Bloomberg News

Sentinel’s Bloom Defrauded Clients, Prosecutor Tells Jurors (1)

March 24, 2014

Eric A. Bloom, chief executive officer of the failed investment firm Sentinel Management Group Inc., fraudulently misled its clients about how their assets were being used, a prosecutor told a federal court jury.

“Sentinel was a fraud” led by Bloom, Assistant U.S. Attorney Patrick Otlewski said today in U.S. District Court in Chicago. He asked for “the only verdict consistent with the evidence: a verdict of guilty on all counts.”

Bloom, 49, was indicted in 2012 charges he and another man cheated at least 70 investors of more than $500 million through Sentinel, a suburban Chicago firm that managed short-term investments for commodity pools, hedge funds, a pension fund and other customers.

Sentinel filed for bankruptcy in August 2007 days after Bloom told clients it was freezing their accounts due to financial market turbulence and saying some customers joined in the panic, Otlewski told the jury in his closing arguments.

In fact, the firm had been using client assets as collateral for loans taken from the Bank of New York Mellon Corp. (BK:US), putting that money toward its heavily leveraged house trading account, Otlewski said.

The Northbrook, Illinois-based firm’s downfall preceded by more than a year the bankruptcy of Lehman Brothers Holdings Inc., the collapse of Bernard Madoff’s and Allen Stanford’s firms and the failure of MF Global Holdings Inc.

Possible Punishment

Bloom faces 18 wire-fraud counts, each punishable by as long as 20 years’ imprisonment, and one count of investment-adviser fraud.

Otlewski spoke for almost two hours.

Defense attorney Terence Campbell told the jury in his closing that the government needed to prove his client’s guilt beyond a reasonable doubt.

“Reasonable doubt is not something you have to search for in this case,” Campbell said.

Bloom’s lawyers have maintained their client is innocent and that his firm was overwhelmed by market forces beyond its control. Lead defense lawyer Theodore Poulos told the jury at the trial’s outset on Feb. 26 that his client acted in good faith.

A second man charged in the case, Charles K. Mosley, the firm’s head trader, pleaded guilty to two counts of investment adviser fraud last year and agreed to cooperate with the prosecution. He hasn’t been sentenced.

BNY Mellon has been pursuing a claim for more than $312 million since Sentinel filed for bankruptcy.

U.S. District Judge Ronald A. Guzman is presiding over the trial.

The case is U.S. v. Bloom, 12-cr-00409, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net. Charles Carter, Stephen Farr


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