Local Ponzi schemer gets 90 months

CHARLOTTESVILLE—Standing up to make remarks before the judge sentenced him, John Mark Donnelly turned to the audience and paused. The courtroom observers, some of whom were once Donnelly’s investors, looked back at him.

“I’m sorry to each one of you that I have harmed,” Donnelly said.

Friday’s apology came more than 10 years after Donnelly began a Ponzi scheme that netted him more than $5.3 million from more than 30 victims. U.S. District Judge Norman K. Moon sentenced Donnelly in Charlottesville’s federal court to 90 months in prison and three years of supervised release and ordered him to pay restitution.

Unlike other Ponzi schemes, authorities said Donnelly, 52, relied on personal connections rather than mass mailings to find investors.

The money that Annie Nash and her brother lost was the proceeds from the sale of their parents’ house in Washington, D.C. Nash, who read a statement in court, said she intended to use the money to go back to school.

She said she didn’t think Donnelly, who she said lied to her for nine years, could change.

“This is a man who has willingly put his kids’ future in jeopardy so he can buy a Hummer with stolen money,” Nash said.

At first, Tower Analysis Inc. was just that — an analysis firm managing skyscraper exteriors, said defense attorney John Davidson. The business morphed into something entirely different around 2002, when Donnelly collected investors for the “Tower fund,” authorities said.

According to his indictment, Donnelly told investors that he would invest their funds with a “complex futures market trading strategy.” How-ever, Donnelly “conducted almost no trading” and instead distributed money to investors from the principal of other investors.

Time to pay the piper

The deception was uncovered Jan. 29 when one investor called to get his money back, court documents show, at which point Donnelly admitted he didn’t have the cash.

Donnelly’s reason for not making the trades may stem from experiences in his youth, he said in a letter filed in court documents. According to the letter, Donnelly’s father was an undercover Central Intelligence Agency officer, and Donnelly grew up during the Cold War in Warsaw, where he experienced “intense stress and trauma.”
He wrote that a paralyzing fear kicked in when he tried to make trades.

“I had made my living descending the outsides of skyscrapers and won a national motorcycle racing title,” Donnelly wrote. “Certainly I could defeat the inability to operate my keyboard. But I could not.”

The indictment said Donnelly tried to raise more money from new investors until his March 11 arrest. He pleaded guilty in May to fraud charges.

Donnelly could have faced a maximum prison sentence of 48 years, but his sentencing guidelines recommended between 78 and about 90 months. Davidson said he was grateful that the judge rendered a “reasonable sentence,” but the attorney was worried his client would get the maximum sentence, citing some 100-plus year sentences handed down in other Ponzi cases this year.

‘I can do something’

Authorities estimate that Donnelly owes $5,311,038 to his victims. Donnelly said he intends to pay it back.

“I understand what the crime says about me, but I can do something about this,” Donnelly said.

U.S. Attorney Timothy J. Heaphy said it is unlikely that Donnelly will be able to earn enough money to pay back the investors in full.

The government will liquidate assets in Donnelly’s name. Davidson said in court that Donnelly’s wife can support the family so all the money Donnelly makes upon his release can go to the victims.

Donnelly remains out on a $100,000 bond until he is ordered to a prison, a process Davidson said probably will take four to six weeks. The furlough will give Donnelly time to deal with civil action from the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.

Before he turned back to face the judge and be sentenced Friday, Donnelly thanked his wife. Pausing for a moment, he lowered his head and his voice.

“I’m sorry,” Donnelly said one last time.