Judge orders Champion-Cain to spend 15 years in prison for $400M Ponzi scheme
She receives the maximum penalty with her request to postpone the start of prison term denied. She is taken into custody immediately
Gina Champion-Cain, a once high-profile restaurateur who orchestrated a nearly $400 million Ponzi scheme involving hundreds of victims, was sentenced Wednesday to 15 years in prison.
She received the maximum penalty for the criminal charges of conspiracy, securities fraud and obstruction of justice.
While federal prosecutors had recommended a lesser sentence of nearly 11 years, in part because of her cooperation in the ongoing case, U.S. District Judge Larry Burns said Champion-Cain deserved the maximum, calling her crimes a “tremendous fraud” and a “betrayal.”
Not only was her Ponzi scheme long-running, it was likely the biggest fraud committed in the history of the federal court’s Southern District of California, Burns said. He was unwilling to give her full credit for her cooperation because he felt that had already been taken into consideration as part of her original plea deal last year. In truth, Burns said, Champion-Cain could have been charged with many more criminal counts — and faced a much longer prison term — for a scheme that so far has resulted in net losses of more than $180 million.
“This went on for seven years. This wasn’t just strangers hoping to get rich,” Burns said, referring to some of the victims who had been longtime friends of Champion-Cain and addressed the judge in court Wednesday. “I didn’t realize the personal relationship between the defendant and many of the people who were victimized. This is a level of deceit and betrayal I wasn’t fully aware of.”
In addition to time behind bars, Burns sentenced Champion-Cain to three years of supervised release. Depending on her behavior while in prison and other factors, she could potentially shave more than three years off her prison term, Burns suggested.
After delivering the sentence, he declined Champion-Cain’s request to postpone the start of her prison term so that she could get her COVID-19 vaccine and build immunity to the virus. Champion-Cain, 57, showing little emotion during the hearing, was taken into custody and led out of the courtroom with her hands behind her back.
Long regarded as a high-powered businesswoman who in recent years was best known for her chain of now closed Patio restaurants, Champion-Cain conceived nearly a decade ago a Ponzi scheme that the U.S. Attorney’s Office described as one “on steroids,” drawing in at least $372 million from more than 490 investors over a seven-year period.
In July, Champion-Cain pleaded guilty to criminal charges in connection with a far-ranging liquor license lending program that enticed investors who thought they were making high-interest loans to license applicants who supposedly could not afford to put up a required sum of money while their applications were pending before the state Department of Alcoholic Beverage Control.
What the investors did not know was that Champion-Cain was funneling the bulk of the funds to companies she controlled — American National Investments and its subsidiary ANI Development — and using money from new investors to pay back individuals who had invested earlier.
In some instances, the money she solicited from investors was used to prop up her restaurant, clothing and vacation rental businesses, some of which were failing or had negative cash flows. Millions more, said the U.S. Attorney’s Office, went toward supporting her “luxurious lifestyle,” including making payments on personal homes and purchasing San Diego Padres and Chargers box seats, automobiles, jewelry and vacations.
Upon learning of investigations into her lending program, Champion-Cain instructed her employees to destroy emails, refrain from producing an electronic calendar and messaging, and trash files that were sought by the Securities and Exchange Commission, said Assistant U.S. Attorneys Aaron Arnzen and Andrew Galvin in a sentencing memo.
“Nearly 500 victims poured over $350 million into Champion-Cain’s sham investment scheme,” Galvin said following the court hearing. “Champion-Cain did not use the money to finance liquor license transactions as she told investors. Rather, she used tens of millions of dollars to line her own pockets and to support her failing Patio restaurants and other retail businesses.”
Of the judge’s decision to deliver a harsher sentence than what was recommended, Arnzen said, “In this case, the judge actually had more information than we did. We’re satisfied that it was a very significant sentence.”
During the hearing, Arnzen, in response to a question from Burns, said he expects more prosecutions to emerge from the ongoing probe of the Ponzi scheme. Last week, Champion-Cain’s former chief financial officer, Crispin Torres, who pleaded guilty last year to a single charge of conspiracy, was sentenced to four years in prison.
