Reporting Irene Cornell
NEW YORK (AP / WCBS 880) - A judge on Wednesday sentenced a former financial adviser to the stars to seven years and six months behind bars for a multimillion-dollar fraud, suggesting he was blinded by love for a woman half his age when he stole investor money to fuel a lavish lifestyle.
WCBS 880 reporter Irene Cornell on the sentence
Kenneth Starr “lost his moral compass … partly as a result of his infatuation with his younger fourth wife,” U.S. District Judge Shira Scheindlin said before imposing the prison term.
The judge was referring to 34-year-old Diane Passage, a former stripper who sat in the first row of the gallery while her 67-year-old spouse sought mercy.
“I stand before you a contrite, humiliated and ashamed man,” Starr said in a glum voice.
He also described himself as a religious man - one who “strayed from the values I’ve been taught. … I have no one to blame but myself.”
Federal prosecutors had argued that Starr - the one-time financial adviser to Wesley Snipes, Sylvester Stallone and Martin Scorsese - deserved at least 10 years for using the spoils from his fraud to buy a $7.5 million luxury condo on the Upper East Side of Manhattan and for other personal expenses. The defense wanted five years.
Scheindlin split the difference, saying the scheme was a serious violation of his burned clients’ trust but not as devastating as larger frauds that crippled pension funds, destroyed charities or wiped out thousands of smaller investors, as Bernard Madoff‘s multibillion-dollar Ponzi scheme had.
She agreed with defense arguments that the nine unidentified victims cited in the case were rich enough to absorb a loss that prosecutors put at $33.3 million.
“None of the victims were left financially destitute as they have been in other cases,” she said.
The judge also ordered Starr to forfeit about $29 million, though prosecutors have said he doesn’t have enough assets to cover it.
The Starr fraud was Madoff-like because he paid some early investors with money he received as investments from other clients, the government has said. Along with buying the apartment, he used other funds to cover business expenses, repay clients who caught him cheating and pay a $4 million legal settlement.
Among the victims were a former hedge-fund manager and well-known philanthropist, an actress who was a longtime friend of Starr’s, a 100-year-old heiress to a business empire and a prominent jeweler with a flagship Manhattan store. There’s never been any allegation that Snipes, Scorsese or Stallone took a hit.
None of the victims spoke at the sentencing. Passage had no comment as she left the courthouse.
Starr had pleaded guilty last year to money laundering, bank fraud and other charges alleging that since 2005 he diverted investor money into risky investments or into his own pockets.
The same investigation also snared a once-prominent New York City politician, Andrew Stein. The former City Council president and state assemblyman is awaiting sentencing after pleading guilty to failing to pay income taxes - a charge stemming from a fraudulent loan engineered by Starr.
In recently filed court papers, lawyers for Starr conceded he “made a colossal error in judgment which has had a devastating impact.” But his victims were all “incredibly wealthy individuals with millions of dollars of discretionary funds,” the papers add.
At the same time, the defense said Starr, a father of two teenage daughters, deserved credit for starting a foundation that donated hundreds of thousands of dollars to various causes.
“A man should not be judged solely by the worst thing he has ever done,” the papers say. “Kenneth Starr has also brought joy and comfort to countless people in need of assistance.”
Prosecutors scoffed at the notion that Starr’s crimes were a mere mistake.
Starr “systematically defrauded his own longstanding clients, individuals who trusted him to advance their financial interests, not his own,” they wrote in their own submissions. “Whatever other acts of charity and altruism the defendant may have performed in his life, it’s clear that in this case the defendant serially victimized his clients in order to help himself.”
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