NEW YORK -- Merchant banker C. Gregory Earls was sentenced to more than 10 years in federal prison yesterday and ordered to pay $21.9 million in restitution for defrauding investors, many of whom he met in Washington's elite social circles.
"There simply doesn't seem to be a genuine recognition" of wrongdoing, said U.S. District Judge Naomi Reice Buchwald, who rejected Earls's arguments that, while he may have "played fast and loose" with investors' money, he never intended to defraud them.
"It never occurred to me that I was doing anything wrong. I had all of my friends in this transaction," says C. Gregory Earls.
(David Karp -- Bloomberg News)
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Many were individuals he considered close friends, he told the judge. A longtime fixture on Washington's social and charity circuit, Earls, 60, drew investors including his employees, his children's teachers, fellow parishioners at Christ Church in Georgetown, syndicated columnist George F. Will and former White House counsel C. Boyden Gray. Prosecutors alleged the West Virginia native used Southern charm and well-practiced salesmanship to persuade investors to back U.S. Technologies Inc., a prison-labor firm that Earls helped turn into an Internet venture company just as the 1990s high-tech bubble burst.
Investors poured $20 million into USV Partners LLC, a private firm Earls set up to buy shares in U.S. Technologies. But instead of buying the company's stock, Earls diverted 65 percent, or about $13.8 million of the money, for personal expenses including shopping trips at Tiffany & Co. and his daughter's Harvard tuition, according to prosecutors.
Ken Jones, who did consulting work for Earls, told the court that he gave Earls nearly $300,000, most of his retirement savings, after a holiday party in December 1999.
Earls promised to return the money within two months but began avoiding his calls, he said. "I should have listened to my wife," Jones said. "There's not a day that goes by that I don't hope he gets what's coming to him."
"Mr. Earls has been living off other people's money for the better part of a decade," said William Stellmach, the assistant U.S. attorney. "He stole their money" and their lives, he said.
Earls has been dogged by lawsuits and accusations for more than 20 years as he pursued investments in a variety of ventures, including movies, corporate takeovers, coal mines and minor league baseball. In an emotional plea Friday, Earls pointed to his family, Jones and other investors who spoke out against him and said he had made mistakes but had not stolen the millions prosecutors accused him of.
"It never occurred to me that I was doing anything wrong. I had all of my friends in this transaction," Earls said. "I deeply regret that Ken Jones hates me. It hurts a lot."
While Earls's ventures had faulty bookkeeping, Earls said there are records that show virtually all of the $20 million invested in USV Partners was used -- as promised -- to purchase U.S. Technologies stock.