SAN JOSE -- A federal judge Monday sentenced a former Silicon Valley hedge fund manager to 12 years in prison for defrauding local investors out of millions of dollars by luring them into an international scheme with phony promises of backing from prominent law firms and auditors.
After a nearly three-hour hearing, U.S. District Judge Ronald Whyte imposed the sentence on Albert Ke-Jung Hu for his conviction on seven counts of wire fraud in connection with the scam, which federal prosecutors say cost investors, particularly from the Chinese community, at least $6.5 million.
The judge's sentence was well short of the 191/2 years sought by federal prosecutors and recommended by probation officials. At the same time, it was double the term urged by Hu's lawyer, who was hoping for between five and seven years.
Whyte called Hu's fraud scheme "very serious" and expressed concern that "he took a lot of money from a group of people and had a major impact on their lives."
Before the sentence was imposed, Hu, dressed in orange county jail garb and shackled at the ankles, told the judge he was sorry for his conduct and pleaded for mercy so he could return to work as a valley entrepreneur.
"We all make mistakes," he said softly.
A federal jury in June convicted Hu of the fraud charges, siding with prosecutors who argued he orchestrated the scheme over a seven-year period through several Sunnyvale-based hedge funds. Prosecutors alleged Hu enlisted well-heeled clients by assuring them his hedge funds, Asenqua Beta Fund and Fireside LS Fund, were affiliated with reputable lawyers and auditors and promising investment returns of 20 to 30 percent.
Assistant U.S. Attorney Joseph Fazioli, in asking for a harsh prison term Tuesday, called Hu's scheme "one of the most extreme cases of pronounced fraud" he had encountered as a prosecutor.
Law enforcement officials arrested Hu in Hong Kong in 2009, after he skipped the country to avoid capture. The U.S. Securities and Exchange Commission also has civil fraud charges pending against him.
In addition to the prison sentence, prosecutors are asking the judge to order Hu to pay $6.5 million in restitution to his victims. Whyte plans to rule on the restitution amount at a later hearing.
Hu, while awaiting sentencing in the Santa Clara County Jail, has been working with a fellow engineer to establish a foundation for a high-tech company to develop solar energy equipment, according to court papers filed on his behalf.
Howard Mintz covers legal affairs. Contact him at 408-286-0236; follow him at Twitter.com/hmintz.