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Former Chief Executive Officer Of Investment Advisory Firm Sentenced In Manhattan Federal Court For Fraud And Obstruction Of Justice

FOR IMMEDIATE RELEASE
Tuesday, June 10, 2014

Preet Bharara, United States Attorney for the Southern District of New York, announced today that JOSEPH LOMBARDO, the founder and former chief executive officer of Prim Capital Corporation (“Prim”), was sentenced today to 18 months in prison for mail fraud and conspiracy to obstruct justice, arising from his scheme to defraud the National Basketball Players Association (“NBPA”) through the use of a fraudulent contract worth more than $2 million to Prim. LOMBARDO also attempted to obstruct a grand jury investigation of that fraudulent contract, including by testifying falsely and asking others to testify falsely in the grand jury. LOMBARDO, who was arrested in April 2013, along with Carolyn Kaufman, the then-chief compliance officer of Prim, pled guilty in November 2013 before U.S. District Judge Jesse M. Furman, who imposed today’s sentence.

Manhattan U.S. Attorney Preet Bharara said: “Not only did Joseph Lombardo attempt to steal millions of dollars from the National Basketball Players Association, he then tried to cover it up by creating an entirely fake agreement and asking others to lie for him under oath. Today’s sentence closes out Lombardo’s season of scam.”

According to the Complaint, Indictment, previously filed documents, and evidence presented at the trial of Kaufman:

Prim was founded by LOMBARDO. From 2001 until 2013, Prim was the primary outside investment advisory firm entrusted with the NBPA’s investments and finances. In that capacity, Prim performed various services for the NBPA, including assisting with the management of up to $250 million of the NBPA’s assets, reviewing the investments of individual NBA players, and conducting financial seminars for NBA players.

In the spring of 2012, as part of a U.S. Department of Labor (“DOL”) investigation, Prim was served with a grand jury subpoena requesting, among other things, copies of all agreements between Prim and the NBPA. In response, Prim produced a copy of a 2005 contract between the NBPA and Prim, under which Prim’s fee was $350,000 per year. That was the only contract that Prim produced at the time.

Several months later, in January 2013, after Prim learned that a law firm’s review of the NBPA was going to be made public in the near future, Prim produced to the DOL a previously undisclosed contract with the NBPA (the “Purported 2011 Contract”). Prim’s fee under this contract was $602,000 per year for a five-year term, for a total of $3,010,000. The Purported 2011 Contract also contained a provision indicating that it could not be cancelled for any reason by the NBPA. The Purported 2011 Contract was supposedly signed in March 2011 by LOMBARDO, Gary Hall, who was the former NBPA General Counsel, and another NBPA employee.

An investigation revealed that Hall’s signature was not authentic, and that the Purported 2011 Contract was actually created at Prim months after the death of Gary Hall. LOMBARDO had arranged for the creation of a signature stamp capable of stamping the signature “Gary A. Hall,” and used the stamp to falsify Hall’s signature months after his death.

In addition, the investigation revealed that LOMBARDO and Kaufman had agreed and attempted to obstruct a grand jury investigation. During the course of the investigation, both LOMBARDO and Kaufman appeared before the grand jury and provided false and misleading testimony. Kaufman testified, among other things, that she had not spoken with anyone regarding her testimony prior to testifying. However, in a recorded conversation prior to appearing before the grand jury, LOMBARDO gave her specific instructions on how to answer questions before the grand jury, and said that his “life is in [her] hands.” Kaufman also testified that she learned in March 2011 that the Purported 2011 Contract had been executed that same month. But the Purported 2011 Contract had not been fraudulently created until at least nine months later. In another recorded conversation, LOMBARDO instructed another individual that, if he provided certain false information to the grand jury about the creation of the fraudulent contract, “[w]e’re home free.” In a third recorded conversation, LOMBARDO instructed another individual to provide false information and said, “It’s important that we didn’t doctor this document up, okay?”

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In addition to the prison term, LOMBARDO, 73, of Gates Mills, Ohio, was sentenced to three years of supervised release. He was also ordered to pay a $10,000 fine and a $200 special assessment.

LOMBARDO’s co-defendant Carolyn Kaufman was convicted of all counts against her—conspiracy to obstruct justice, obstruction of justice, and perjury—after an approximately two-week trial in December 2013. On May 21, 2014, Kaufman was sentenced by Judge Furman to three years’ probation with a special condition of six months’ home confinement, and was ordered to pay a $25,000 fine and a $300 special assessment, and to perform 500 hours of community service.

Mr. Bharara praised the outstanding work of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the U.S. Department of Labor, Office of Labor-Management Standards.

This case is being handled by the Public Corruption Unit of the U.S. Attorney’s Office. Assistant United States Attorneys Daniel C. Richenthal and Paul M. Krieger are in charge of the prosecution.

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