Ex-Xinhua Finance CEO Gets Month in Prison for Tax CrimeTom Schoenberg
Xinhua Finance Ltd.’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 law firm, Drinker Biddle & Reath LLP, said in a statement highlighting the government’s dismissal of more serious charges, “Ms. Bush has long professed her innocence of those charges and is pleased to be vindicated 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 of the company, 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.
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, in court filings, claimed the government’s fraud case was based on incomplete information. She said prosecutors never examined Xinhua Finance accounting records to find out what the company’s chief financial officer, general counsel and outside auditors knew about the transactions that formed the basis of the fraud indictment.
“The due diligence performed by defense counsel revealed that the indictment’s prosecution theory was flawed as a matter of both law and evidence,” her lawyer, Charles Leeper, wrote in an April 25 court filing.
Before she was sentenced, Leeper told Lamberth that Bush suffered from medical problems and had become the primary caretaker for her family. He pointed to letters from children who have been recipients of Bush’s charitable work.
Bush read a short statement in court apologizing for her hiding assets from the government and asking Lamberth to keep her out of prison so she could care for her family.
“I should be setting a better example in my personal life and in my professional life,” Bush said. “It’s not the kind of person I am.”
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 pleaded 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).