A former executive involved in one of the biggest bankruptcies in South Carolina history is appealing his conviction for securities fraud, saying that the state failed to prove its case and that a judge shouldn't have allowed heartbreaking testimony from investors who lost nearly everything.
Attorneys for former HomeGold Financial Inc. Chairman Jack Sterling will ask the state Supreme Court to also throw out his 5-year prison sentence during arguments Tuesday. It's a high-risk appeal for the 73-year-old executive, who has been allowed to remain free on $100,000 bail since he was found guilty of securities fraud in March 2009.
Sterling was one of six executives who were convicted by a jury or pleaded guilty after Carolina Investors went bankrupt in 2003, leaving 8,000 investors with a combined loss of $275 million. Trustees would eventually recover about 18 cents on each dollar invested, but that was hardly enough to replenish the nest eggs of many investors.
Sterling's lawyers said he tried to do anything he could to save HomeGold and therefore save its subsidiary, Carolina Investors, but his solutions just didn't pan out, in part because of the actions of other executives. Prosecutors said he made reckless decisions and didn't explain his reasons to investors.
Two of the executives convicted in the case have already had their appeals rejected by the Supreme Court.
But Sterling's attorneys said his case is different because state prosecutors never proved Sterling lied directly to investors, according to briefs filed with the court.
Instead, prosecutors convinced jurors, based on the judge's erroneous instructions to them, to convict Sterling because he withheld information about bad decisions he made trying to save HomeGold, Sterling's attorneys said.
In court papers, Sterling's lawyers also go point by point through his indictment, arguing the state never proved its case. They said the jury's decision to find Sterling not guilty of a conspiracy charge bolsters their case that he never intentionally misled investors. They said the judge was wrong to tell jurors that prosecutors only needed to prove Sterling was "severely reckless," instead of having to show he willfully defrauded investors.
"Jack Sterling consistently ensured that all material information — good, bad and ugly — was fully and properly disclosed to the public. No rational jury could find beyond a reasonable doubt that Sterling willfully misrepresented or omitted material facts," Sterling's lawyers wrote in one of their arguments.
Sterling's attorneys also said he did not get a fair trial because a judge allowed five investors to testify about the hardships and heartbreak they suffered when they lost their money. One man testified he was once a millionaire, but after Carolina Investors collapsed he couldn't afford a funeral for his wife and had her cremated without any ceremony.
Those investors never met Sterling, only speaking with executives at Carolina Investors, so it wasn't fair for jurors to hear their stories, according to court papers.
The state attorney general's office responded to the allegations by saying Sterling's lawyers at his trial didn't object to any of the items in his appeal, meaning the justices shouldn't be able to consider their arguments.
They said the testimony from investors was relevant to the case because those people would have never continued to put their money into Carolina Investors if Sterling and others had let them know the company's true financial state.
Sterling "engaged in a course of business or scheme to omit materially relevant information which would likely have changed the decisions of many CI (Carolina Investors) investors," according to court papers filed by the attorney general's office.
Sterling's lawyers used their briefs before the Supreme Court to aggressively attack the state's case, saying that prosecutors treated him terribly in their "zeal to convince the public that justice has been done."
"The state obtained Sterling's conviction without a shred of evidence," Sterling's lawyers wrote in court papers. "Its brief supporting that conviction is without a shred of legal analysis."
By Jeffrey Collins, Associated Press
Source: Houston Chronicle