Former Part-Owner of Litigation Funding Company Sentenced to 30 Months in Prison for Defrauding Business Partners in $869,492 Kickback Conspiracy
|U.S. Attorney’s Office October 21, 2013|
NEWARK—The former part-owner and underwriter for New York-based litigation funding company The Law Funder LLC was sentenced today to 30 months in prison for participating in a kickback scheme that defrauded his former business partners of $869,492, U.S. Attorney Paul J. Fishman announced.
Mathew Sheldon, 39, of New York, previously pleaded guilty before U.S. District Judge Dennis M. Cavanaugh to a superseding information charging him with conspiracy to commit wire fraud through the deprivation of honest services. Judge Cavanaugh imposed the sentence today in Newark federal court.
According to documents filed in this case and statements in court:
The Law Funder, which extends loans to plaintiffs in pending civil litigation, did business with Montclair Funding Group LLC (MFG)—at one time headquartered in Union City, New Jersey—and its owner, Rory Donadio, 43, of New York. MFG was a broker between plaintiffs seeking advances against potential recoveries in pending litigation and private entities such as Law Funder. In exchange for a broker’s fee, MFG would, among other things, gather necessary information and documents in support of funding opportunities so Law Funder could evaluate whether to fund a case and for how much. Sheldon was a 25 percent owner in Law Funder and supervised the underwriting process for the company.
Sheldon admitted that from February 2005 through July 2009, he conspired with Donadio to design and execute a secret kickback scheme. Sheldon would offer certain of Law Funder’s investment opportunities to MFG in exchange for personally receiving a portion of each broker’s commission Law Funder paid MFG. Sheldon and Donadio agreed to conceal their fee-splitting arrangement from Law Funder and Sheldon’s three partners. The kickback scheme resulted in $869,492 in fraudulent payments to Sheldon, which were paid by wire transfer and other means.
Sheldon also admitted that he and Donadio concealed the scheme by using code, such as “Giants” or the letter “G,” in records referring to related transactions. He acknowledged he regularly communicated with Donadio to identify the coded transactions and calculate the amount payable to Sheldon pursuant to the kickback scheme.
In addition to the prison term, Judge Cavanaugh sentenced Sheldon to three years of supervised release and ordered him to pay $869,492 in restitution and forfeit $869,492.
Donadio also has pleaded guilty in connection with the scheme and awaits sentencing.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, and inspectors of the U.S. Postal Inspection Service, Newark Division, under the direction of Maria L. Kelokates, with the investigation leading to today’s sentence.
The government is represented by Assistant U.S. Attorneys Joseph B. Shumofsky, Mala Ahuja Harker, and Jenny Kramer of the U.S. Attorney’s Office Economic Crimes Unit, and Evan Weitz of the Office’s Asset Forfeiture and Money Laundering Unit.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.