Former broker pleads guilty to money laundering charge
The former head of a Newport News investment brokerage pleaded guilty Friday to one count of money laundering — admitting he used investors’ cash to defend himself from allegations that he had ripped off some of the same investors.
Jeffrey A. Martinovich, 50, entered a plea agreement in U.S. District Court in Norfolk in which he admitted to one illegal cash transfer — for a $100,000 payment to his 2013 trial attorney — in return for 12 other pending felony fraud charges being dismissed.
As part of the agreement, federal prosecutors promised to ask U.S. District Judge Arenda L. Wright Allen to run Martinovich’s new sentence concurrently with a pending prison sentence from his 17 fraud convictions from 2013.
If the judge agrees, the new conviction won’t translate into additional time behind bars for the once-high-flying former chief executive of MICG Investment Management LLC.
Prosecutors further promised that when Martinovich is resentenced on the 2013 convictions, they would not ask the judge for any more prison time beyond the 11 years and eight months that U.S. District Judge Robert G. Doumar previously handed down after the original trial.
A federal appeals court recently ordered an all-new sentencing hearing for the 2013 convictions because Doumar misunderstood federal sentencing guidelines as “mandatory,” on judges, when they are merely discretionary.
The appeals court said that gave rise to a concern that Doumar might have felt constrained by his incorrect understanding.
Martinovich will now be sentenced in both cases on Sept. 29, and will get credit for the more than two years he’s already spent locked up.
Martinovich appeared before Wright Allen on Friday in a dark gray jump suit from the Tidewater Regional Jail, where he’s been held since the appeals court ordered the new hearing in January. That stood in contrast to the sharp dark suits and bright ties he wore at the 2013 jury trial.
After routine questions to ensure that Martinovich is of sound mind, not under the influence of drugs or alcohol, and satisfied with his lawyer, Wright Allen asked Martinovich about the single money laundering count he faced.
“How do you plead … guilty or not guilty?” she asked him.
“Guilty, your honor,” Martinovich replied firmly and politely, the first time he had ever uttered the term “guilty” in a federal criminal case against him.
“The court accepts the plea and finds you guilty of Count 10,” Wright Allen said.
Though the charge carries a maximum penalty of 20 years in prison, discretionary sentencing guidelines — calculated by the probation office — are expected to be far less.
After the plea, Wright Allen dismissed the other pending charges — nine counts of money laundering and one count each of mail fraud, wire fraud and transferring money derived from an “unlawful activity.”
Federal marshals then led Martinovich away after the half-hour hearing, as he turned and thanked his wife for coming.
Assistant U.S. Attorney Brian J. Samuels declined to comment on the plea deal, as did Martinovich’s current attorney, Lawrence H. Woodward Jr. Two MICG investors in the audience who have been following the case also declined to comment.
Previous trial leads to more charges
Following a month-long trial in April and May of 2013, a federal jury in Newport News convicted Martinovich of 17 of the 25 fraud counts he faced.
Among other things, the jury found that the broker schemed to artificially inflate the appraisal of a company held by one of his hedge funds as a way of boosting the performance fees his firm could collect. Several investors testified Martinovich told them they could easily withdraw their money from those funds, when in fact they could not.
Soon after that trial, federal agents discovered hedge fund bank accounts and associated money transfers. An indictment unsealed earlier this year accused Martinovich of improperly moving more than $700,000 from one of his company’s hedge funds, MICG Partners LLC, to a new account in August 2010.
Prosecutors said Martinovich spent $125,000 of that money on his trial lawyer, plus another $45,000 on other trial defense fees.
Though he got a legal opinion from a Chesapeake attorney that one of the MICG hedge funds — the one at the center of the fraud case — was obligated to pay those bills, he paid the legal bills from a different hedge fund account.
Court documents from a 2013 hearing indicate that Martinovich withdrew more than $147,000 in cash from the hedge fund account in multiple transactions.
A “statement-of-facts” that Martinovich, his lawyer, and federal prosecutors signed off on Friday does not spell out how much Martinovich may have pocketed, but said, “The defendant used such funds to support his lifestyle in this time period and for other purposes.”
No cash was paid to investors during this time, the statement said.
The specific money laundering charge that Martinovich pleaded guilty to was for a $100,000 cash payment to his then-trial lawyer, James Broccoletti. But Wright Allen said she was free to consider Martinovich’s other “relevant conduct” in sentencing him.
For example, the day after Martinovich filed for personal bankruptcy in February 2011, the statement-of-facts said, he moved $4,996 from the hedge fund account he controlled to his personal bank account.
In April 2013, the statement said, Martinovich told an employee to “retroactively assign categories” for several cash transfers, “including fabricating reasons that the defendant took certain monies from the Partners fund.”
“The defendant … agrees that his participation in the events described was undertaken knowingly … and not as a result of an accident, mistake, or other innocent reason,” the statement added.