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Saying "Restitution Comes First," Judge Slashes Prison Sentences For Brothers Convicted Of Running Ponzi Scheme

"The longer you're incarcerated, the longer the victims go without any money...Restitution comes first." 

- Ingham County Judge Rosemarie Aquilina

A Michigan judge drastically reduced the sentences of twin brothers convicted of operating a multi-million dollar real estate Ponzi scheme, reasoning that their ability to pay restitution to defrauded victims weighed in favor of a reduced prison sentence.  James and Thomas Mulholland had their 10-to-20 year prison sentence reduced to 3.75-to-20 years by Ingham County Circuit Court Judge Rosemarie Aquilina after an appellate court vacated the brothers' previous sentence over an error in applying sentencing guidelines.  With the new lower sentence range and because they have been in prison since 2016, the brothers will be eligible for parole in mid-2020.

The Mulholland twins - who incredibly are one of at least three sets of twins accused of running Ponzi schemes (see here and here) - were convicted by a Michigan jury in 2016 of eight charges stemming from their operation of Mulholland Financial.  The company, which they started in 1987, invested in residential real estate in Michigan.  Shortly after forming the company, the Mulhollands began raising money from investors to purportedly buy, maintain, and rent residential housing.  Prospective investors were promised a guaranteed 7% annual return which would purportedly be generated from company profits.  The Mulhollands recruited clients of thier insurance business as well as those clients' friends and relatives, and many of those clients were retirees with limited or no investment experience.  Despite Mulholland Financial's dissolution in 2006, the brothers continued raising funds until 2010.

Perhaps unsurprising given the company's real estate focus, the financial downturn was devastating to Mulholland Financial and resulted in the twin brothers filing bankruptcy in February 2010.  In late 2012, the Securities and Exchange Commission filed a civil enforcement action against the brothers alleging that they conducted a fraudulent and unregistered securities offering and accusing them of making numerous misrepresentations about the business and the use of investor funds.  For example, despite the brothers allegedly telling investors in late 2009 that the business was doing well and would be expanding soon, the SEC alleged that Mulholland Financial had been experiencing financial hardship since at least January 2009 and frequently operated at a loss during 2009.  The SEC also alleged that the brothers used investor monies raised in 2009 to, among other things, "shore up their money-losing business" and make repayments to existing investors - the hallmark of a Ponzi scheme.  The Mulhollands consented to the entry of final judgments in 2012 ordering them to pay disgorgement and civil monetary penalties.

The Mulhollands were later charged by Michigan authorities several years later.  After an August 2016 trial where a jury convicted the brothers of eight charges, a sitting Ingham County judge sentenced each of the brothers to 10-20 years in prison and ordered them to pay approximately $200,000 in restitution.  The restitution paled in comparison to the estimated $18 million in losses because Michigan law limits the awarding of restitution only to victims whose cases resulted in the conviction.  The Michigan Court of Appeals vacated the brothers' sentences last year over errors in the application of applicable sentencing guidelines, including the improper maximum scoring for one scoring variable that allowed an increase where victims experienced serious psychological injuries.  At a hearing this week, Judge Aquilina observed that keeping the Mulhollands in prison would only delay their ability to pay the $208,000 in restitution they owe to victims and reduced the twins' sentences to 3.75-to-20 years in prison.  

The brothers will be eligible for parole in mid-2020.

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