Key trader at center of $500 million fraud pleads guilty
By KIM JANSSEN Federal Courts Reporter October 8, 2013 12:18PM
Updated: November 10, 2013 6:23AM
The trader at the heart of one of the biggest financial fraud cases ever prosecuted in Chicago pleaded guilty Tuesday under a deal that caps his possible sentence at 10 years behind bars.
Charles Mosley, 49, of Vernon Hills, had faced up to 370 years if convicted at trial of playing a key role in the alleged $500 million fraud that ultimately forced Northbrook-based Sentinel Management Group into bankruptcy in 2007.
Sentinel’s CEO, Eric Bloom, 48, of Northbrook — who’s due to stand trial on similar charges in the spring — insists that the market downturn in 2007 drove his business under.
But Mosley admitted to Judge Ronald Guzman on Tuesday that he’d continued to tell investors their money was safe, even as Sentinel headed for ruin.
“Yes, I did that,” he told the judge.
Under the terms of his plea deal, Mosley is required to cooperate with prosecutors in the case against Bloom. In return, they’ll ask Guzman to sentence Mosley to the maximum of 10 years for two counts of investment fraud, instead of proceeding with 18 counts that could have seen Mosley spend the rest of his life in prison.
Sentinel’s website once claimed that since 1979 it had “never lost a dime” of its clients’ funds.
But investors and prosecutors said the firm improperly put investors’ money into a so-called “house” account, aiming to benefit a select few within Sentinel.
The company pulled the wool over eyes of investors by claiming it maintained its good record by only investing in safe, highly liquid cash management products, prosecutors said.
In August 2007, the company filed for bankruptcy. At that time, Sentinel controlled accounts for about 70 clients, made up primarily of large institutional investors as well as at least one pension fund.
Mosley and Bloom allegedly used their customers’ investments as collateral for a credit line with Bank of New York Mellon Corp. to buy millions of dollars of high-risk securities, including collateralized debt obligations or CDOs.
Mosley bought the CDOs and in return received substantial benefits “in the form of gifts, vacations, expensive tickets to sporting events and parties,” prosecutors said last year.
Court papers say that Sentinel’s hierarchy also benefitted because members’ compensation and bonuses were based on that “house” account.
Sentinel hid the activity, according to charges, giving investors phony daily account statements.
Mosley, who is due to be sentenced after Bloom’s trial, declined to comment as he left the Dirksen Federal Courthouse Tuesday morning.