As The Pandemic Raged, Jailed Ponzi Schemers Sought – And Sometimes Received – Early Release
As the global pandemic spiraled out of control earlier this year, a number of convicted Ponzi schemers used the crisis as an opportunity to seek an early “compassionate release” from prison due to COVID-19 fears. Although the majority of these efforts were denied, a few were successful and included a Florida man who was released more than seven years early from a 20-year sentence for a nearly-$1 billion Ponzi scheme. These stories provide a unique and fascinating window into how both society and the courts handled these requests and emphasized the seriousness of the underlying crimes in largely denying the requests.
Compassionate Release And Its Expanded Use During The Pandemic
In the federal prison system, a prisoner has long had the right to seek a “compassionate release,” billed as a humanitarian gesture to allow certain terminally ill or frail inmates to serve the remainder of their sentence outside of prison. These requests, however, have historically been seldom granted and were usually subject to the subjective determination of those inside the prison system. Indeed, the Marshall Project and New York Times found that roughly 6% of the 5,400 applications were granted during the time period from 2013 to 2017.
The passage of the bipartisan First Step Act in late 2018 ushered in sweeping reforms to the compassionate release program that included an inmate’s ability to seek judicial review if the Bureau of Prisons (“BOP”) denied their release request. These reforms saw mixed success; a New York federal judge granted an early release (over BOP’s objection) to former WorldCom CEO Bernard Ebbers while a different judge denied Bernard Madoff’s request.
As the COVID-19 pandemic exploded in March 2020, U.S. Attorney General William Barr issued a series of memorandums directing BOP to “maximize” the use of home confinement as a way of easing prison populations. Prisons were uniquely susceptible to the virus as a result of their housing conditions; the BOP reported that, as of December 9, 2020, over 6,000 inmates and 1,600 staff tested positive for COVID-19 and the virus had claimed the lives of 153 inmates and 2 staff members. Barr’s first memorandum, issued on March 26th, directed the BOP to “prioritize the use of your various statutory authorities to grant home confinement for inmates seeking transfer in connection with the ongoing COVID-19 pandemic.” Among other factors, Barr instructed prison officials to consider “the inmate’s crime of conviction, and assessment of the danger posed by the inmate to the community.”
Following passage of the CARES Act, which included a provision expanding the eligibility of prison inmates beyond those within six months of their release date, Attorney General Barr issued another memorandum in early April directing officials to expand their review of potential inmates to “all at-risk inmates – not only those who were previously eligible for transfer.” The memorandum emphasized that “time is of the essence” and ordered implementation of these directives “as quickly as possible.”
According to the Marshall Project, inmates were actually less successful in obtaining compassionate release as the pandemic raged. An article dated October 7, 2020, indicated that the requests were denied at a 98% rate according to its data:
Of the 10,940 federal prisoners who applied for compassionate release from March through May, wardens approved 156… Higher-ups in Washington, D.C., reviewed 84 of the warden approvals and overturned all but 11. Time and again, the only way prisoners were able to win compassionate release was to take the bureau to court to fight the wardens' denials.
Convicted Ponzi Schemers Seek Compassionate Release With Varying Success
The Marshall Project’s data shows that nearly 10% of the federal inmate population sought compassionate release beginning in March 2020. This included a number of inmates serving prison sentences for their role in Ponzi schemes.
Based on data reviewed by Ponzitracker, at least 12 convicted Ponzi schemers petitioned the BOP for a compassionate release. After nearly all of those requests were denied, the petitioners then sought judicial review.
Consistent with the overall statistics cited by the Marshall Project, the majority of requests by these 12 individuals were rejected by the reviewing judge. In a recurring theme throughout those denials, the presiding judge often noted that the inmate’s particular health situation paled in comparison to the seriousness of the underlying crime and the minimal percentage of the original sentence that had been served leading up to the compassionate release request.
For example, Lamar Adams was sentenced in 2018 to a nearly-20 year prison sentence after he pleaded guilty to masterminding a $100 million Ponzi scheme involving timber tract investments. In his May petition, Adams cited his age (61) as well as his underlying health conditions (hypertension, high cholesterol, psoriasis, vertigo, and recurring lung infections) as evidence of his high risk for infection that warranted his serving the rest of his sentence in home confinement. The federal judge that sentenced Adams, U.S. District Judge Carlton Reeves, ruled that Adams’ allegedly increased susceptibility to contracting the virus was outweighed by the seriousness of his crime and the fact that he had served only 17 months of his nearly 240-month sentence. Judge Reeves also considered the opposition voiced by several of Adams’ victims. In addition to Adams, the compassionate release requests submitted by Glyn Richards, Rick Koerber, Dennis Bolze, Troy Wragg, and Glen Galemmo were also denied (though some of those decisions remain on appeal).
Indeed, multiple Ponzi schemers had their petitions denied even after they contracted COVID-19 in prison. In the case of Albert Parrish, a former economics professor who received a 292-month prison sentence for masterminding a $66 million Ponzi scheme, his handwritten motion for compassionate release was filed in April:
After the Government opposed the request, the Court entered an order denying Parish’s motion on April 27, 2020. Four days later, Parish asked the Court to reconsider his request on the basis that he had since contracted the virus in prison. After the Government provided ongoing updates about Parish’s treatment (and indicating that Parrish would be moved to the hospital if his status worsened), the Court entered an Order on May 19, 2020 finding that Parish had failed to demonstrate “extraordinary and compelling reasons” warranting his release.
Another Ponzi schemer was initially successful at securing a compassionate release but later saw that release overturned after an outcry by his victims. Scott Farah has been serving a 15-year sentence since being imprisoned in 2010 for what authorities called the largest Ponzi scheme in New Hampshire history. After Farah’s compassionate release request was granted by prison officials in June, a number of victims learned of the impending release and contacted both the U.S. Attorney’s Office and a local newspaper to express their outrage at the decision. After the U.S. Attorney’s office reportedly intervened with prison officials, Farah’s release was overturned.
Not all of the requests were denied. A few individuals were successful in securing release, most notably a Florida man who was released to home confinement seven years ahead of his scheduled release for running one of Florida’s largest Ponzi schemes. Nevin Shapiro pleaded guilty in 2011 to running a $930 million Ponzi scheme involving a fictitious grocery distribution business and received a 20-year prison sentence. He was scheduled to be released from prison in June 2027. However, it was reported in June that Shapiro had secured an early release and had been transferred into home confinement. Shapiro’s case for release was reportedly aided by the fact that he had served more than half of his sentence and that he had several underlying health conditions that placed him at increased risk of catching the virus.
According to Yahoo Sports, Shapiro was released to the custody of a family member and will be subject to electronic monitoring, a ban on drinking alcohol, and a monitored walking area near the residence. Any job Shapiro secures will also result in the garnishing of any earnings towards the remainder of his $82 million restitution obligation.
Others who were able to obtain an early release included Chris Bass (was released five months ahead of scheduled release) and Philip Lochmiller (released more than 20 years ahead of schedule due to ongoing dementia).
An Unfavorable Outlook
Of the few release requests that were granted to convicted Ponzi schemers, it appears they came near the onset of the pandemic during which authorities were scrambling to manage an unprecedented situation and comply with Attorney General Barr’s urgent directives. Since that time, as both authorities and courts have become better educated about the virus and adapted to the new normal, the trend appears to be that the increased susceptibility to the virus alone does not satisfy the “extraordinary and compelling” threshold needed to justify an early release. Although these requests will continue to be judged on a case-by-case basis, it seems those few who were successful in obtaining an early release may have benefitted from their diligence in seeking relief.