President Biden Grants Clemency To At Least Five Convicted Ponzi Schemers
President Biden made headlines earlier this week when he announced he had granted clemency to nearly 1,500 people – an act the White House described as the largest single-day act of clemency in history. In making the announcement, the White House announced that the President was commuting the sentences of nearly 1,500 individuals who “were placed on home confinement during the COVID-19 pandemic” and have “shown successful rehabilitation and a strong commitment to making their communities safer.” Yet, while the announcement details the steps at rehabilitation taken by those 39 individuals receiving full pardons, only the name and former inmate registry number was provided for the 1,499 individuals whose sentence was commuted.
As the public has been left to investigate the underlying conduct of those who had their sentences commuted, it has emerged that those receiving clemency include at least five convicted Ponzi schemers whose schemes collectively raised nearly $750 million from thousands of defrauded investors that ultimately resulted in total losses in the hundreds of millions of dollars. Specifically, President Biden commuted the sentences of the following individuals:
Timothy McGinn: Sentenced to 15-year term in August 2013 after being convicted at trial for what prosecutors claimed was a Ponzi scheme that caused $130 million in losses and was “the largest financial crime in the history of the upstate New York federal court.” The SEC later sued 10 agents of McGinn’s firm for ignoring red flags in selling the unregistered securities to customers.
Marc Dreier - Sentenced to 20-year term in July 2009 after pleading guilty to allegations that his law firm, Dreier LLP, caused roughly $400 million in losses by selling fraudulent promissory notes. U.S. District Judge Jed Rakoff, who sentenced Dreier, observed that “When you turn to the facts of the crime that Mr. Dreier committed, one must be appalled.”
Gregory McKnight – Sentenced to 15-year term in August 2013 after pleading guilty to $72 million Ponzi scheme that promised thousands of investors monthly returns of at least 15%.
Brian Callahan – Sentenced to 12-year term in September 2017 after pleading guilty to $96 million Ponzi scheme in which he operated four investment funds as a “large-scale Ponzi scheme.”
Andrew Mackey – Sentenced to 27-year term after he and his common-law wife were convicted of running a $12 million Ponzi scheme in which they purported to profit from private and confidential offshore business deals. At the time, the U.S. Attorney remarked that Mackey’s sentence was the “longest imposed in this district for a case of this type.” The FBI similarly remarked that the sentence “reflect[ed] the damage done to the victim investors.” Oddly, it does not appear that Mackey’s common-law wife, who received a 14-year term, had her sentence commuted.
This is not the first known instance of a convicted Ponzi schemer being granted clemency; President Trump previously commuted the sentence of Eliyahu Weinstein in the last days of his initial term after Weinstein had served 8 years of a 24-year sentence for his role in a $200 million Ponzi scheme. Weinstein, ironically, was arrested last year along with four others and accused of running a $35 million “Ponzi-like” scheme.
However, it is the number and severity of those convicted Ponzi schemers receiving clemency from President Biden that is raising eyebrows. Collectively, the five Ponzi schemers receiving commutation were involved in raising nearly $750 million from thousands of duped investors – many of whom suffered a loss of at least some of their investment for their misplaced trust.
The President’s wielding of clemency power can be a powerful and profound tool often aimed at righting previous wrongs. Indeed, I was one of the many volunteers in President Obama’s Clemency Initiative that sought to rectify sentencing disparities handed down to non-violent drug offenders in the 1980s; one of the highlights of my career was receiving a call from President Obama’s Office of the Pardon Attorney informing me that one of my client’s life sentence had been commuted. That client had served nearly 25 years in federal prison for non-violent drug offenses and they would have likely been sentenced to a much lower term had they been sentenced today due to changes in sentencing laws and guidelines.
Absent additional justification or explanation from the White House, which is not expected given that the decisions are not subject to oversight or appeal, it is hard to understand a similar justification for those convicted of running massive Ponzi schemes that defrauded and victimized innocent investors. One could certainly argue that Mackey’s 27-year term was lengthy for “only” running a $12 million Ponzi scheme, but it is likely still within the sentencing guidelines used today given the loss amount. Conversely, the non-violent drug offenders that received clemency were able to demonstrate that the current sentencing guidelines would have resulted in a much-lower sentence. I previously spent over 10 years representing Court-appointed Receivers tasked with recovering assets for those victimized by Ponzi schemers, and I can say first-hand that the harm inflicted on many of these victims was devastating and permanent. Many lost everything and their lives were irreparably changed to their detriment and without any of their own fault.