Monica L. Coleman, the former Baltimore money manager who early this year pleaded guilty to bilking her clients, faces a possible 15-year jail term - with all but three years suspended - at a sentencing hearing scheduled for today.
Had federal authorities, instead of the state, prosecuted this case, Coleman might be facing even more time in jail, legal experts said yesterday. But having the state attorney general's office pursue the kind of financial fraud case typically left for federal authorities sends a strong message: Law enforcement agencies at every level of government are increasing their vigilance over financial fraud and other types of white collar crime, the legal experts said.
"If she did what she was charged with doing, she deserves to go to jail," said Charles H. Roistacher, a partner in the white-collar crime practice group at Powell, Goldstein, Frazer & Murphy LLP in Washington and a former federal prosecutor.
"The state is using this case as a vehicle for publicizing that these cases will be prosecuted [by one of the area law-enforcement agencies]. It might be prosecuted by the state's attorney in Baltimore, the U.S. attorney in Baltimore or the attorney general's office, which has statewide jurisdiction."
Coleman's attorneys did not return several telephone calls seeking comment for this article.
In April, Coleman pleaded guilty to five counts of securities fraud and one count of misappropriation by a fiduciary. She and her attorneys struck the plea-bargain deal just as the one-time star investment manager was headed for trial on a list of charges that included felony theft.
Each one of the five fraud charges can lead to a maximum prison term of three years and a fine of $50,000. The misappropriation charge can lead to a maximum five-year sentence.
But the charges Coleman would have faced had she gone to trial carried much starker penalties. For instance, each of the 15 counts of felony theft carried a maximum prison sentence of 15 years, and a fine of $1,000.
Eileen McInerney, the assistance attorney general who is prosecuting the case, declined to comment on the sentence when reached last week, noting the impending sentencing hearing.
The state is recommending 15 years in prison, with all but three years suspended. McInerney did note that - even with the plea agreement in place - Coleman's lawyer is free to argue for a reduced sentence. The sentence cannot be increased.
However, experts said that, even though it is unlikely Coleman will walk out of Baltimore City Circuit Judge Roger W. Brown's court today with no jail time, it's also unlikely that she will spend three years behind bars.
In general, "there is an upward trend in enforcement, an upward trend through higher sentences," Roistacher said. "But if [Coleman] actually does three years in prison [it would be a surprise].
"But it still isn't just a pat on the wrist."
Over the past year, with financial scandals such as Enron Corp. and Adelphia Communications Corp. in the news almost daily, Congress and the Bush administration reached agreement on a series of new regulations designed to overhaul the U.S. financial system.
Those reforms, which created new oversight for the U.S. accounting industry, also made securities fraud a crime with a 25-year maximum jail term.
While these new rules would not have affected Coleman, experts such as Roistacher said that even under the old federal sentencing guidelines the former money manager would likely have received a longer jail sentence than in the Maryland-prosecuted case.
All these new factors will combine to have a chilling effect on securities fraud and related infractions by corporate executives, public companies and financial advisers, said Robert J. Cleary, a former U.S. attorney for the state of New Jersey who Monday became a co-chair of the white-collar crime defense group of Proskauer Rose LLP, a law firm based in New York.
State law-enforcement agencies typically have more resources than the state offices of the U.S. attorney, according to Cleary.
By joining forces, state and federal law enforcement units could put the squeeze on surging securities fraud. That's the message broadcast by Maryland's involvement in the Coleman case, he said.
"It says there are [now] two prosecutorial authorities vigilant" against such infractions, Cleary said.
Upon her release, Coleman would be on probation for five years, and would have to make restitution.
Prosecutors alleged that Coleman, who previously worked at Legg Mason Inc., bilked five of her clients out of an aggregate $2.6 million between June 1997 and April 1999.
They also allege that she either used the money for herself or used it to help keep her business - brokerage firm Coleman Craten LLC - from foundering.
Founded in February 1998 and at first intentionally kept out of the limelight, Coleman Craten was given a lavish coming-out party late that same year.
It represented a considerable departure from the conservative, sometimes sterile, brokerage offices of today, combining the comforts of private clubs and the plush brokerage offices of yesteryear: It had soft leather chairs, rich carpeting, a quiet-and-comfortable reading room stocked with the financial reports of thousands of public companies, billiard tables, and even a place to get refreshments. Tuxedo-clad doormen stood at the entranceways.
The anticipated stampede by Baltimore's investment elite never materialized, and the need for the planned-for 120 financial advisers didn't either. Ultimately, prosecutors and creditors theorized, Coleman extracted money from client accounts and used it to prop up her brokerage firm.
Her firm ultimately failed, and there is now a bankruptcy proceeding separate from the criminal case
In a settlement announced in December, about 20 former Coleman Craten clients were to get back as much as half of their money lost through investments made with Coleman's firm.
That half was more than investors have typically been getting after being victimized in financial scandals of recent vintage.