2 accused in $500M Illinois financial fraud case
Friday, June 1, 2012
CHICAGO (AP) — In one of their largest financial-fraud cases ever, federal prosecutors in Chicago announced charges Friday againt the former CEO and head trader at a now-bankrupt cash-management firm accused of defrauding more than 70 customers out of more than $500 million.
Former Sentinel Management Group Inc. CEO Eric Bloom, 47, of Northbrook, and Charles Mosley, 48, of Vernon Hills, are accused of misappropriating customers' securities by using them as collateral for a loan received from the Bank of New York Mellon Corp., according to the U.S. Attorney's Office in Chicago.
Before the Northbrook-based company collapsed in 2007, it was fond of boasting that no client had ever lost money in its fund, which was available to corporations, institutional investors and wealthy individuals.
Phone messages seeking comment from the mens' attorneys by The Associated Press were not returned Friday.
The indictment alleges that part of the bank loan was used to purchase millions of dollars of high-risk, illiquid securities — not for customers, but for a trading portfolio that benefited Mosley, Bloom, some of Bloom's relatives and corporations controlled by his family.
As Sentinel begin to hit financial rocks in 2007 — with a default on its more than $400 million bank line of credit looming — Bloom and Mosley sought to conceal the dire state of the company from customers, the indictment alleges.
According to the indictment, Bloom purposely misled customers days before the firm declared bankruptcy by blaming a worldwide credit crunch and "investor fear and panic," even though he knew the core problem was the purchase of high-risk, illiquid securities and other issues.
Bloom and Mosley were each charged with 18 counts of wire fraud, one count of securities fraud, and one count of making false statements to an employee pension plan in an indictment that a federal grand jury returned this week.
If convicted, they could face a maximum 20-year prison term on each count of wire fraud. Securities fraud and making false statements to a pension plan each carry maximum five-year prison sentences.
Authorities are also seeking the forfeiture of more than $500 million.