Orange County Funder gets 30 years

by Christopher Menkin

James P. Lewis Jr., 59, received the maximum sentence of 30 years from U.S. District Judge Cormac Carney on Friday in Orange County, California, federal court. He also was ordered to pay back the $156 million he stole from 1,600 people in a Ponzi scheme that lasted over twenty years, until it imploded from the duplicate selling of equipment leasing contracts and loans.

Southern California newspaper reports have testimony from many of Lewis' victims, who were fellow Mormons whom he met through the church. More than 50 of the former investors packed the courtroom during the sentencing hearing. They were quite angry, some losing their entire retirement money, and applauded the 30 year sentence as a “death penalty.”

Defense attorney Scott M. Schlegel said he would appeal the sentence, saying it was cruel and unusual punishment for a man of Lewis' age.

Lewis ran a Lake Forest firm called Financial Advisory Consultants between 1990 and 2003.

Prosecutors said Lewis raised $311 million between 1985 and 2003 by telling investors he was earning returns of 18 percent to 40 percent by leasing medical equipment, financing purchases of medical insurance, making commercial loans and buying and selling distressed businesses. Billing his operation as perfect for individual retirement accounts, Lewis attracted many from attending Church of Jesus Christ of Latter-day Saints church services and meetings, who heard glowing reports about the yields he was able to obtain.

During the hearing, federal prosecutors and Lewis' attorney argued about the value of the net loss, which was one of the key elements in the sentencing procedure.

Brick Kane of Robb Evans & Associates of Sun Valley, the court-appointed receiver for Lewis' holdings, testified that Lewis took in $311 million between 1985 and 2003. He paid back $214 million to investors and lost $20 million on foreign exchange and commodities trades.

The receiver also found Lewis had taken over $15 million of investor funds for his personal expenses, including $3 million for homes in Villa Park and Greenwich, Conn., for his ex-wife, two girlfriends and their families.

U.S. District Judge Cormac J. Carney asked how Lewis could keep up his scheme for nearly two decades.

"As long as you're able to raise money and keep paying the promised annual or monthly payments, you can keep going until you implode," Kane said.

Another reason why the fraud succeeded for so long in was because many of the money he was taking in came from investors he had earmarked the funds for retirement and weren't seeking returns on for years. While others received a return, some more than they invested.

Receiver Robb Evans & Associates of Sun Valley has been liquidating Lewis' assets and suing hundreds of clients who were paid more than the money they invested, hoping to reclaim some for the losing investors.

Evans has recovered nearly $11 million, of which investors will get $9.5 million after expenses, said Evans' chief operating officer, Brick Kane.

Lewis pleaded guilty to one count of money laundering and one count of mail fraud on October 3 rd , 2005, after he was arrested in Houston in 2004 following a nationwide manhunt. He was in disguise at the time, and found with a plan to escape to Mexico. Prosecutors agreed to drop 12 of 14 counts in exchange for the pleas. According to the plea agreement, Lewis admitted promising investors annual returns as high as 18 percent to 40 percent or more Lewis fled Southern California after a search warrant was executed at his firm's offices in December 2003, prosecutors said. He was arrested in Houston the following month. Since then, he has been jailed in Orange County.