Former state lawmaker sentenced to 6 months in prison for misusing $384,000 in collateral funds

By Seth Koenig, BDN Staff
Posted April 22, 2013, at 3:57 p.m.

PORTLAND, Maine — A former state lawmaker who illegally used $384,000 in funds, which were supposed to be collateral for a federal loan, to help pay for his company’s unaffiliated debts and expenses was sentenced Monday to six months in prison.

Adam Mack — who represented Standish, Frye Island and Limington as a Republican in the Maine House of Representatives from 1997 until 2000 — had waived indictment and pleaded guilty to the charge of equity skimming in October.

As a result, Mack was convicted of misusing about $384,000 in funds held by his grandfather’s property management firm, DACO Associates, as collateral for a U.S. Department of Agriculture Rural Development loan of $1.1 million to acquire the Topsham-based Baron’s Hill I low-income housing complex.

Mack’s sentence of six months in prison, plus three years of supervised release and $384,000 in restitution payments, was delivered by U.S. District Court Justice D. Brock Hornby on Monday afternoon.

“The USDA has more than $10 billion in outstanding loans like this around the country,” said Special Assistant U.S. Attorney Bill Morse, who recommended a sentence of 18 months in prison, in court Monday. “Especially in the current economy, that represents a substantial temptation for property managers and owners, and a substantial sentence is necessary to show those individuals they cannot use those accounts as their personal piggy banks.”

Mack ran Baron’s Hill I through his Portland property management firm Chartwell Management Co. Inc. on behalf of his grandfather’s company, DACO Associates, when his elderly grandfather became ill in late 2006 and after he died in March 2007.

In that role, federal prosecutors say, Mack diverted the collateral funds into an investment account to get around requirements that USDA officials sign off on withdrawals, then moved the funds without federal authorization into a long-dormant account under the name of his grandfather.

From that account, Mack over an approximately three-month period wrote checks or withdrew about $384,000 in federal funds to, as prosecutors wrote in a federal court filing, “meet Chartwell’s expenses or to pay debts arising from several unaffiliated real estate development projects in which the defendant was engaged and owned.”

But Mack, his attorney and several family members told Hornby on Monday that he only moved the funds in order to save other failing family businesses and financially protect his surviving grandmother, who had a lingering stake in them.

“In retrospect, he should have let those businesses fail, he should have let those businesses been foreclosed upon,” said Portland attorney Thomas Marjerison, representing Mack.

“This isn’t something where Adam was taking the money and going down to Foxwoods or spending it on personal expenses,” he added later.

Mack’s grandmother, sister, former bookkeeper and business associate all described Mack in court Monday as an honorable man who took desperate steps in an effort to keep family businesses afloat and prevent financial harm from coming to his grandmother after his grandfather fell ill and died.

Marjerison also argued that the value of the Baron’s Hill I property, approximately $2.25 million, represented more than adequate collateral for the federal loan and as a result, the misappropriated $384,000 from the DACO account did not place the federal lender in jeopardy of losing its money.

“I’m very sorry for the pain and embarrassment I’ve caused my family,” Mack told the court. “I’ve always tried to live a clean life and help my grandmother and help pay for my grandfather’s medical bills late in his life.”

Hornby said he issued a sentence, which is to begin at 2 p.m. May 17, lower than the prosecution’s recommendation in part because of Mack’s character and lack of criminal history.

“I recognize that Mr. Mack did not do this for personal gain, and I understand he was trying to salvage his family businesses,” the judge said.

http://bangordailynews.com/2013/04/22/news/portland/former-state-lawmaker-sentenced-to-6-months-in-prison-for-misusing-384000-in-collateral-funds/ printed on August 31, 2014