Former Sentinel trader pleads guilty to fraud charges

Reuters

By Nate Raymond

Oct 8 (Reuters) - A former executive at Sentinel ManagementGroup Inc pleaded guilty on Tuesday to defrauding customers outof more than $500 million before the futures brokerage collapsedin 2007.

Charles Mosley, a former Sentinel senior vice president andhead trader and who faced 20 criminal counts in the initialindictment, pleaded guilty to just two before a federal judge inChicago under a new charging document prosecutors filed Friday.

Mosley and Sentinel's former chief executive officer, EricBloom, were indicted last year on charges they used customersecurities as collateral for a bank loan to fund a "house"trading portfolio intended to benefit them and Bloom's family.

Under a plea deal, prosecutors have agreed to recommend aprison term of 10 years. Mosley, 49, has meanwhile agreed tocooperate with the investigation.

Charges remain pending against Bloom, who faces trialstarting Feb. 24.

Mosley's guilty plea was confirmed by a spokesman for ActingU.S. Attorney Gary Shapiro in Chicago.

A lawyer for Mosley did not immediately respond to a requestfor comment, while a lawyer for Bloom had no immediate comment.

Before it collapsed, Northbrook, Illinois-based Sentinelmainly managed money for other futures brokerages who sought outthe high-yield returns Sentinel offered.

The indictment of Bloom and Mosley became what prosecutorscalled one of the largest federal criminal financial fraud casesever brought in Chicago.

More than 70 customers were affected by the alleged fraud,which ran from January 2003 to August 17, 2007.

The indictment charged that Bloom and Mosley used customersecurities for a loan from Bank of New York Mellon Corp in order to buy high-risk, illiquid collateralized debtobligations (CDOs), for the benefit of Sentinel's "house"portfolio.

The indictment also charged that Bloom misled customers fourdays before Sentinel filed for bankruptcy by blaming itsinability to honor client redemptions on a market "liquiditycrisis" and "investor fear and panic."

The real problem, prosecutors said, was Sentinel's exposureto high-risk illiquid securities and a $415 million balance onthe BNY Mellon credit line.

Separate cases by the U.S. Securities and ExchangeCommission and the U.S. Commodity Futures Trading Commissionbrought prior to the indictment remain pending.

The cases are in the U.S. District Court, Northern Districtof Illinois. The criminal case is U.S. v. Bloom et al. The civilcases are SEC v. Sentinel Management Group Inc et al, No.07-04684; and CFTC v. Sentinel Management Group Inc et al, No.08-02410.

Rates

View Comments (0)