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O.C. insurance broker gets 10-year sentence for bilking investors

James Halstead persuaded victims, including retirees on fixed incomes, to invest $50 million, promising huge returns. He used the money to buy such things as exotic cars and a Las Vegas home.

May 13, 2010|By Stuart Pfeifer, Los Angeles Times

An Orange County insurance broker was sentenced Wednesday evening to 10 years in federal prison for stealing millions in investor dollars that he spent on exotic cars, expensive jewelry and a Las Vegas house.

James R. Halstead, who pleaded guilty to three charges in the case, had persuaded victims to invest $50 million from 2004 to 2006 by offering to pay them returns of 25% to 35% over three to four months. Instead of investing the money as promised, however, Halstead used new investors' deposits to make interest payments to earlier investors and kept millions for himself, federal prosecutors said.

U.S. District Judge David O. Carter imposed the sentence — the maximum that could have been given in this case under federal guidelines — during a hearing at the federal courthouse in Santa Ana. Several victims told the judge that the investment losses devastated them financially and emotionally. They spoke of foreclosed homes, unpaid medical bills and broken families.

"I have lost everything I have worked 56 years for," said 74-year-old Bent Christensen, who said he was forced to sell his Huntington Beach home to avoid bankruptcy and now relies on loans from his children to survive. "My family has been totally destroyed.... Our golden retirement years have been turned into a nightmare."

Halstead — wearing a tan jail outfit, his hands shackled at his waist — told the court that he was deeply sorry for the victims' losses. He said his mistake was trusting Irvine securities lawyer Jeanne M. Rowzee, who he said misled him about how the money was invested.

"I made poor choices. I did not do my due diligence. The money became an addiction. I took the free ride and the devil was waiting," said Halstead, 63. "I cannot blame anyone but myself. I failed myself and hurt my loving family. I am severely sorry for the problems I have caused."

In addition to the prison term, Carter ordered Halstead to pay $14 million in restitution, but the judge warned the victims in the courtroom that Halstead would not have the means to pay that amount or an earlier $66-million civil judgment imposed on him. The sentencing was based on two fraud charges. The third charge, for money laundering, had been dismissed since Halstead pleaded guilty. The judge said the length of the prison term was warranted.

"You caused tremendous harm," he told Halstead. "I get bank robbers in here … who are getting substantially more time than that by slipping a note to a bank teller. People who get involved in Ponzi schemes are stealing from the public huge amounts of money with devastating consequences."

Halstead was accused of teaming up with Rowzee to solicit millions of dollars from investors, including wealthy real estate developers and retirees on fixed incomes. The pair said they would put the money in securities known as private investment in public equity, or PIPEs, which are used to make bridge loans to companies in the process of obtaining long-term financing.

An estimated 140 investors lost money in the scheme, with 87 of those incidences attributed to Halstead, prosecutors said in a sentencing memorandum. Halstead spent the stolen money lavishly, including $353,000 on a Ferrari and Porsche, and $1 million on a house in the Las Vegas area.

Rowzee has pleaded guilty and is awaiting a Dec. 13 sentencing. Investors alleged in lawsuits that Halstead acted as an affable salesman while Rowzee presented herself as a skilled securities lawyer.

The pair met in the 1990s, when Rowzee defended Halstead against charges that he and another man bilked investors out of $1 million in a scheme to sell crude oil and German bank shares. In 1998, he pleaded guilty to five counts related to that scheme and was put on probation.

Halstead was arrested in September 2008 after a grand jury indicted him on fraud charges related to the PIPE investment scheme. He pleaded guilty to three charges last September and promised to make restitution to victims.

Investors obtained the $66-million civil judgment against Halstead in 2008.

Attorney Kenneth Reed, representing Halstead, ascribed the majority of the wrongdoing to Rowzee and urged the judge to impose a lesser sentence. He also asked the judge to consider volunteer work Halstead had performed with the YMCA Indian Guides, youth baseball leagues and Foothill High School.

"He was duped by the attorney who knew what she was doing." Reed said. He said Halstead's actions were an aberration, the acts of a man who went "middle-aged crazy."

But prosecutors and investors said Halstead used stolen money to lead a lavish lifestyle. His home in Henderson, Nev., had a breathtaking view of the Las Vegas Strip. He also was alleged to have purchased a home in that city for a girlfriend and to have spent tens of thousands of dollars partying in Las Vegas with friends.

"He wasn't going crazy with his money. He was going crazy with the money of the victims," said Assistant U.S. Atty. Gregory Staples. "That is not some middle-age aberration. That is a crime."

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