shaw capital management: Hollenbeck fraud sentence may be cut by a third for helping convict two others

http://www2.journalnow.com/news/2011/mar/01/wsmain01-hollenbeck-fraud-sentence-may-be-cut-by-a-ar-822244/
By Wesley Young
Published: March 01, 2011
Federal prosecutors are asking a judge to trim almost five years off the original 14-year prison sentence ofScott Hollenbeck, a former Kernersville resident who lured retirees and people he met in church circles into pouring millions of dollars into a Ponzi scheme.
The prosecutors are proposing a sentence reduction that could make Hollenbeck, 56, eligible for release in 2015 or 2016 because he helped them convict two men involved in other risky investments to which Hollenbeck steered some of his clients.
Hollenbeck was indicted in 2007 on federal criminal charges relating to his sale of investments in a Ponzi scheme masked as a truck-mounted billboard business. He was convicted and sentenced to 14 years and ordered to pay $5.6 million in restitution.
Hollenbeck had sold about $10 million in investments in Mobile Billboards of America. Many victims lived in the Triad or other parts of central North Carolina. When Mobile Billboards, masterminded by men from California and Missouri, went defunct, investors lost most of their money.
Government prosecutors are proposing to reduce Hollenbeck’s sentence by a third, to a total of about 9.3 years. Without that reduction, Hollenbeck is scheduled for release in April 2020, having apparently already had his sentence shortened under good-behavior guidelines.
Assistant U.S. District Attorney Clay Wheeler said in a court filing that Hollenbeck “provided substantial assistance” to the government in cases resulting in the convictions of John K. Colvin, a Tennessee businessman, and Gregory Bartko, an Atlanta securities lawyer.
A spokeswoman for Wheeler said victims of Hollenbeck’s investment scams will have the right to be heard in person when the court conducts a hearing in Raleigh on April 4, and victims also can submit written statements.
Most of the investors victimized in the schemes have been characterized as “mom and pop” investors — people lured into the scam by Hollenbeck’s charisma or evangelical zeal.
Mary Beck, who lives in Davidson County, invested her entire 401(k) plan in Mobile Billboards through Hollenbeck. She said she disagrees with giving Hollenbeck a lighter sentence.
“Just because he decided to testify for them, I still don’t think it is right,” Beck said. “The Good Lord took over, and I’m fine, and I forgave Scott. I still think he should serve his time.”
Beck recalled how Hollenbeck would pay for children to attend a private Christian school they could not afford. There were other things Hollenbeck did that convinced her and others that he was trustworthy, she said.
“He claimed to be such a good Christian and let us down,” Beck said. “We have had to skimp and save and try to make it because my husband and I are both senior citizens, and it has been hard.”
Hollenbeck testified against his lawyer and a business associate in two fraud cases in which Hollenbeck was named as an unindicted co-conspirator but never charged.
Colvin was a business associate of Hollenbeck’s in investment companies called Franklin Asset Exchange, Webb Financial Services and Disciples Limited. From 2003, Hollenbeck sold $20 million in investments through those companies to people he found by networking among his investment clients and church connections, court records say. Colvin directed where the money was to be invested.
Although billed as safe and backed with a phony “surety bond” that Hollenbeck cooked up, the investments were steered by Colvin mostly into a highly speculative coal mine in Montana called Bull Mountain, court records show. When the mine developers couldn’t get their operation up and running in time, they defaulted on the loans Colvin and Hollenbeck had made from the investors’ money.
As with Mobile Billboards, many of the 350 investors in Bull Mountain also live in the Triad and other parts of North Carolina. Investors included Hollenbeck’s former church, Gospel Light Baptist Church, which invested about $2 million with Hollenbeck, and a church as far away as Hawaii.
The coal-mine investors eventually recovered about 75 percent of their money in a settlement distribution. A number of Hollenbeck investors recouped part or all of some investments through other out-of-court settlements. Gospel Light Baptist Church recovered all of its money, according to Bobby Roberson, the pastor.
Bartko hired Colvin in 2004 to raise money for the Caledonian Fund, an investment fund Bartko started with a man in California, prosecutors said. Prosecutors said Bartko found out from Colvin that Hollenbeck was raising the money and using unscrupulous methods to do so. Hollenbeck raised about $700,000 for the Caledonian Fund, which sank and took the money with it in late 2004.
Nonetheless, prosecutors said, Bartko became Hollenbeck’s attorney in mid-2004, when North Carolina regulators shut down Hollenbeck’s sales of Mobile Billboards and the Securities and Exchange Commission began investigating the billboard scheme.
Bartko helped Bull Mountain investors recover some of their money, although he and another attorney pocketed $4 million in fees as part of the deal. Some investors were grateful to Bartko, but others were critical of his representation of Hollenbeck and claimed the lawyer knew that Hollenbeck was doing dishonest business.
Some of Hollenbeck’s former investors say they have put the episode behind them. Beck said she sat and cried a lot when Hollenbeck was convicted in 2008. Although she recovered some of her money, she said, it wasn’t nearly what she lost. “My husband looked at me one day and said, ‘You have got to get over this,’?” she said. “I couldn’t carry it around with me for the rest of my life.”