A federal judge sentenced Norman Hsu, a Democratic fund-raiser and admitted Ponzi scheme operator who used tenuous connections to the fashion world as social capital, to more than 24 years in prison Tuesday.
In May, Hsu pleaded guilty to 10 counts of mail and wire fraud for running what prosecutors called a $50 million Ponzi scheme. Later that month, a jury convicted him on four separate charges of campaign finance fraud after a six-day trial.
In U.S. District Court in Manhattan, Judge Victor Marrero sentenced Hsu to 240 months in prison on the wire and mail fraud counts, and an additional 52 months for the election convictions. The government had been seeking 30 years to life behind bars.
Hsu was a major fund-raiser for the failed presidential campaign of then-Sen. Hillary Clinton in the 2008 election season and hosted an event for President Obama’s political action committee in 2005, among his other contributions to Democratic candidates.
According to a federal indictment, Hsu circumvented caps on individual contributions in the run-up to the 2008 election by donating for himself and others under the names of clients from his investment business. That venture was itself a Ponzi scheme wherein investors were paid out with money from subsequent victims.
The 57-year-old Hong Kong native helmed several Los Angeles-based men’s wear lines, such as H Two O Inc. and Laveno Sportswear, in the Eighties. Though the labels fizzled before the end of the decade, Hsu later presented himself as a sourcing and fashion executive while making inroads with investors and in Democratic fund-raising circles.
He told one set of investors from the New York-based fund Source Financing Investors that their money would be used in China to manufacture men’s wear for Prada, Gucci and Theory, a source close to the firm told WWD in 2007. Hsu promised his victims their investments would earn a 40 percent profit. After his arrest, the luxury brands said they had never worked with Hsu.
Clinton, now Secretary of State, returned more than $800,000 in contributions linked to the fund-raiser.
In issuing his decision, Marrero compared white-collar criminals to the “wolf in sheep’s clothing” and said Hsu’s appearance as a powerful donor to presidential candidates helped enable his fraud.
“Mr. Hsu’s disgraceful use of political campaigns as an aspect of his Ponzi scheme strikes at the very core of our democracy,” Marrero said.
The judge also ordered that Hsu pay restitution to his victims and be placed under supervision for three years after his release.
Hsu apologized to his victims and the court Tuesday. He appeared skittish and spoke so low the court stenographer had to ask him to raise his voice.
“I apologize to everyone…,” Hsu said.
Before the sentencing, Hsu’s attorney, Alan Seidler, called the government’s proposed guidelines of 30 years or more unreasonable.
“If you walked into a bank and took that amount of money, even if you used a gun, the guidelines would be significantly less than they are today because Mr. Hsu used a deal sheet,” Seidler said.
After the hearing, Seidler said Hsu had expected to receive a sentence similar to the one handed down and that an appeal is planned.
Seidler said Hsu will not begin serving his time in federal prison until he finishes serving a three-year sentence in California stemming from an unrelated Ponzi scheme case in 1992. Hsu pleaded guilty to grand larceny, but never reported to serve his term. He managed to hide in plain sight until his 2007 arrest.
Following the sentencing, he was remanded to federal custody.
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