict was read and left the courthouse accompanied by his lawyers and family without commenting on the outcome. He’s free on bond secured by his home and faces as long as 20 years in prison on each wire fraud count. No sentencing date has been set.
His mother, Sybil, seated in the first row of benches near the defense table, sobbed as U.S. District Judge Ronald A. Guzman announced the result on each count. She was heard shrieking after being led from the courtroom by Bloom’s father, firm founder Philip Bloom.
“We all felt for her,” the foreman said.
Cliff Histed, the lead prosecutor, said it was a “powerful moment.”
“Everybody in the room perceived that she was just now realizing the magnitude of the jury’s verdict,” he said.
At trial, prosecutors presented evidence they said proved the firm had been using client assets as collateral for loans from Bank of New York Mellon Corp., and using the money to buy assets for an account maintained for the benefit of Sentinel and firm insiders.
Defense attorneys said all those activities had been disclosed to clients.
“Sentinel was a fraud,” Assistant U.S. Attorney Patrick Otlewski said in closing arguments March 24.
Defense attorney Terence Campbell told the jury his client acted in good faith and that the firm’s downfall was a result of market forces beyond its control.
“The government in this case is trying to blame Eric Bloom for the effects of the global financial crisis,” Campbell said in his closing argument. He also said any wrongdoing was committed by Mosley.
Mosley pleaded guilty to two counts of investment adviser fraud last year and agreed to cooperate with the prosecution. He didn’t testify against Bloom. Mosley’s attorney, Charles Nesbit, who was present for the verdict, declined to comment afterward.
“Obviously we’re very pleased with the outcome,” Histed told reporters yesterday.
The case is U.S. v. Bloom, 12-cr-00409, U.S. District Court, Northern District of Illinois (Chicago).
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