Former Nixon Peabody securities partner David Tamman was sentenced on Monday to seven years in prison for his role in a $22 million Ponzi scheme.
U.S. District Judge Philip Gutierrez said he was sympathetic to the “out of whack” sentencing guidelines, and acknowledged that Tamman did not benefit financially from the scheme. Still, he imposed a sentence much closer to the federal government’s requested eight years than a request by Tamman’s lawyers for three years and one month.
He said it was because Tamman obstructed a U.S. Securities and Exchange investigation and lied during his trial last year.
“He’s a lawyer and he obstructed justice,” Gutierrez said during a hearing in Los Angeles.
He added three years of supervised release and a fine of $2,500. Tamman, who declined to offer a statement during the hearing, must surrender to federal authorities by November 15.
Tamman client John Farahi, founder of Newpoint Financial Services Inc. in Beverly Hills, Calif., convinced investors—primarily from the Iranian-American Jewish population in Los Angeles—to purchase corporate bonds purportedly backed by the Trouble Asset Relief Program. Instead, he funneled the money toward other investors and to support a lifestyle that included a yacht and Beverly Hills mansion. Farahi pleaded guilty to defrauding investors and in March was sentenced to 10 years in prison. He also was ordered to pay more than $24.3 million in restitution.
Tamman, by contrast, was convicted at a bench trial of 10 counts including obstruction of justice, altering records in a federal investigation and being an accessory after the fact to the fraud. Duncan noted that his client, unlike Farahi, suffered financially and personally. Tamman, a graduate of the University of Southern California School of Law, was suspended from practicing law in California earlier this year.
“There is no question that the main instigator of this fraud…was Mr. Farahi,” said David Duncan of Zalkind Duncan & Bernstein in Boston, who represented the defendant. “Not Mr. Tamman.”
In presentencing filings on September 6, Tamman’s lawyers argued for lighter punishment on the ground his crime primarily involved the cover-up of the Ponzi scheme and not the actual fraud. Tamman did not know the full number of victims and the dollar amount of the fraud, they added.
They cited the July 15 sentencing of Joseph Collins, a former partner at Mayer Brown, to one year and one day in prison, due in part to his less culpable role as outside counsel in the Refco Inc.’s $2.4 billion fraud.
Tamman, 46, lives in a rented home with his elderly and ailing parents and faces mounting legal bills that are being paid for by his uncle, according to the sentencing memo, and suffers from depression.
But assistant U.S. attorney Aaron May stressed that Farahi’s scheme would not have been so successful without Tamman, who altered legal documents to evade government scrutiny. Tamman’s efforts at obstructing justice—including blaming his secretary for altering the documents—cost the government extra investigative resources and prevented the receiver of Newpoint Financial from recovering as much money for the 86 known victims.
“He can’t escape responsibility for the harm Mr. Farahi did,” May said. “He is responsible for it, as well.”
Still, prosecutors, acknowledging Tamman’s history of mental health problems, backed off an earlier demand that he serve the probation office’s recommended sentence of at least 12 years and seven months in prison.
Gutierrez called that guidelines range “out of whack.” But he said he was troubled that Tamman had lied to him and to the SEC—especially since the defendant was a lawyer.
Lawyers for Tamman, who has been under house arrest for 10 months, requested that their client serve his sentence at a facility other than the one where Farahi is incarcerated in Taft, Calif.
Tamman worked at a string of law firms before landing at Nixon Peabody in 2007 as a nonequity partner. He was promoted to equity status there two years later. After being fired from Nixon Peabody in 2009 over his involvement in the Newpoint case, he moved to Greenberg Traurig, which dismissed him in 2011 amid the SEC investigation.