Peter Jerald Frommer, 35, of Santa Barbara, was sentenced by a U.S. District Court judge in Los Angeles, who also fined him $8.1 million to refund his victims. Frommer pleaded guilty in November to wire fraud, money laundering, and three counts of failing to file federal income tax returns from 2004 to 2006.Frommer's Ponzi scheme operated under the names "Cap Exchange" and "Cap X," fictitious companies he claimed bought surplus equipment from defunct companies via commercial auction websites, and then resold at a substantial markup.
From early 2004 through August 2006, Frommer conned more than $13 million from 64 investors nationwide by promising them "guaranteed" returns of upwards of 15 percent in as little as six weeks. Frommer's victims believed he was using their money to purchase distressed assets for Cap X, and would share the profits with them after the assets were resold.
Instead, Frommer used his victims' money to make Ponzi payments and bankroll a life of luxury that included expensive cars, first-class globe-trotting, a $20 million Malibu mansion and lavish parties boasting celebrity performers.
Frommer, who one of his victims called "the West Coast version of Bernie Madoff," also persuaded investors to sink money into other worthless schemes, including a wireless Internet company, a high-end automobile parts venture, real estate deals and other investments.
During Frommer's sentencing, filings by prosecutors quoted from letters sent by his victims, including residents of California, Oregon, Virginia, Illinois and Massachusetts, who urged the judge to throw the book at Frommer. Here are sections from two of them:
"I am sorry to admit my family was victimized by Peter Frommer. A close relative of ours introduced us when my family and I were in California seeking cancer treatment for our youngest son. In a moment of weakness, when we were struggling with the cost of his cancer treatment, we were duped and convinced ourselves, our adult children, and a sister that this was a smart and safe investment. We made a terrible mistake."
Frommer will begin serving his sentence on May 31.
"My son values his education and was very intent on attending a prestigious California university. Unfortunately, he has not been able to attend that college because of the change in financial circumstances caused by Peter Frommer's actions. What value do you put on the quashing of a teen's dreams?"
Fraud also seems to run in the Frommer family -- his little sister, Monica Elizabeth Frommer, was indicted last November for her role in an unrelated $2 million mortgage fraud scheme.
Monica, 33, was indicted by a federal grand jury on charges of bank fraud, loan fraud, wire fraud and making unlawful monetary transactions. She pleaded not guilty to the 12 counts in the indictment.
According to the indictment, from mid-2004 through mid-2007, Monica submitted at least six fraudulent mortgage loan applications to National City Bank and Washington Mutual Bank. The charges say Monica greatly exaggerated her monthly income, tricking the banks into granting her $2 million in loans.
The indictment also says that Monica used most of the ill-gotten loans to finance residential construction and repay earlier mortgage loans, but also used the money to finance expensive vacations for her family.
Her trial is expected to begin in March.