Judge throws out FRM prosecutors’ recommendations

In the end, Scott Farah was judged the mastermind of the Financial Resource Mortgages Inc. Ponzi scheme and was sent straight to a 15-year prison term — five more years than federal prosecutors sought.But U.S. District Court Judge Paul Barbadoro said that Donald Dodge, president of FRM’s mortgage servicing company CL&M, only became a knowing accomplice. Barbadoro gave him three more weeks of freedom before he reports for his 6 1/2-year sentence.Assistant U.S. Attorney Mark S. Zuckerman recommended that both Farah and Dodge be sentenced to 10 years apiece, agreeing that while Farah role in the scheme was larger, he was more willing and able to cooperate than Dodge. Indeed, he thought the 68-year-old should serve one more month than Farah.But after more than a hour of testimony from the victims — all of whom focused their ire on Farah, with a few even speaking up for Dodge — Barbadoro said that Farah was the “principal deceiver” who “drew Dodge into the scheme.””I’m not persuaded that he knew from the outset that he [Dodge] was a culpable participant,” Barbadoro said.He added to Dodge: “To some extent, you were taken advantage of. Your crime was that after learning that it was a criminal act you continued to act.”It was Farah who started FRM, a mortgage brokerage firm that told lenders – sometimes individuals, and sometimes pooled in trusts – that their money would go to specific commercial projects. But in fact, all the money was put together in one accountFarah turned to Dodge in 2005, after the state Bureau of Securities Regulation demanded that he return about $3 million to preferred investors. The money would go to CL&M – the loan servicing company – which set up a line of credit to Scott Farah personally, who would then “pay in capital” to FRM, which would then use it to pay off creditors and cover a future deficit, masking the fact from various regulators that the firm was deeply in the red.When the firm closed in November 2009, Farah owed CL&M $20 million, with no way to pay it back.At the sentencing, no one had a good word to say about Farah, save his defense attorney and his prosecutor.Zuckerman argued for departing from the sentencing guidelines — ranging from roughly 15 to 20 years — because of Farah’s unprecedented degree of cooperation, which amounted essentially to agreeing to tell all about the complicated scheme and allowing everything he said to be used against him.”It is the first time in my career” that a defendant agreed to waive his rights, Zuckerman said, and his “complete and truthful assistance” helped save the state resources and helped the bankruptcy court locate any assets that would eventually be distributed to the victims.While Barbadoro agreed that the cooperation was “unusual” and “significant,” he was not sure that Farah was acting out of altruism or acting out of self-interest.”He tried to keep it going as long as he could and then he went to Plan B — to throw himself on the mercy of the court,” said Barbadoro, adding that Farah knew that the “evidence of guilt was overwhelming, so what did he have to lose?”Barbadoro did grant that Farah only received a $125,000 salary from the scheme, was able to donate money to his father’s church and accepted Zuckerman ‘s assurance that Farah did not “squirrel away” any funds or live a lavish lifestyle.But, said Barbadoro, that was a small percentage of the $33 million he defrauded from lenders, Barbadoro said.Barbadoro also wasn’t willing to accept Michael D. Ramsdell’s contention that Farah, his client, was intelligent but a “fool” to believe that what he was doing would somehow work out. That only drew only scornful laughter from a court full of his victims.When Farah himself told the judge, “The only thing I can say is I’m sorry for all the people I’ve hurt,” one audience member commented, “You were sorry you got caught.”That was the start of the victims’ barrage, led by Frank Marino, an FRM victim who lives in Meredith. He said he wrote Farah a $235,000 check, based on a forged letter, for a short-term loan. Marino said he told Farah that “this is all the money we have,” and Farah allegedly assured him “this is safe, safe.”Marino said that he felt that Farah seemed to have “representation from both sides of the aisle,” that his cooperation has resulted in “no money coming back to the lenders” and that Farah “worked his evil in God’s name.””This Satan of a man,” he said, belongs in “a cold, dank, rat-infested dungeon.”According to Seka Sisic, who left war-torn Bosnia to resettle in New Hampshire a dozen years ago — only to lose everything she worked for through FRM — Farah was “a slimy criminal” who “buried our dream.”His business plan, she said, was, “let me screw as many people as possible and stash the cash.”Harry and Pricilla Bean, in written testimony read by others, told how Farah took $3.5 million from the family, even inducing his brother Ronny Bean to invest $52,000 while he was dying of cancer, even though he knew the money wouldn’t go for a mortgage but into his failing company. Bean died on Sept. 9, 2010.Zuckerman insisted that Dodge was central to the whole scheme. In addition to the line of credit that kept the whole enterprise going, Dodge came up with the idea of pooling lenders’ money in various trusts, in which he would act as the trustee, to insure that it was spent on specific projects – all the while knowing that it was commingled with all the other money in CL&M’s bank account.When Dodge’s attorney Mark Howard said that CL&M was a legitimate business – aside from the $20 million line of credit – Barbadoro came down hard, saying “it wasn’t even a close call.””It was a fiction that these trusts were secured by mortgages when the money was going to an unsecured line of credit. That is central to the fraud. He isn’t innocent. He is a criminal,” Barbadoro said.However, he said, the fact that he invested his own wife’s money in the scheme made it more “plausible” that he had no criminal intent, at least at the beginning.None of the victims spoke against Dodge, but Dodge — with tears as he spoke — told the court, “I know I deserve any punishment I get. I know I am going to prison.”After another emotional plea from his son, Barbadoro paused in thought for a long time. Then he gave Dodge a 78-month sentence — some 3 1/2 years less than the amount prosecutors recommended.Aside from the other stated reasons, Barbadoro said that Dodge showed “legitimate remorse.”Dodge, who was expecting a 10-year sentence, told Barbadoro that he was “thankful for your sentence.”Unlike Farah – who was denied the right to surrender himself and went straight to jail — Barbadoro told Dodge that he had until Feb. 11 to surrender himself because the transport to a county jail to federal prison would be difficult for someone of his age and health. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW<

Categories: News