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Ex-Chief of Investment Firm Gets Prison Term : Fraud: Morris English is sentenced to 18 years for swindling 1,600 people out of more than $30 million. Angry investors pack the courtroom.

July 07, 1994|GORDON DILLOW | TIMES STAFF WRITER

While a capacity courtroom of angry investors looked on, the former head of a defunct South Bay real estate investment company, who swindled 1,600 people out of more than $30 million, was sentenced to 18 years in federal prison.

In a dramatic confrontation with some of his victims, Morris D. English Jr., 52, who once headed the Rollings Hills Estates-based Wellington Group, faced the courtroom audience before he was sentenced and said: "I'm sorry for what you feel. . . . I'll never convince you that I never set out with the intent to defraud any of you."

As English spoke, some members of the audience, most of them elderly people who lost tens of thousands--or even hundreds of thousands--of dollars in English's scheme, grumbled: "No, no," and "Liar!" Others called out, "All of us!" when English said of the audience, "I don't know which are the ones with the blood in their eyes."

The judge ordered the crowd of about 100 people to be quiet, and federal court security personnel stationed themselves between English and the audience.

After a two-month trial and a month of jury deliberations, English was convicted in March of 30 counts of mail fraud, securities fraud, bankruptcy fraud, money laundering and criminal contempt. He was found not guilty of two mail fraud counts, and the jury was deadlocked on 15 other criminal counts.

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In pronouncing the sentence Tuesday, U.S. District Judge Dickran Tevrizian noted the "devastating effect" that English's fraudulent scheme had on the victims, including a woman who committed suicide after losing her life savings and many others who lost their homes.

Assistant U.S. Attorneys Peter G. Spivack and Jeffrey B. Isaacs had asked for a sentence of 30 years to life in prison. English's final sentence, however, was in the middle range of what was permitted by federal sentencing guidelines. Under federal rules he will have to serve a minimum of 85% of the sentence.

"That should take care of Mr. English for the foreseeable future," Isaacs said after the sentence.

But many of the spectators thought it wasn't enough.

"I put in $84,000, all the money I had," said Caroline Laserna, 80, of Sun Valley. Now I have to live on Social Security. I think (English's sentence) should have been more."

Tevrizian also ordered English to pay about $850,000 restitution, but few expect him to make good on that. After the sentencing, defense attorney Richard M. Callahan Jr. said that English will be in his 60s when he gets out of prison, adding: "At that age it's going to be difficult for him to pay anybody back."

The case, described by prosecutors as one of the biggest real estate investment scams in state history, began in 1984 when English purchased a dormant Manhattan Beach company called Wellington Escrow Corp. for $7,000. English changed the name to The Wellington Group, moved to Rolling Hills Estates and began making short-term, interest-only loans to borrowers who secured the loans with real estate. To fund the loans, English solicited money from investors, promising them a 15% return on their investment. English pitched the company on radio programs, and investors from across the country invested millions with the company.

Prosecutors said the enterprise eventually evolved into a classic Ponzi scheme, with new investors' money being used to pay off old investors. Meanwhile, prosecutors said, English diverted investors' funds to finance a lavish personal lifestyle, buying expensive homes, airplanes and cars for his son and girlfriend.

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In 1990 the California Department of Corporations obtained a preliminary injunction to prevent Wellington from selling "unqualified securities." The Wellington company later filed for bankruptcy and, prosecutors said, illegally omitted investors' names from the list of creditors so the investors wouldn't find out about it. English also concealed or destroyed numerous records concerning the company, prosecutors said.

Some investors later said they didn't know anything was wrong at the company until the interest payments on their investments abruptly stopped, and by then it was too late to get their money back.

The company's collapse sparked civil lawsuits involving hundreds of investors. The company has been placed in the hands of a court-appointed trustee who has been selling its remaining assets to pay off investors. Some investors hope to get back 10 or 15 cents on the dollar.

English's criminal court troubles began in 1991, when he was charged in Torrance with eight counts of grand theft and writing bad checks to investors. In a plea bargain, he agreed to make good on the checks, but was later arrested for failing to do so.

Meanwhile, federal agents were investigating his business affairs. English was arrested in May, 1993, on the federal charges and has been held in federal custody ever since.

Testifying in his own defense during the trial, English insisted that his company was a legitimate business that simply fell on hard times when the California real estate market plummeted.

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