James Mulholland, 59 and Thomas Mullholland, 59, have been sentenced to 10 to 20 years in prison on eight felony convictions by District Judge William Collette for running an $18 Million Ponzi scheme. The prison sentences for all eight convictions will be served concurrently with the maximum being 10-20 years.
“These two men abused the trust they were given for their own personal gain and today’s sentence is long overdue,” said Michigan Attorney General Bill Schuette in making the announcement. “The sentences today will not repay the life savings they stole, but it will stop these brothers from ever doing this again.”
They were found guilty in a jury trial in front of Judge Collette at Ingham County Michigan District Court on August 9, 2016.
Thomas and James Mulholland started their business, Mulholland Financial in 1987. They bought real estate to be used as rental properties mostly in college towns. At the height of their business Mulholland Financial managed $22 million worth of highly leveraged real estate however they were not prepared for the recession in 2008.
Starting in 2009 until they filed for bankruptcy in 2010, the brothers raised almost $2 million from investors. They made no mention that their business was in trouble and promised a 7% rate of return from the real estate profits and that the principal and interest were guaranteed and could be liquid within 30 days of making a written request.
In reality almost every month from January 2009 to February 2010, Mulholland Financial lost money and new investor money began being used to pay off earlier investors. The Mulholland brothers knew the business was losing money and consciously decided to purchase more property in an attempt to get themselves through the crash. To do so, they increased their attempts to procure investors. At the end of 2009, they reached out to previous investors and urged them to reinvest. They again said there would be a guaranteed 7% return and they also indicated that 2009 had been their best year ever, not revealing any of the financial problems they were facing.
Mulholland Financial was forced to file for bankruptcy in February of 2010 due to overwhelming debt. By this time there were multiple investigations being conducted into the business practices. The case sat dormant with another agency until spring of 2016 until Schuette’s office picked up the case. Over 250 investors lost $18.3 million.
All the victims have been identified and were listed in various bankruptcy pleadings. The Attorney General is seeking $208,000 from the Mulholland brothers in restitution. Under Michigan law, restitution can only be ordered in counts charged that result in conviction. All victims received some proceeds from their 2010 bankruptcy.
The Mulholland brothers were sentenced on all eight charges as follows. All charges will be served concurrently:
- One count of Criminal Enterprises – Conducting, 10-20 years in prison
- One count of Conspiracy to Commit Criminal Enterprise – Conducting, 10-20 years in prison;
- One count of False Pretenses -$20,000 Or More But Less Than $50,000, 100 months -15 years in prison;
- One count of False Pretenses – $1,000 Or More But Less Than $20,000, 3-5 year sin prison;
- One count of Blue Sky Laws- Fraudulent Schemes/ Statements, 6-10 years;
- One count of Securities Fraud, 6-10 years;
- One count of Blue Sky Laws Offer/Sell Unregistered Securities, 6-10 years; and,
- One count for Violation of the Securities Act, 6-10 years.