Starr Gets 7.5 Years for Running Ponzi Scheme

     MANHATTAN (CN) – Kenneth Starr, a financial advisor to wealthy businessmen and celebrities, was sentenced to 7 1/2 years in prison for defrauding his clients in a $33 million Ponzi scheme.




     “I stand before you a contrite, humiliated and ashamed man,” Starr said, standing slumped before U.S. District Judge Shira Scheindlin. He added that his fraud betrayed his clients, family and religious community.
     Scheindlin granted Starr leniency, departing from sentence guidelines that called for him to spend more than a decade behind bars.
     The sentence was, however, longer than that requested by Starr’s attorney, Flora Edwards, who requested five years of incarceration in defense memorandums.
     In the documents, Edwards pointed out that billion-dollar fraud cases – like Bernie Madoff’s – ended in sentences below what the government requested. Edwards also noted that both of Starr’s parents died at younger ages than Starr’s current age of 67.
     “There’s no need for him to die in jail for what he did,” Edwards said at the sentencing hearing.
     Through his companies Starr & Co. and Starr Investment Advisers, Starr managed his clients’ finances, paid their bills, advised them about their taxes, made their investments and generally assumed “total control over his clients’ finances” for decades, according to a government memo.
     Starr stole millions to finance a $7.5 million luxury condominium on the Upper East Side of Manhattan, cover his companies’ operating expenses, reimburse clients who discovered his fraud and pay for a multimillion-dollar legal settlement with an elderly playwright who was his former client.
     He pleaded guilty to three counts of wire fraud, securities fraud and money laundering on Sept. 10, 2010, and his attorney Flora Edwards asked for leniency in a sentencing memo on Feb. 9, 2011.
     Court papers do not disclose the identities of the victims. But prosecutors say they include two actresses, a talent agency executive, a film producer, a hedge fund manager, a well-known jeweler, a 100-year-old heiress and the step-son of a deceased heir to a business fortune. Uma Thurman was reportedly one of the actresses, and Rachel “Bunny” Mellon matches the description of the centenarian heiress.
     Judge Scheindlin called Starr’s conduct “despicable,” but said his victims were “not left penniless,” as was the case in other significant fraud cases.
     Prosecutor Michael Bosworth countered that, although none of Starr’s victims were destroyed financially, they were emotionally vulnerable by the fraud of a close adviser.
     Scheindlin also credited Starr for his long history of philanthropy with several nonprofits, including the arts-supporting Women’s Project, the Museum of Modern Art, the Morgan Library, the Frick museum and Friends in Deed, an AIDS charity. (Starr was prompted to support the latter charity after a stepson from a previous marriage died of AIDS, a defense memo states.)
     “I don’t think that he did all this for the purpose of this sentencing,” Scheindlin said.
     Edwards said that Starr “lost his way,” but was “more than the sum of his offenses.”
     Scheindlin said Starr’s supportive family, several of whom were in the courtroom, weighed on her decision to impose a below-guidelines sentence. A groan was heard in the courtroom when the judge said Starr’s “infatuation with his young, fourth wife” may have been partly to blame for the fraud.
     That wife, seated in the front row, did not appear happy with the remark. After the hearing, as U.S. Marshals escorted Starr from the courtroom, she mouthed, “I love you,” to Starr, and Starr responded in kind.
     A government memo states that Starr left his third wife when she was diagnosed with a serious illness.
     The government and defense dispute the amount of money that was the result of “outright theft” in a Ponzi scheme, and how much was lost by his victims on bad investments without proper disclosure. Both parties agree, however, that the poor investments are close $9 or $10 million.
     Starr will pay $29 million in forfeiture, and will be assigned to Otisville Correction Facility.

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