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The Associated Press November 24, 2010, 8:29AM ET

Ex-Va. finance chief gets 10 years for wire fraud

Virginia's former secretary of finance was sentenced to 10 years in prison Tuesday for stealing $4 million from a state commission set up to bolster the economy of the state's tobacco-growing region.

U.S. District Judge Henry E. Hudson gave John W. Forbes II the maximum term under federal sentencing guidelines and lectured him for abusing his Cabinet position for personal gain.

"In that position you had an aura of responsibility and you betrayed that trust," Hudson told Forbes, who served as finance secretary from May 2001 to January 2002 under then-Gov. Jim Gilmore.

Forbes, 54, pleaded guilty in August to defrauding the Virginia Tobacco Indemnification and Community Revitalization Commission. Forbes, who served on the commission's board, secured a $5 million grant for a literacy foundation that he created. He acknowledged using about $4 million of the money for his own expenses, which authorities say included a luxurious new home and personal investments.

"The foundation wasn't created with larceny in my heart," Forbes told the judge. He apologized for his actions and said he is no longer the "cocky and arrogant" man he was a decade ago, when he established a handful of bogus companies whose sole purpose was to convert the grant money to his personal use.

Hudson did not seem convinced, however, as he rejected Forbes' request that he be allowed to report to prison after the winter holidays.

"Given the amount of dishonesty and deceit I've seen in this case, I don't trust you to self-surrender," said Hudson, who directed federal marshals to immediately take Forbes into custody.

Forbes' lawyers had asked for leniency in sentencing, contending in court papers that the death of Forbes' 14-year-old son in 2002 "caused a downward spiral" in his life that led to excessive drinking, marital problems and the fraud scheme.

"He is not using his son's death as an excuse for what he did," Forbes' attorney, Erich Ferrari, told the judge. "The purpose is to give the court an overall view of what was going on in his life."

Forbes did not mention his son's death in his statement to the court.

Hudson heard about 90 minutes of testimony from FBI Special Agent Tyler Kennedy, the lead investigator in the case. Kennedy testified that Forbes sought the $5 million grant even before he officially established the Virginia Literacy Foundation, and the commission went along largely because of Forbes' position.

Kennedy said he interviewed two commission members who said Forbes carried "a lot of weight" with the commission as the governor's representative.

Forbes installed his then-wife Tina as the foundation's executive director at $130,000 a year, Kennedy said, but she had no executive duties and her husband controlled all of the bank accounts. Forbes later took over as executive director but kept Tina Forbes on the payroll at $40,000.

Kennedy said that after the investigation began, Forbes tried unsuccessfully to persuade Tina Forbes to conceal documents. He later turned over several boxes of documents, but investigators executing a search warrant found a box containing the most damaging evidence in the trunk of Forbes' car.

Prosecutors also played a portion of a tape-recorded phone call between Tina and John Forbes. She told her ex-husband that the FBI was asking questions about the foundation's operations and asked if he had done anything illegal.

"Nothing you don't know about," Forbes brusquely replied.

She continued to press for answers, and Forbes shot back: "Why are you acting like this is all news to you?"

Kennedy testified that about $900,000 of foundation money was used for literacy programs and scholarships, but the bulk of the rest went for the Forbes' salaries and personal expenses.

"Instead of using settlement funds to help bring economic recovery to Virginia communities which had depended on tobacco, he stole millions of dollars which he spent on a lavish new home and personal investments," U.S. Attorney Neil H. MacBride said in a written statement.

Gilmore said he was "extremely disappointed" by Forbes' actions.

"He abused the trust that was put in him at the great expense of the people of Southside Virginia, who deserve much better," Gilmore said in a written statement.

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