Gary Armitage sent to prison for Ponzi scheme
Published: Monday, April 8, 2013 at 5:42 p.m.
Last Modified: Tuesday, April 9, 2013 at 6:58 a.m.
REDDING -- Gary T. Armitage, a former Santa Rosa investment adviser accused of helping to swindle hundreds of millions of dollars from North Coast residents, was sentenced to 10 years in prison Monday following an emotional hearing where victims of his massive Ponzi scheme lashed out at the man they hold responsible for ruining their lives and their retirements.
Concord resident Andy Fine, 65, was particularly scathing during a lengthy statement in Shasta County Superior Court, where more than three dozen Bay Area victims gathered to confront their former financial adviser.
"You are a shameful, repulsive excuse for a human being," Fine told Armitage, who sat with his back to the gallery of victims and did not face them. "I will hate you and hold you in contempt for the rest of my life."
Armitage, 62, is expected to be released in less than four years, with credit for time already served in jail and good behavior -- a sentence criticized as lenient by both victims and a probation officer. After his release, he is expected to be on parole for three years.
Armitage was arrested in 2009 with two alleged accomplices, James Koenig of Redding and Jeffrey Guidi of Santa Rosa, after a 17-month investigation.
The case, with 2,000 victims statewide, is considered one of the largest Ponzi schemes in state history. Then-Attorney General Jerry Brown said the men "callously swindled thousands of individuals out of $200 million to bankroll their extravagant lifestyles."
At its height, Koenig's Asset Real Estate and Investment, or AREI, controlled 22 senior assisted-living housing facilities. Investors were told the investments were risk-free tax shelters that would produce healthy returns and steady retirement income for years to come.
There were just two problems. Koenig was a convicted felon who had served time in federal prison in the 1980s in a gold-selling scam, something investors say was concealed from them. And prosecutors accused the men of selling more shares in the investments than really existed, and using the assets from new investors to pay returns to existing ones.
Koenig went on trial in January, a case expected to wrap up in May. Armitage took a plea bargain in January on the eve of trial. Guidi also took a plea deal to lesser charges.
Fine accused Armitage of advising him to invest six figures in a corporate note for AREI. Fine said Armitage knew the investment was "a piece of garbage" by April 2007, but reassured him of its soundness anyway.
"Gary played me like a drum," said Fine, who himself worked in the financial services industry. "He lied to me on the phone. He lied to me in emails. He lied to me . . . while looking me right in the eye."
Ron and Sandy Johnson of Auburn, retired employees of Fireman's Fund Insurance in Novato, said Armitage convinced them to refinance their home and sell a rental property to get more money to invest with him.
He said Armitage moved his money from one of the senior living centers into the corporate note and lied about having Johnson's permission to do so. They lost $1.2 million, according to court records.
"Not only did you steal the money we worked for our entire lives, you also destroyed our ability to trust in others and ourselves," Ron Johnson told him. "All of your words and promises turned out to be lies to support your grand way of living."
At one point, Armitage owned a luxury home in Healdsburg and an 80-acre castle-themed estate in the mountains west of Redding.
"Was the castle worth it?" Fine asked at one point.
Because of the money he lost, Fine said he lives in constant fear of losing his home. He wears four layers of clothing and keeps the thermostat at 52 in the winter to save money. He hasn't purchased a stitch of new clothing in six years.
"How you were able to get a 10-year sentence only, I don't pretend to know," Fine said.
Many of the victims who attended the hearing expressed bitter disappointment with both the length of the sentence and the fact that Judge Bradley Boeckman sharply limited which victims could make statements.
Three dozen victims attended the hearing, but only three who invested with Armitage after April 2007 were allowed to speak. Of the dozens of counts of securities fraud Armitage was charged with, he pleaded no contest only to charges stemming from sales that occurred after that date, when prosecutors said it was clear the investments were in trouble.
This outraged several victims who had made the lengthy drive expecting to be able to make a statement.
"This is disgusting!" said Dee Sunderland, a Marin County investor who lost at least $240,000 of the more than $600,000 she invested with Armitage.
"Will we get to see him taken out in chains?" Sunderland asked state Deputy Attorney General Robert Morgester.
"Yes, ma'am," Morgester told her.
Armitage was taken into custody after the hearing, but he wasn't put in chains. Wearing a gray pinstripe suit and burgundy tie, deputies led him past the gallery of victims, but he averted his eyes. In a hallway outside the court, he could be seen changing into orange prison garb.
Victims weren't the only ones who believed Armitage was getting off easy. Yvonne Pierce, the deputy probation officer who wrote a pre-sentence report on Armitage, said the 10-year sentence seemed to her a "generous disposition."
"The defendant showed no remorse," Pierce wrote. "The defendant's crimes were cold, calculating and cruel."
Boeckman said he understood the frustration of victims in not seeing a longer sentence, but noted that the plea deal prevented him from altering the 10-year sentence.
Boeckman said he would order restitution in the case in August, but Armitage is bankrupt and he is not expected to be able to repay victims.
After imposing the sentence, Boeckman noted that Armitage told probation officials he had lost money in failed investments as well, as if to portray himself as a victim in the case.
"There are a number of victims in this case, but you are not one of them," Boeckman said. "And that is why you are going to prison."
You can reach Staff Writer Kevin McCallum at 521-5207 or firstname.lastname@example.org.
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