Before hearing what her sentence would be, Champion-Cain addressed Judge Burns, saying she understood the seriousness of her crimes and the “horrible impact” they’ve had on her victims, as well as her own family and friends. She said she’s been questioning what would have driven her to “such horrendous conduct.”
In part, she said, she believes her fraudulent behavior had its roots in the fallout from the recession in 2008 when she reached a “desperation point.”
“I worked hard to generate wealth for my family, my friends and myself as we all struggled to make it out of that dark economic hole,” Champion-Cain said, her voice quavering at one point during her remarks. “I kept trying to pull deals together, to be creative in the re-creation of my business, but I kept failing. I panicked and felt I needed to support an image of who people believed Gina Champion-Cain was.”
Champion-Cain’s victims, the U.S. Attorney’s Office said, covered a broad swath — from wealthy investors who lost tens of millions of dollars to a former state prosecutor “who had a far more modest nest egg that he could not afford to lose.”
A few of them delivered statements to Burns in which they attempted to convey the level of betrayal they felt, especially given their longstanding personal relationships with Champion-Cain.
Jane Gilbert, a criminal defense lawyer who described herself as a former roommate and friend of more than 30 years who attended Champion-Cain’s wedding, said she is still in disbelief as to how her friend could have conned her. Gilbert said she was torn between wanting to punch her in the face and give her a hug.
“The hardest part is not the loss of money but the betrayal I feel,” she said. “I’m so saddened by it. I’m so hurt by it. I thought I knew her and now I don’t, and I don’t know if what she is saying today is true.”
Calling Champion-Cain “evil” and a “very bad person,” Kristine Heidrich urged Burns to sentence her to the maximum possible under the law. Heidrich, who at one time owned a bioidentical hormone therapy company, said she regarded Champion-Cain as a “business companion.”
“The moment she met me she knew she’d take my money and she had a plan,” said Heidrich, who dabbed her eyes with a tissue after she finished speaking. “For her to say she’s trying to be cooperative doesn’t mean anything to me.”
Following the court hearing, she said she was pleased with Burns’ decision. While the sentence was gratifying, it also felt painful, Heidrich said. “It’s a human being who hurt other human beings. How can you have joy in that? I don’t know.”
Champion-Cain has the option of filing an appeal of her sentence within the next 14 days. Her attorney, David Scheper, said no decision has been made yet.
Federal judges have broad discretion in sentencing. They do not always follow sentencing recommendations from prosecutors and frequently end up sentencing people to less time in prison than the government sought. It is unusual but not unprecedented, however, for a judge to disagree and increase the sentence recommended by prosecutors.
“Here in San Diego, judges quite frequently sentence below the government’s recommendation,” said Jeremy Warren, a criminal defense lawyer not associated with the Champion-Cain case. “On occasion, in extreme cases, a judge may impose a sentence in excess of the government’s recommendation.”
Burns, a former federal prosecutor in San Diego, made it clear during the hearing that the recommendation from the U.S. Attorney’s Office of 130 months in prison was too lenient. He noted that once the scam was discovered and investigators had access to records detailing the swindles, it was likely prosecutors could have proved their case — without the help of Champion-Cain.
Arnzen responded that her cooperation after the scam broke open has saved time and money for the receiver charged with untangling her financial affairs, and recover money for investors.
While Wednesday’s sentencing finally answers the question of how much punishment Champion-Cain will face for her crimes, the probe into the overall liquor license lending program remains ongoing as investigators look to see whether there are others who were complicit.
In an effort to recoup some percentage of their losses, multiple groups of investors have filed lawsuits against Chicago Title, claiming that the company played a role in facilitating the fraudulent lending program. Chicago Title was the escrow company that Champion-Cain used for holding investor money she raised for the purported loans. So far, Chicago Title has reached settlements with close to 200 investors for more than $60 million, which represents only a portion of their losses.
Champion-Cain has said her overarching goal is to help recover funds for her victims.
Burns, however, said he thinks it is unlikely many victims would see very much, if any, of their money returned since so much of it was already spent on lavish personal items — a $20,000 golf cart, jewelry, box seats at sporting events.
“A lot of it,” Burns said of the money, as several victims in the gallery nodded quietly in agreement, “is gone.”
1:02 p.m. March 31, 2021: Updated with judge’s remarks.
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