UPDATE IN TODAYS PAPER. Looks like a lot of money was paid to "recruiters".
November 4, 2014 in City
Doris Nelson sentenced to nine years in prison for Little Loan Shoppe fraud
Kip Hill The Spokesman-Review
Tags: Doris Nelson Elizabeth Kelley fraud jeffry finer ponzi scheme sentencing U.S. District CourtEditor’s note: A previous version of this story misidentified Caitlin Baunsgard, the U.S. Assistant Attorney who prosecuted the case, and incorrectly identified Jeffry Finer’s affiliation with regard to the case. This story has been updated to correct and clarify.
A sobbing Doris Nelson apologized Monday to hundreds of people who lost money to an investment scheme she ran for years to support her Little Loan Shoppe online lending business in Spokane. U.S. District Judge Robert Whaley then sentenced her to nine years in prison.
“I don’t quite buy that you began evil,” Whaley told her.
Nelson’s apology met with scoffs from several onlookers who left the courtroom angry. Federal prosecutors wanted Nelson to spend 30 years in federal prison for bilking investors of about $50 million.
Whaley said such a long sentence would verge on vengeance rather than justice.
Nelson pleaded guilty in April to 110 criminal counts of wire fraud, mail fraud and money laundering. There was no plea agreement with prosecutors.
She then retained new lawyers and attempted to withdraw her plea. She failed. She tried again Monday before the sentencing and failed again.
Nelson’s attorney Jeffry Finer said late Monday he is unsure whether Nelson would ask to pursue further legal appeals based on a sentencing result “that was far better than we had feared.”
“I don’t know whether a trial would bear a lower sentence,” said Finer, who worked with attorney Elizabeth Kelley on Nelson’s behalf.
Testifying on Monday were several federal agents assigned to Nelson’s case, which was launched by Canadian authorities in 2001. Also testifying was a longtime employee of Nelson’s, Brittany Becker, who detailed seven years with the Little Loan Shoppe and its undoing that occurred shortly after the economic downturn of 2008.
Much of the questioning by Finer dealt with the details of the federal government’s investigation. An 18-page “master list” of investors in what the government described as a Ponzi scheme was presented as evidence by the government that somewhere around $48 million was lost.
“This is the largest Ponzi scheme in the Eastern District of Washington, and the second-largest in the state of Washington,” said U.S. Assistant Attorney Caitlin Baunsgard.
But Finer questioned where the numbers came from that supported the so-called master list of investors, who put money into Nelson’s business that was then supposed to be used to make high-interest payday-type loans.
The government said Nelson instead used some of the newer investor funds to pay on older ones as the business faltered. Prosecutors also said Nelson used the money to fund an extravagant lifestyle.
Many investors who lost money live in Canada and are members of the Jehovah’s Witness religious community, a factor Baunsgard pointed out in asking that Nelson spend 30 years behind bars.
Whaley ruled Nelson’s scam was not a Ponzi scheme, a finding that allowed defense attorneys to add the amount earned by some investors to the money lost by others and arrive at a total $19 million loss from the scheme. That amount was below a $20 million cutoff for a harsher prison sentence.
Whaley, however, would not rule that Nelson’s actions affected just 40 victims, an argument Kelley made based on the number of victim impact statements received by the courts.
“There are real people you hurt bad,” Whaley said, acknowledging that, as an attorney, he defended a Ponzi scheme case before being assigned to the bench.
Baunsgard asked Whaley to make an example of Nelson, given the notorious reputation Spokane has received in the national press as the fraud capital of America.
Nelson’s nine-year sentence comes a year after Greg Jeffreys also pleaded guilty to defrauding investors out of a little more than $9 million. Jeffreys received an eight-year prison sentence.
Prosecutors will plan to seek $50 million from Nelson to repay investors.
“This is not a number we ask for lightly,” Baunsgard said of the request for 30 years’ imprisonment. “Especially in a fraud case.”
Kelley accused the government of demonizing Nelson, who she patted on the arm and hugged after the sentence was read.
“Doris Nelson is not Spokane’s Bernie Madoff,” Kelley said. “She is a good and trusting woman who got caught up in something that was way over her head.”
Whaley ordered that Nelson may self-report to prison, to which the defendant replied, “God bless you.”