Five men who pleaded guilty in a $100 million fraud scheme that claimed about 800 victims nationwide were sentenced Friday to federal prison terms ranging from three years to more than 15 years.
The five included the co-founder and the former president of Houston-based companies known as A&O, which purchased life insurance policies from individuals at less than face value and then collected the benefits when those people died. Prosecutors said A&O officials misrepresented many aspects of their business and failed to repay investors.
“The impact of this massive fraud on many of A&O’s investor victims has been disastrous,” U.S. Attorney Neil MacBride said in a written statement after the sentencing hearings. “Hundreds of elderly investors invested their life savings with A&O and saw it all vanish in an instant.”
One by one, U.S. District Judge Robert Payne scolded the defendants and reminded them that while they will have an opportunity to rebuild their lives after prison, many of their victims lost everything and will never fully recover.
“The damage you wrought was absolutely hideous,” Payne told A&O co-founder Brent Oncale of Houston, who was sentenced to 10 years in prison. Payne said “it turned my stomach” to read statements from victims of the conspiracy.
As part of a plea agreement, Oncale cooperated with the government’s investigation and testified against two other A&O principals who were convicted in jury trials and will be sentenced in September.
“I know what I did was wrong and I’ve done everything in my power to right that wrong, and I will continue to do so,” Oncale told the judge.
Payne also sentenced former A&O president David White of Missouri City, Texas, and wholesaler Eric Kurz of The Woodlands, Texas, to five years. Lawyer Russell Mackert of Spring, Texas, got 15 years, eight months, and salesman Tomme Bromseth of Richmond was sentenced to three years.
The judge rejected a motion by Mackert’s attorney for a lighter sentence. The attorney, Carolyn Grady, said Mackert’s participation was solicited by one of A&O’s leaders and “he was naive enough and not smart enough to look behind the curtain and see the fraud.”
Grady asked for the same 10-year-sentence Payne had just given Oncale, but the judge imposed a term near the middle of the federal guideline range.
Payne was mystified by the wrongdoing of White, saying all indications were that he led an exmplary life before quitting a banking job to join A&O. White’s wife, Stephanie, testified about his fundraising on behalf of autism charities, his role in helping her achieve her dream of opening a speech clinic and his devotion to their two young sons.
“What on earth happened to this man?” Payne asked White’s lawyer, Claire Cardwell.
She said White didn’t know A&O was doing anything illegal when he took the job, and after he realized what was happening he made some bad decisions in trying to set things right. She noted that he was only with A&O for five months of the approximately three-year conspiracy and suggested he deserved a lighter sentence.
Payne said the plea agreement already included the appropriate concessions, however.
White apologized to investors.
“Accepting a position with the firm — and my actions thereafter — I will regret for the rest of my life,” White told the judge.
Payne also declined go easy on Kurz, saying the conspiracy would not have been possible without his involvement. Kurz was the middle man between A&O principals and sales agents, providing the bulk of the misleading materials and sales pitches that were used to ensnare investors.
The judge said he believed Kurz was remorseful, but he added: “Remorse is insufficient to undo the damage that was done.”
However, Payne did approve a shorter sentence for Bromseth. Prosecutors asked for a sentence of five years, but Payne said he did not believe the 70-year-old Bromseth deserved the same prison term as Kurz, who ranked ahead of him in the A&O hierarchy. He also cited Bromseth’s age.
Bromseth, who also has testified against A&O officials, said he appreciated the government allowing him “to particpate in a small way in the convictions of those in power.”
After serving their prison terms, the men will be required to make payments toward restitution for the victims.
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