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Pair Sentenced in Investing Scheme

Fraud: The man who led the operation must pay $1.2 million in restitution and go to prison for 10 years. His wife got probation and owes $154,000.

September 13, 1997|JOSE CARDENAS | TIMES STAFF WRITER

A Lancaster man who masterminded a Ponzi scheme that bilked millions of dollars from Los Angeles city schoolteachers was sentenced Friday to 10 years in state prison and ordered to pay $1.2 million in restitution.

David Missman, 60, was convicted in July of 48 counts of grand theft, sale of unregistered securities and making a false misrepresentation in the sale of a security.

His wife, Karen Missman, 47, who the defense argued played a lesser role, was convicted of six counts. She was sentenced Friday at Los Angeles Superior Court to five years probation and ordered to pay $154,000 in fines and restitution.

"It's the maximum we could give him," said Richard A. Lowenstein, the deputy district attorney who prosecuted the case.

"I thought [the sentence] was harsh but anticipated," said Andrew M. Stein, David Missman's attorney. "My client never lied to anybody . . . but unfortunately he was the president of the company and he bears the ultimate responsibility."

Karen Missman, who is waiting for a lung transplant, has been given three years to live, said Mark P. Brandt, her Santa Monica-based attorney. He said her poor health played a role in the sentencing.

"The judge gave a lot of weight to her condition. She was on a respirator when she was talking to the court," Brandt said. "We believe justice prevailed."

Prosecutors will not retry the Missmans on counts on which the jury deadlocked because David Missman could not get a harsher penalty and his wife is not expected to live long, Lowenstein said.

In all, the jury deadlocked or acquitted the Missmans on 60 counts. Dozens of other allegations were dismissed before trial.

A Ponzi scheme is a fraudulent investment game in which new investors' money is used to pay artificial returns--instead of true profits--to earlier investors.

According to prosecutors, the Missmans operated the scheme from 1979 to 1988 out of their San Fernando Valley-based businesses, S.C.S. Co. and MKA Limited/MKA Corp. The couple used fraudulent property loans and sold promissory notes, according to authorities.

The two salesmen were Hank Springer, a former United Teachers-Los Angeles president, and Nate Glazer, a former teacher and union member, authorities said. Both men received immunity after cooperating with investigators.

The couple found customers partly by advertising the investments in the teachers union's publication, The United Teacher, as well as in The Jewish Bulletin.

Much of the investors' money was used by the duo to buy luxury cars, property and to travel, prosecutors claimed. Using classic fraud schemes, some of the money was used to keep the scheme operating as well as to pay off some of the initial investors.

In all, prosecutors contend, the Missmans defrauded customers of $18 million, a figure disputed by Stein, who said $8 million is closer to the mark.

The scheme began to fall apart early in 1988 when the Missmans ran out of new investors and no money was available to pay old investors, according to authorities.

Friday, Brandt said his client was eager to pay restitution. "She's remorseful for the loss the victims sustained. She did not believe she did anything wrong."

Stein said he would appeal the sentence partly because he believes the California Departments of Corporations and Real Estate withheld evidence from defense attorneys. He said he also thinks the statute of limitations had run out by the time the case was filed in 1989.

Both defense attorneys said the salesmen, Springer and Glazer, should have been prosecuted.

"The judicial system really failed," said Stein. David Missman, who has yet to begin serving his sentence, is a diabetic with serious respiratory problems, and Stein said he would try to keep his client free temporarily.

"My sense is he will die in prison unless I'm successful getting him out on bail during appeal," Stein said.

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