CHICAGO (AP) — The head of a bankrupted financial management company was convicted Tuesday of defrauding customers out of more than $500 million before the suburban Chicago firm collapsed in August 2007.
Former Sentinel Management Group Inc. CEO Eric Bloom was accused of misappropriating customers' securities by using them as collateral for a loan received from the Bank of New York Mellon Corp. Prosecutors said the money was used to purchase securities for a trading portfolio maintained for the benefit of Sentinel's officers, including Bloom, members of his family and corporations controlled by the Bloom family.
After two hours of deliberations, a federal jury found Bloom guilty on 18 counts of wire fraud and one count of investment adviser fraud.
Bloom, 49, of Northbrook, remains free on bail while awaiting sentencing, which wasn't scheduled pending post-trial motions. According to the U.S. attorney's office, each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. The investment adviser fraud count carries a maximum penalty of five years in prison and a $250,000 fine.
During closing arguments Monday prosecutors said Bloom made a lot of money by defrauding Sentinel's investors.
Defense attorney Terry Campbell blamed Sentinel's financial officer, Charles Mosley, for wrongdoing.
Prosecutors contended that as Sentinel begin to fail — 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.
Bloom 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.
Campbell said Bloom acted in "good faith" and was in Africa on his honeymoon as the crisis deepened in the month leading up to Sentinel's collapse. Campbell told jurors that "inattentiveness isn't a crime."
"It's not a crime to lose money on investments," he said.
Mosley entered a guilty plea in October to fraud charges. As part of the deal with prosecutors, Mosley faces up to 10 years in prison.