BALTIMORE—A federal jury yesterday found a former money manager guilty of defrauding the state retirement system, ending a trial in which attorneys often focused on the manager’s political relationship with former Gov. Parris N. Glendening.
Nathan Chapman Jr., 46, was found guilty on 23 fraud counts, including ripping off his own companies by using “business development” checks, partly to pay for extramarital affairs. Prosecutors accused Chapman of looting more than $500,000, but jurors did not reach a unanimous decision on the amount.
Chapman was charged in a sweeping, 32-count indictment with mail fraud, wire fraud, securities fraud and other crimes relating to his use of state retirement system funds to revive the stock price of his sagging company.
The $29 billion retirement system, which is responsible for the pensions of more than 250,000 teachers, police officers, firefighters and other government workers, lost nearly $5 million in the transactions.
“He did it because he could. He did it because he didn’t think anybody would stop him,” U.S. Attorney Thomas DiBiagio said outside the downtown Baltimore federal courthouse. “He was wrong. And today the jury told him he was wrong.”
A jury of five women and seven men deliberated for six full days before delivering the verdict to U.S. District Judge William Quarles early on the seventh day.
The jury found Chapman guilty on 15 counts of wire fraud, two counts of mail fraud, three counts of investment advisory fraud, one count of making false statements to the Securities and Exchange Commission, and two counts of making false statements on tax returns.
They acquitted Chapman on two wire fraud counts, four mail fraud counts and one count of making false statements on tax returns. They couldn’t reach a decision on two other counts of making false statements on tax returns.
The maximum penalties for each of the counts of mail fraud, wire fraud, investment adviser fraud, and making a false statement to a government agency are five years imprisonment and a $250,000 fine. The maximum penalties for each count of making false statements on tax returns are three years imprisonment and a $100,000 fine.
Chapman, who declined to comment as he left the courthouse, will remain free until his Nov. 1 sentencing.
William Martin, his attorney, said he planned to appeal. Mr. Martin said he thought the jury confused what was really a civil case with a criminal case.
“We believe that they did have some confusion of whether a breach of fiduciary duty per se equates to fraud,” Mr. Martin said.
Mr. Glendening, a Democrat who appointed Chapman to the University System of Maryland Board of Regents, was not accused of wrongdoing.
At one point, Chapman managed more than $100 million in funds for the retirement system. He managed funds from 1996 until its trustees fired him in January 2002. Chapman was a prominent black investment banker who said he wanted to use his companies to help minorities enter the financial world.
In arguing the fraud part of the case, prosecutors displayed trading records to show that Chapman pressured Alan Bond, who later pleaded guilty to swindling other clients, to use Maryland pension funds to buy stock in a Chapman company for more than it was worth.
He was found not guilty of corrupting a pension trustee, Debra Humphries, one of the mistresses he showered with thousands of dollars, gifts and a Hawaiian vacation.
Miss Humphries testified during the trial that the relationship made her uncomfortable when Chapman asked to manage an additional $100 million of Maryland’s retirement funds in 2001. She said she felt “boxed” in, but didn’t recuse herself from the matter. She testified that she didn’t tell anyone about the relationship because she was embarrassed.
Mr. Glendening’s name came up frequently during the trial, which lasted nearly two months. Defense attorneys argued that Chapman was a “consolation-prize prosecution” after investigators failed to make a public corruption case against Mr. Glendening. Prosecutors denied the contention.
However, prosecutors delved into how Chapman sought to oversee more state retirement money.
George Harrison Jr., a former state trooper who was a member of the pension system’s board, testified that Mr. Glendening urged him in 2001 to support a plan that would have brought more pension money under Chapman’s management.
In another link to Mr. Glendening, an FBI agent testified that two former Chapman employees told investigators that they had made illegal campaign contributions during his 1994 campaign for governor. The employees were reimbursed by one of Chapman’s companies. The amounts of the donations were not disclosed, and no charges were ever filed.
Although the FBI never concluded that Mr. Glendening was aware of the donations, investigators explored the “straw campaign contributions” as a motivation of conduct by Chapman.
Chapman served on the board of regents for eight years, nearly four of them—from 1999 to 2002—as chairman.
Mr. Glendening expressed an interest in becoming chancellor of the university system after his second term ended in 2003, but eventually decided against seeking the position.
Miss Humphries testified that Chapman recommended her name to Mr. Glendening to appoint her to the board when she was a little-known securities firm employee.
Miss Humphries has pleaded guilty to lying to a grand jury about receiving thousands of dollars in financial support from Chapman. She testified at the trial that she had an understanding that Chapman “expected” her support on board matters “because he was responsible for my appointment,” but she also said that the two never directly discussed specific matters that came before the board.
The investigation into Chapman began after one of his employees purportedly was threatened for reporting inappropriate conduct at his company to the Securities and Exchange Commission, according to testimony.