Petters Co-conspirator Bell Gets 6 Years in Prison
Former Illinois hedge fund manager Gregory Malcolm Bell was sentenced Thursday to six years in prison on one count of wire fraud for his involvement in convicted businessman Tom Petters' $3.65 billion Ponzi scheme.
U.S. District Court Judge Richard Kyle handed down the sentence, recommending that Bell-a former associate of Petters-serve his sentence in Miland, Michigan. He also recommended that Bell participate in a 500-hour residential drug treatment program.
Following Bell's release, he will be supervised and must adhere to unspecified “special conditions” for an additional three years.
Bell pleaded guilty on October 7, 2009, to one count of mail fraud, for which he faced a maximum sentence of 20 years in prison.
However, federal prosecutors had asked for a more lenient sentence, noting Bell's cooperation in the investigation surrounding Petters.
Before the Petters case unraveled, Bell ran hedge fund Lancelot Investment Management. All of the money in the hedge fund was invested in Petters Company, Inc. (PCI), promissory notes. In his plea agreement, Bell admitted that he devised a plan that made it appear that PCI was paying promissory notes to Lancelot investors-which was not the case. Between February 26, 2008, and September 24, 2008, Bell made 86 sham “round-trip” banking transactions that misled investors and potential investors.
In each “round-trip” transaction, money was wired from Lancelot to PCI and then immediately back to Lancelot. When the money came back to Lancelot, it was represented to investors as a payment from PCI on the promissory notes held by Lancelot.
By 2008, PCI was not fulfilling its financial obligations. But that year, Lancelot raised more than $200 million from 43 new investors based on false representations that PCI investments were sound and were paying positive returns.
The U.S. Attorney's Office in Minnesota confirmed that Bell's sentence will be reduced by 14 months to give him credit for time that he served in a county jail after his bail was revoked when prosecutors deemed him a flight risk.
Petters was found guilty in December of 20 felony counts relating to fraud, conspiracy, and money laundering, for orchestrating a $3.65 billion Ponzi scheme that spanned a decade.
Petters, who maintains his innocence, was sentenced to 50 years in prison in April. His attorney filed a formal notice of appeal later that month.
Four of the six other co-conspirators who pleaded guilty to charges related to the fraud scheme-Deanna Coleman, Michael Catain, Larry Reynolds, and Robert White-were sentenced earlier this month. Harold Alan Katz is scheduled to be sentenced Friday, and a date has not yet been set for James Wehmhoff's sentencing.