4th Cir. Gives Mixed Results in Fund Appeal

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By Cameron Finch

Jan. 8 — MICG Investment Management LLC's chief executive officer, convicted of defrauding investors out of millions of dollars, received mixed results in his appeal before the U.S. Court of Appeals for the Fourth Circuit Jan. 7 (United States v. Martinovich, 2016 BL 3228, 4th Cir., No. 13-4828, 1/7/16).

Judge Stephanie D. Thacker vacated Jeffery A. Martinovich's 11-year prison sentence and remanded for resentencing by a different judge. Thacker called the district court's treatment of sentencing guidelines as mandatory “procedurally unreasonable.”

The appeals court still upheld Martinovich's conviction. Although the district court judge's comments and interruptions throughout the trial “strayed too far from convention,” Martinovich couldn't show that the conduct prejudiced him, Thacker said.

The Fraud

According to court documents, Martinovich allegedly assigned unjustifiably high values to MICG Venture Strategies LLC hedge fund's assets in order to inflate management and incentive fees. Martinovich was also accused of distributing false and misleading account statements to investors, and making material misrepresentations and omissions in the private placement memoranda used to sell the assets (47 SLD, 3/10/11).

In 2013, a jury convicted Martinovich of one count of conspiracy to commit mail and wire fraud, four counts of wire fraud, five counts of mail fraud and seven counts of money-laundering.

The Appeal

Martinovich appealed his conviction and sentencing, arguing that the U.S. District Court for the Eastern District of Virginia “improperly interfered” with the proceeding by continuously interrupting and commenting throughout the trial. He also contended that the district court abused its discretion by treating the sentencing guidelines as mandatory.

The appeals court disagreed, holding that although the district court's actions throughout the trial were “imprudent and poorly conveyed,” they did not change the outcome of the trial. Nevertheless, it held that the district court's treatment of the sentencing guidelines as mandatory was a “significant procedural error.”

By Cameron Finch

To contact the reporter on this story: Cameron Finch in Washington at cfinch@bna.com.

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bna.com.