Gina Champion-Cain seeks early release from prison in Ponzi scheme case

Gina Champion-Cain, who went to prison three years ago for masterminding San Diego’s single largest Ponzi scheme, does not deserve a reduction in her 15-year sentence, a federal district court judge ruled on Monday.

The ruling by U.S. District Judge Larry Burns came in response to a motion Champion-Cain filed last month on her own behalf, arguing that federal prosecutors “acted arbitrarily and in bad faith” by failing to seek a reduction in her sentence in exchange for her continued cooperation in the $400 million fraud case. Burns is the same judge who sentenced her in 2021.

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He wrote in this ruling, “The reasons supporting the defendant’s original sentence — the scope, duration, and calamitous consequences of her offenses, the concepts of just punishment, promoting respect for the law, and the need for specific and general deterrence — continue to have great force and effect. The Court finds these factors militate against further reduction of the defendant’s sentence.”

A once high-profile businesswoman and prolific restaurateur, Champion-Cain was sentenced in March of 2021 after pleading guilty to charges of securities fraud, conspiracy and obstruction of justice in connection with a long-running Ponzi scheme that defrauded nearly 300 investors who thought they were making high-interest liquor license loans to cash-strapped restaurant and bar owners. In truth, no loans were ever made. The money solicited by Champion-Cain was instead diverted to her and her business enterprises, many of which were failing.

At the time of her sentencing, prosecutors with the U.S. Attorney’s office had recommended a lesser sentence of nearly 11 years, in part, because of her cooperation in the case.

Burns, however, disagreed with prosecutors, concluding, as he did in Monday’s ruling, that Champion-Cain has already received considerable credit for her cooperation. Besides, he said at the time, Champion-Cain deserved the maximum sentence, calling her crimes a “tremendous fraud” and a “betrayal.”

In his ruling on Monday, he reiterated what he had said in the courtroom that March day, pointing out that the prosecutors could have charged her with more counts that could have brought her sentence up to 30 years in prison.

Burns quoted his own words from the transcript of the sentencing hearing: “In fact, the defendant has pled guilty to obstruction, destruction of records. It appears from your sentencing memo that she instructed other people to destroy things, wiping out computer records, or so she thought. And a number of false statements made and encouragement of others to be involved in the obstruction. That strikes me as unusual that someone who’s engaged in that behavior would also get a substantial assistance recommendation from the United States.”

Champion-Cain, who is serving time at a federal prison camp in Dublin, argued in her court brief that federal prosecutors effectively reneged on a promise to file a motion for a sentence reduction, which is provided for in the federal rules of criminal procedure. She noted that so-called Rule 35 allows for a post-sentencing reduction if the government decides to seek a shorter prison term as long as the defendant provides substantial assistance, she wrote.

“Defendant and her attorneys … have been baffled at the sudden change of heart by the USAO (U.S. Attorney’s Office) in its decision to not file a Rule 35(b) motion on defendant’s behalf, especially since they repeatedly had promised her attorneys, on numerous occasions, starting in 2021, that they would be doing so AFTER her sentencing.”

At one point in her filing, dated. Feb. 20, Champion-Cain speculates that one reason for the U.S. Attorney’s inaction is the extensive media attention her case has drawn. Federal prosecutors, she wrote, may be concerned that her early release could bring their office “bad publicity, especially given the recent negative publicity the USAO has garnered regarding the ‘Fat Leonard’ case.”

Leonard Glenn Francis, also known as “Fat Leonard,” is the defense contractor behind what is considered the worst bribery and corruption scandal in U.S. Navy history. He was returned to San Diego earlier this year after fleeing house arrest in 2022 and then spending some 15 months in a Venezuelan prison.

The U.S. Attorney’s office does not appear to have filed any formal response to Champion-Cain’s motion, according to a review of federal court records.

While Champion-Cain’s sentence is technically 15 years of incarceration, her current release date, according to the Federal Bureau of Prisons, is Jan. 9, 2033, which amounts to a nearly 12-year prison term. That she will inevitably serve less time than her actual sentence is not unusual in federal cases where inmates receive credit for good behavior. Her release date takes that expected good behavior into consideration, say legal experts.

In a move to buttress her effort to secure a reduction in her sentence, Champion-Cain included a letter sent a year ago by court-appointed receiver Krista Freitag to former Assistant U.S. Attorney Aaron Arnzen. Freitag, appointed in 2019, was tasked with unraveling the complex web of Champion-Cain’s legitimate business operations and real estate holdings.

In that letter, Freitag noted that in the two years since the 2021 sentencing, Champion-Cain has continued to cooperate, including agreeing to be deposed for three full days from prison.

“I believe Ms. Champion-Cain’s post-sentencing cooperation was a beneficial factor in reaching the approved global settlement with Chicago Title, which contributed to the projected 90-95% investor recovery that I estimate in this case,” Freitag wrote in her letter.

Freitag has previously estimated that close to 300 investors suffered net losses of $183 million over more than a decade as they funneled some $400 million into Champion-Cain’s duplicitous scheme to make non-existent liquor license loans. Chicago Title, which was responsible for holding investors’ money in what turned out to be bogus escrow accounts, has paid out more than $180 million in settlements to the Ponzi scheme victims, which included one hedge fund that received a payout amounting to more than 100 percent of its net losses.

In his ruling denying Champion-Cain’s motion for a more lenient sentence, Burns pointed to a comment made by one of the federal prosecutors at the sentencing where he said that the U.S. Attorney’s office hoped to come back at a later date with examples of where Champion-Cain’s assistance proved helpful in the ongoing fraud case. Such examples, the prosecutor said at the time, would justify a request for a sentence reduction.

“Three years have passed since the prosecutor — who has since resigned — voiced that expectation,” Burns wrote. “There have been no other prosecutions of anyone associated with defendant’s massive fraud scheme.”

Technically, that is true. However, in November, the U.S. Attorney’s office filed one criminal count of securities fraud against Adelle Ducharme, a former Chicago Title escrow officer who many Ponzi scheme investors had previously alleged was complicit in the investment fraud.

Despite the filing of the charge, the U.S. Attorney’s office also consented last year to what’s known as a “deferred prosecution agreement” that remains in effect for two years. Should Ducharme comply with the terms of the agreement — including not violating state, federal or local laws and not working in the financial services field — prosecutors agree to dismiss the case.

She essentially will have been charged with a federal crime but not convicted.

As for Champion-Cain’s latest effort to secure an early release from prison, longtime San Diego defense attorney Jan Ronis said that such requests, based on allegations of bad conduct by prosecutors, rarely are successful.

“To allege bad faith on the part of the government is a rare occasion and would have to be egregious for a judge to make such a finding,” Ronis said. “These are the kind of garden-variety complaints that defendants oftentimes make when they‘ve cooperated and don’t feel as though they got proper credit.

“This isn’t going anywhere. She has a right to appeal it, but the fact of the matter is this was a huge fraud and so she’s lucky she only got a 15-year sentence in a fraud case like this.”