Lull scheduled to be sentenced Thursday

Former Kaua‘i resident James Lull, who last year pleaded guilty to defrauding many Kaua‘i investors out of millions of dollars, is scheduled to be sentenced on those charges Thursday in a Honolulu federal courtroom.

Some of the Kaua‘i victims, including accountant Jon Anderton, are not holding out much hope of getting their money back, and worry that, after the sentencing, there won’t be any compelling need for Lull to cooperate with officials trying to recover some or all of the money.

“Quite honestly, not really,” Anderton said in a telephone interview when asked if he had much hope of recovering his losses, which he would not quantify.

But there is a chance, according to court documents filed Friday, that Lull will be forced to reveal the extent of his hidden assets, even post-sentencing.

Lull admitted in last year’s court document in which he agreed to plead guilty to wire fraud of “unlawfully, willfully and knowingly devising and intending to devise a scheme and artifice to defraud investors by means of materially false promises, statements and representations, and by omissions of material facts.”

In that document, he also swore to disclose all his domestic and foreign assets, something his bankruptcy trustee and the trustee’s attorney said didn’t totally happen.

“It’s been marginal up to now,” said attorney Michael Lilly, representing Lull’s bankruptcy trustee Ronald K. Kotoshirodo, of Lull’s cooperation in locating and returning assets.

“He hasn’t cooperated in the past,” said Lilly, adding that Lull is out on bail and living in the Pacific Northwest.

 Lull could face up to 20 years in prison, a fine of $250,000 and payment of between $20 million to $30 million in restitution to victims. 

Although he admitted in court to defrauding 50 or more victims out of as much as $30 million, creditors have filed claims amounting to over $56 million, Kotoshirodo said last week.

Among Lull’s other victims is Gregg Gardiner, former publisher of the Kaua‘i Times newspaper and former owner of “101 Things to Do on Kaua‘i,” who filed a claim for over $3.4 million, said Kotoshirodo.

The trustee is tasked with trying to collect money that belongs to Lull’s estate, in order to attempt to repay creditors, many of them Kaua‘i residents, including Alice Gordon, who filed a claim for nearly $11 million.

The $56 million in claims includes large ones filed on behalf of the mortgage company on Lull’s ‘Anini Road home (which was foreclosed), but does not include amounts owed to creditors who have not yet filed claims, Kotoshirodo said.

Since Lull filed personal bankruptcy papers in December 2006, listing more than $31 million in debts and $6.7 million in assets, Kotoshirodo has been painstakingly trying to locate Lull’s assets, often having to resort to subpoenas and interviews with officials at banks where some of Lull’s assets are believed to be held, Kotoshirodo said.

Complicating matters is the fact that some of the assets are apparently in the form of jewels, coins and pool cues, which make them more difficult to find and acquire.

Kotoshirodo said in court papers filed last week that he essentially got lucky in spring 2008 when he discovered and forced Lull to turn over a cache of opals, something that Lull finally admitted to the trustee nearly a year later, in a March 2009 deposition.

Lull was manager of the U.S. Financial Mortgage Corporation office on Kaua‘i from 1995 to 2006, and federal attorneys said in court that between 2003 and 2006 he offered clients business opportunities, promising high rates of return, while in reality using the money for his own purposes.

And the deception is apparently continuing, as Kotoshirodo and Lilly in last week’s filing have uncovered “additional previously undisclosed and unexplained assets,” including:

∫ A large tanzanite stone said to be worth $65,000 that Lull sold to a jeweler for $5,000;

∫ A “package” of assets that a friend, “Mark,” was holding for Lull in Hawai‘i;

∫ A “military person holding substantial assets for Lull in Georgia;”

∫ A “shipment of jewelry from someone in Ohio;”

∫ Two bags of coins being held “by a friend ‘Kenny’ who owned a coin shop in Vancouver, Wash.;”

∫ A “friend back East (who) owed (Lull) substantial money and had agreed to make payments of $3,500 a month.”

Additionally, Kotoshirodo said in last week’s filing that he received information from another acquaintance of Lull that Lull admitted to him “that he had been moving thousands of dollars of cash in and out of an account, and had funds coming from someone in Ohio.”

Also, according to last week’s court document, another creditor of Lull’s said he received a voicemail message from Lull last month wherein Lull indicated “I have property I have not told the government about.”

“None of the foregoing has been previously disclosed by Lull to the trustee or his counsel by Lull during the questionings conducted under oath pursuant to the plea agreement as well as requirements found in the bankruptcy code,” Lilly wrote in his filing last week.

“The foregoing makes clear that Lull has deliberately failed to account for all his assets which belong to the estate and he continues to hide such assets from the trustee and the victims of his crimes,” Lilly’s court filing continues.

“He is smooth,” Anderton said of Lull, adding that one of the many FBI agents assigned to the Lull case told Anderton that it was Lull’s debt service that caused him to file for bankruptcy, not repercussions from his illegal activities.

And while some earlier news stories called Lull’s actions a Ponzi scheme, where he was using money from one person to pay off another, Anderton said the fraud didn’t begin that way.

“It became a Ponzi in the end, but wasn’t in the beginning,” Anderton said of similarities between Lull’s case and the case of the now infamous Bernie Madoff.

“He used their money to buy stuff.”

Some people who got involved with Lull made their money and interest as promised, and got out, Anderton said. Most did not.

“Just a handful of people got in and out with their money.”

Anderton, who with some of the other victims plans to attend the Thursday sentencing hearing, said U.S. District Judge Susan Oki Mollway indicated earlier she may exceed federal sentencing guidelines for years of incarceration because Lull has not cooperated with Kotoshirodo.

Lilly added in a telephone interview Monday that because of the “devastation” done to the victims by Lull’s actions and the “dramatic, sorrowful and compelling” testimony made by victims Anderton, Jeanette Pheasant and others, Mollway continued an earlier-scheduled sentencing hearing.

The continuance was done in order to give prosecutors and Kotoshirodo more time to gather evidence as to whether Lull continues to hide assets, whether Lull is being cooperative as he pledged to be in his plea agreement and whether he is willing to accept responsibility for his crime.

A finding by Mollway of lack of responsibility for his crime could add to Lull’s jail time, Lilly said.

“I think he’s going to be sentenced on Thursday,” said Lilly, indicating a willingness to have Mollway send the case to federal Bankruptcy Judge Lloyd King for an evidentiary hearing into whether Lull continues to hide assets that could be used to repay victims.

“We’d like to have those hearings, but we don’t want to postpone sentencing,” Lilly said.

Assistant U.S. Attorney Clare Connors, prosecuting Lull, said she cannot comment on the case until after Thursday’s sentencing.

Peter C. Wolff Jr., federal public defender, did not respond to a Monday e-mail seeking comment.

• Paul C. Curtis, staff writer, can be reached at 245-3681 (ext. 224) or pcurtis@kauaipubco.com