Va. official sentenced to 10 years in prison for fraud

By Rosalind S. Helderman
Washington Post Staff Writer
Tuesday, November 23, 2010; 8:14 PM

RICHMOND - A federal judge sentenced former Virginia Secretary of Finance John W. Forbes II to 10 years in prison Tuesday for defrauding the state's tobacco commission of $4 million.

Forbes, 54, who served as Virginia's top budgeting officer from May 2001 through January 2002 under former Gov. James S. Gilmore III (R), pled guilty to wire fraud in August.

He acknowledged that in 2001 he encouraged _blankthe Tobacco Indemnification and Community Revitalization Commission, on which he served as Gilmore's representative, to award a $5 million grant to a nonprofit he controlled.

The Virginia Literacy Foundation spent about $900,000 on scholarships and grants to community colleges in economically depressed parts of the state. Forbes acknowledged that he diverted the rest to his personal use, paying himself and his then-wife hefty salaries and transferring the money to shell companies he controlled.

Erich Ferrari, Forbes's attorney, argued he was deeply remorseful and should be sentenced to a little less than six years in prison. Forbes told Judge Henry E. Hudson that he had changed in the past decade.

"My life is vastly different than it was then. I'm a different man, a better man," he said.

But U.S. District Court Judge Henry E. Hudson said Forbes had shown a pattern of dishonesty and deceit, and accepted Assistant U.S. Attorney Michael Gill's recommendation that Forbes receive the high end of federal sentencing guidelines for his crime.

"You have not only betrayed the citizens of Virginia but also the governor who appointed you," Hudson said.

In a statement, Gilmore said he was "extremely disappointed by what has come to light about John Forbes's behavior over the last several years."

"He abused the trust that was put in him at the great expense of the people of Southside Virginia, who deserve much better," Gilmore said.

Ferrari also requested that Forbes be allowed to surrender to authorities and begin serving his sentence after the holidays. But Hudson said he did not trust the former state cabinet secretary to surrender as ordered. Instead he had Forbes taken from the courtroom to begin serving his sentence immediately.

The tobacco commission was created in 1999 to divvy up Virginia's share of a massive legal settlement reached by 52 states and territories and the nation's four largest manufacturers of cigarettes.

In Virginia, lawmakers agreed to use half of the state's share, which has so far come to $1.23 billion, to help revitalize the economy of southwest and Southside Virginia, where farmers have been hit hard by steep declines in demand for tobacco.

The 2001 grant to Forbes's Virginia Literacy Foundation was one of the commission's first and largest projects.

In court Tuesday, Gill argued that Forbes' role as a top state official and Gilmore's representative to the commission caused other members to probe the arrangement less deeply than they would had he been an ordinary citizen.

Forbes' fraud has caused questions about whether the tobacco commission has been wisely spending the state's settlement funds. Several current commission members have said they have instituted stricter financial controls that would likely have prevented Forbes' fraud.

But a 2008 blue ribbon panel led by former Gov. Gerald L. Baliles (D) concluded the commission was spending too much of the money on small projects that did not have dramatic enough impact on the depressed economic region.

A spokesman for Gov. Robert F. McDonnell (R) has said he is reviewing whether changes are needed to the tobacco commission.

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