SALT LAKE CITY — Former Cedar Hills Mayor Eric A. Richardson appears headed for prison after admitting in federal court Monday that he falsified a loan application as part of an equity skimming scheme.
In an agreement with federal prosecutors, Richardson pleaded guilty to one count of felony bank fraud before U.S. Magistrate Judge Paul Warner. In return, prosecutors agreed to recommend the 38-year-old man spend 12 months and one day behind bars. The additional day allows him the opportunity to be released early for good behavior.
A teary-eyed Richardson, surrounded by his wife and family, declined to comment as he left the courtroom.
His attorney, Rodney Snow, called Richardson a "fallout victim" of former business partner Christopher Hales, who's serving a 90-month prison sentence for masterminding a financial scam that took individuals and lending institutions for $12.7 million. Hales used the money to live a lavish lifestyle, including throwing $100,000 parties in Las Vegas.
"There's a lot of mitigating factors here," Snow said.
Richardson, he said, pleaded guilty to put the matter behind him and move on. "He's accepted responsibility and apologized," Snow said.
The former mayor signed a blank loan application in February 2010 with HeritageWest Credit Union for $57,144 for a 2009 Land Rover, knowing that an accomplice would falsely inflate his salary and represent him as an area manager with Bentley Equities, according to a plea agreement. He had previously disassociated himself from Bentley and never received a salary.
He also failed to disclose a $168,000 mortgage on a rental property and two car loans totaling $80,000 from different banks obtained two weeks prior.
Richardson knew the loan exceeded the price of the vehicle and admitted to splitting the proceeds with others.
As part of the agreement, Richardson must pay restitution totaling nearly $80,000 on two car loans and up to $330,000 for the use of a $25 million CD. Snow said the auto loans have been paid off.
"With all due respect, Mr. Richardson, your finances are a mess," the judge told him. "As they say, you can't get blood from a turnip. We'll see what happens."
U.S. District Judge David Nuffer must accept the plea agreement and sentence recommendation before it becomes valid. Federal bank fraud carries up to 30 years in prison and a $1 million fine. A sentencing hearing is scheduled for Nov. 13.
Richardson, 38, resigned as mayor a month ago on June 24 without explanation. Federal prosecutors charged him with bank fraud three days later. He had served as mayor since 2010 and on the City Council before that. The council last week appointed Councilman Gary Gygi as Richardson's replacement.
During his tenure as mayor, Richardson was under fire from a group of Cedar Hills residents who campaigned for his removal from office, claiming he improperly moved recreation funds to the city's golf course to make it appear profitable, among other complaints.
A recent external audit commissioned by city leaders showed the city's finances to be in order.
In May, Richardson and Hales were named in a U.S. Commodity Futures Trading Commission complaint in federal court for allegedly soliciting fraudulent investments for Bentley Equities.
The pair allegedly collected more than $1.1 million from 38 participants in a commodity futures trading pool and individual investment accounts. They misappropriated at least $557,000 for personal use, including food, clothes, cars, utilities and credit card payments and $71,000 to pay clients in a Ponzi scheme, according to the complaint.
Richardson's attorneys are seeking to have three alleged violations against him dismissed, contending the commodity futures trading commission can't show he solicited investors.2 comments on this story
"The CFTC is attempting to saddle Richardson with Hales’ alleged fraudulent solicitations. Hales conducted the solicitations, Hales executed the trades for futures contracts, and made the decisions on which futures contracts should be traded," according to court documents.
Hales and Richardson formed Bentley Equities in April 2009. It currently is in default for failing to pay its annual franchise tax fees. Neither were registered with the commodity futures commission, which enforces the Commodity Exchange Act. Commodity futures are agreements to buy or sell a commodity at a specific date in the future at a specific price.