In this Feb. 26, 2002 file photo, William 'Boots' del Biaggio III is seen in San Jose, Calif. (THE ASSOCIATED PRESS/San Jose Mercury News, Rick E. Martin)
SAN FRANCISCO - A federal judge has sentenced Silicon Valley financier William (Boots) Del Biaggio III to more than eight years in prison for bilking investors and banks - including one he helped launch - out of millions of dollars in a desperate attempt to buy an NHL team.
The disgraced scion of a prominent San Jose family is to report to prison in January, capping a long fall for a former high roller who counted hockey great Mario Lemieux as a golfing buddy and who jetted on private planes to Las Vegas, where he amassed a US$4 million gambling debt.
Del Biaggio pleaded guilty to one charge of forging financial documents to obtain $110 million in loans from several banks and two NHL owners - Craig Leopold of the Minnesota Wild and Los Angeles Kings owner AEG. Del Biaggio used the money to purchase a controlling interest in the Nashville Predators.
Del Biaggio set his crime in motion by turning to David Cacchione, a financially strapped stockbroker at Merriman Curhan Ford Group Inc. who owed him $2 million. According to federal prosecutors and the SEC, Cacchione e-mailed Del Biaggio account statements from several wealthy Merriman clients showing tens of millions of dollars worth of stock holdings.
Del Biaggio then doctored the account statements by cutting out the clients' names and pasting in his own and presenting them to the banks and NHL owners as collateral. Auditors examining Merriman's books uncovered the fraud last year. Cacchione has pleaded guilty to one fraud charge and is scheduled to be sentenced Sept. 29.
Henry Tang, Merriman's chief financial officer, on Tuesday told U.S. District Court Judge Charles Breyer that the scam cost the San Francisco-based company $10 million in legal fees and forced it reduce its staff from 188 employees to 85. Tang said the publicly traded company's share price has tumbled because of Del Biaggio's action, wiping out $43.4 million in market capitalization.
Breyer ordered Del Biaggio to pay back eight banks and the two NHL owners a combined $47.5 million. One of the victim banks is Heritage Bank of Commerce, which Del Biaggio co-founded with his father nearly 20 years ago. The judge ordered Del Biaggio to pay the bank $4.8 million.
Besides the fraudulent loans, the Securities and Exchange Commission has filed a lawsuit seeking to recover roughly $20 million of individual investments the agency accuses Del Biaggio of spending on personal expenses. Three of those investors on Tuesday urged the judge to mete out a lengthy prison sentence, complaining that Del Biaggio squandered their retirement funds and children's education nest eggs.
Several other victims, including childhood friends and longtime business associates, wrote the court with similar sentiments. Although those losses weren't included in the indictment, Breyer still ordered Del Biaggio to also pay back those victims. In all, Del Biaggio has to repay a total of $67.4 million.
"A betrayal of trust is an awful thing," Breyer said. "I don't care if you can pay back everything - this will never leave you and that's the real punishment here."
Breyer said Del Biaggio's co-operation with investigators once his fraud was discovered spared him a longer prison sentence of more than 10 years.
He filed for bankruptcy and many of his assets, including his Nashville Predators stake, will be sold by court order.
On Tuesday, while his weeping parents and friends looked on, Del Biaggio tearfully apologized and vowed to pay back everyone.
"I was blinded by pride and ego," he said. "Everyone makes mistakes. I will come back from this and I refuse to let this define my life."