Former Cincinnati money manager Glen Galemmo was sentenced on Thursday for running a Ponzi scheme that may have topped $100 million.

About a dozen investors’ testimony in court helped convince the judge to impose a stiff 15-year sentence.

Glen Galemmo – The modus-operandi

Hedge fund fraudster Glen Galemmo ran a Ponzi scheme at his Cincinnati-based Queen City Investments, which collapsed last year. Despite major losses, he claimed to have returned 432% from 2006 through 2011, without a losing year during the stretch.

According to prosecutors, Galemmo orchestrated the complicated fraud for at least seven years. The investment advisor would play a shell game with investors’ money, using new cash that was supposed to be invested to pay back existing clients asking for withdrawals. Assistant U.S. attorney Emily Glatfelter said Galemmo fabricated monthly reports that showed the firm was faring well even in the struggling economy and described investments and stock sales that never happened.

Glen Galemmo

 

Galemmo also diverted investor funds for a variety of unauthorized uses, including the purchase of real estate and entertainment complexes. The scheme came to a sudden halt in July 2013 when investors received an email from the investment advisor stating that the funds were shutting down and directing all further inquiries to an IRS agent. He was later arrested, and agreed to plead guilty shortly thereafter.

188-month sentence

Senior U.S. District Judge Herman Weber passed down the 188-month sentence. He said: “The offenses and their devastation can’t be tolerated”. Weber said he meant to send a “loud, emphatic message” to would-be fraudsters with the ruling, but he also said the sentence reflected Glen Galemmo’s remorse.

Gary Frey, one of 141 victims identified as having been defrauded by Glen Galemmo in what may have been the largest Ponzi scheme in Hamilton Country’s history, said the sentence was fair, but that it brought him no joy. He lost about $200,000 to Galemmo and that savings represented some 80 years of hard work and savings between Frey and his wife. He said: “It’s still only 31 days per investor”

The sentence was handed down after nearly two days of the sentencing hearing in which victims of the scheme spoke out about their losses. The disgraced money manager apologized to investors and his family in court on Thursday, the first time he spoke in the case.

Glen Galemmo’s attorney Ben Dusing tried to argue for a shorter sentence by claiming the former Hyde Park investment manager didn’t set out to defraud investors. The attorney said the former money manager made a bad decision in order to cover $1.4 million in loans that were unexpectedly slow to be repaid. However, the attorney couldn’t convince the judge.

As part of the sentence sentence, Weber ordered that up to half of any money Galemmo earns while working in prison will go to his victims, and he’ll be expected to continue paying them after his eventual release around 2030. The former investment manager must also give up his stake in several pieces of property, five vehicles and bank accounts containing about $1.5 million that had been seized by the feds during the investigation.