General Counsel Sentenced 15 years In Fraud Case

Five men convicted in a $100 million hedge fund fraud scheme that victimized more than 800 individuals across North America were recently sentenced to prison terms ranging from three years to 15, the US Department of Justice said.

Among those sentenced were Russell Mackert, general counsel of A&O Resource Management, who will spend 15 years in jail; Brent Oncale, the former owner and founder of A&O, who was sentenced to 10 years; and David White, A&O’s former president, who will serve five years in jail. Also jailed were Eric Kurz, a wholesaler of A&O investment products, for five years; and Tomme Bromseth, the company’s agent in the Richmond area, for three.

Mackert was seen as the key figure in the scheme in which the former employees falsely marketed life settlement products to investors, many of whom were elderly, from the fall of 2010 through early 2011. The co-conspirators illegally obtained money from investors by making misrepresentations about A&O’s prior success; exaggerating its size, office locations and number of employees; and misrepresenting the safety of its investment offerings and the company’s use of investor funds.

‘The impact of this massive fraud on many of A&O’s investor victims has been disastrous,’ said Neil MacBride, US attorney for the Eastern District of Virginia, in a statement. ‘Hundreds of elderly investors invested their life savings with A&O and saw it all vanish in an instant [and] these investors were not looking for quick cash, just a safe alternative to invest their retirement funds. The safety, security, and no-risk nature of the investment was critical to the sales pitch, and it was all a big fat lie.’

The DoJ says that when state regulators began to further investigate A&O’s investment products, the swindlers manufactured a sham sales transaction to ‘sell’ A&O to an offshore shell corporate entity named Blue Dymond, and later, to another such entity named Physician’s Trust. However, A&O and Physician’s Trust were still quietly controlled by the now defunct firm’s principals and their conspirators.

‘Its troubling that the company’s general counsel was a part of this crime. He was supposed to act as the company’s gatekeeper,’ says Deborah Meshulam, chair of the Securities Enforcement Practice at Washington-based DLA Piper. ‘He was clearly trying to keep the house of cards from falling and actively facilitated the illegal acts…clearly, there was an utter lack of transparency here.’

Meshulam says it is also hard to believe the hedge fund company had any corporate governance policies in place. ‘A company in this business, if it is a legitimate company, would have conducted extensive due diligence and would have had the right controls in place,’ she says.

[Article by Aarti Maharaj, Corporate Secretary]

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