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The sentencing of a Beverly Hills, Calif., businessman who admitted his role in a $20 million Ponzi scheme might bode ill for his alleged co-conspirator, former Nixon Peabody securities partner David Tamman.

John Farahi, founder of Newpoint Financial Services Inc., was sentenced to 10 years in federal prison on March 20 after pleading guilty to defrauding investors and attempting to cover it up when the U.S. Securities and Exchange Commission launched an investigation. U.S. District Judge Philip Gutierrez in Los Angeles ordered Farahi to pay more than $24.3 million in restitution to individual investors and the banks he defrauded.

The sentence mirrored what federal prosecutors had been seeking; Farahi, on the other hand, had asked for two years in prison and a restitution amount closer to $10 million.

Tamman pleaded not guilty but was convicted in a bench trial on November 13. His sentencing is scheduled for May 20, and his objections to the U.S. Probation Office’s presentencing report are due on April 15.

David Duncan, a partner at Zalkind Duncan & Bernstein in Boston, who Tamman hired on January 23 to represent him at sentencing, insisted that his client and Farahi are in "very different positions."

"My client’s a different person and a different defendant in a different posture," he said. "I suspect the judge will listen to what we have to say and make a decision accordingly."

Tamman, who worked for Nixon Peabody from February 2007 to October 2009, was suspended by the State Bar of California on February 18 following his conviction on 10 counts including conspiracy to obstruct justice, alteration of records and mail fraud. He faces a statutory maximum sentence of 190 years.

A graduate of the University of Southern California Gould School of Law, Tammanfirst began representing Newpoint Financial in 2009 while at Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor in Los Angeles. He brought the client with him to Nixon Peabody, which fired him amid the SEC investigation. He has since sued Nixon Peabody in Los Angeles County, Calif., Superior Court, claiming he was "thrown under the bus" by the firm in an attempt to distance itself from the SEC investigation. The receiver for Newpoint also has sued Nixon Peabody, alleging complicity in the fraud.

Tamman was represented at trial by Stanley Stone and Steven Stone of Stone & Stone in Encino, Calif. Following his conviction, Tamman replaced his attorneys with Duncan, his partner Norman Zalkind and associate Ruth O’Meara-Costello. Tamman also is represented by William Genego of the Law Offices of William Genego in Santa Monica, Calif., who is local counsel.

Tamman was convicted on charges that he backdated documents related to the fraud. Farahi told investors—mostly members of the Iranian-American Jewish population in Los Angeles—that their money would be used to purchase corporate bonds backed by the Trouble Asset Relief Program; instead, Farahi used the money to support a lavish lifestyle that included a Beverly Hills home and a yacht, and to cover millions of dollars in stock losses he suffered during the fall of 2008.

Farahi pleaded guilty on June 7 to one count each of mail fraud, loan fraud, illegal sale of securities and conspiracy to obstruct justice. Under his plea deal, he agreed to spend at least two years in prison, while prosecutors said they would not seek more than 10 years.

In sentencing documents, Farahi’s attorneys attempted to argue that the U.S. Probation Office’s presentencing report, which calculated his prison term at between 15 years and eight months and 19 years and seven months, "greatly overstates the seriousness of the offense conduct," given the economic collapse at the time. He questioned the truth of some of the investor statements and argued that the banks that loaned him money were aware of his losses and therefore not entitled to restitution.

"There’s a broader story," Farahi’s attorney, Gary Lincenberg, a principal at Los Angeles-based Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg, told The National Law Journal. "Things can be painted with the government throwing out large numbers, and it doesn’t really tell the whole story of how we got to where we did. We were trying to present that to the court in a manner that I don’t think supported a 10-year sentence."

Prosecutors, in court documents, played down the role Farahi’s cooperation played in their case against Tamman.

"Defendant tries to shift the blame from himself to his victims, claiming they—not him—were the ones to blame for defendant operating a Ponzi scheme and using their hard earned money to support his luxurious lifestyle," prosecutors wrote. "The investors are not to blame for defendant’s crimes. That blame lies solely on defendant."

Following his release from prison, Farahi must serve three years of supervised release. He is scheduled to report to prison on May 3, and Phillips has recommended that he be incarcerated at a minimum-security facility in Taft, Calif., near Bakersfield.

"We hope and believe that the investors in this case will eventually be repaid in full after the receiver completes his work and that, in the long run, Mr. Farahi will also be judged by the incredible history of good deeds that he has done for people throughout his life," Lincenberg said. "Unfortunately, here we had a very angry group of investors because they had lost money and had been delayed in recovering money because the receivership work has taken so long."

Contact Amanda Bronstad at [email protected].

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