Ex-Pimco CEO’s ‘Guilty’ Starts Frenzied Day in College Scam

(Bloomberg) -- Former Pimco CEO Douglas Hodge kicked off a frenetic Monday in the U.S. college admissions scandal by changing his plea to guilty, followed by three more parents giving up the fight.

On top of that, a Houston man accused of helping the scheme’s mastermind, Rick Singer, sneak a student into the University of Texas as a bogus tennis recruit decided to change his own plea to guilty -- and to cooperate with prosecutors.

Hodge was accused of paying Singer $525,000 for bribes to athletic coaches at the University of Southern California and Georgetown University to get three of his kids in as recruits. He appeared in federal court in Boston, where he shared a handshake and a smile with a prosecutor. His lawyer told the court that prosecutors said they wouldn’t file additional charges if his client pleaded guilty -- a fact likely weighing on the 15 parents sticking with their not-guilty pleas.

In a statement released Monday morning, Hodge, 61, said he was “ashamed” of his conduct.

“I promise to spend the rest of my life proving that this lapse of judgment is not who I am,” he said.

Also changing their pleas to guilty were Hercules Capital founder Manuel Henriquez and his wife, Elizabeth, and Michelle Janavs of the Hot Pockets family food empire.

Federal prosecutors in March accused Martin Fox, the former president of a private tennis school in Houston, of helping applicants get into selective colleges through bribes to coaches. Fox will admit to conspiracy to commit racketeering and will work with prosecutors, according to court filings Monday. Under his plea deal, the government agreed to recommend he serve a prison term on the low end of 21 to 27 months.

“Martin is a good man who deeply regrets getting into this,” his lawyers, Michael Pineault and David Gerger, said in a statement. “He takes full responsibility for his conduct.”

The plea changes by the parents come after months spent planning defenses to fraud and money-laundering conspiracy charges that could send them to prison for years if they lose at trial.

Ex-Pimco CEO’s ‘Guilty’ Starts Frenzied Day in College Scam

And that may explain the rush for the exits.

“The decision to plead guilty right now strikes me as quite rational, given the prospect of a higher punishment if convicted,” said Daniel S. Medwed, a law professor at Northeastern University in Boston. “Some of us have called the plea system a ‘trial tax’ that pressures you to plead out, because of the stark sentencing differential between post-plea and post-trial sentences.”

U.S. District Judge Indira Talwani has handed out a string of jail terms, ranging from two weeks to five months, to nine of the 10 parents sentenced so far, with a year’s probation for one. They and half a dozen other parents who pleaded guilty earlier this year, most of whom Talwani is sentencing, admitted participating in a mail fraud conspiracy.

The parents who’ve been fighting the case -- until now including Janavs, the Henriquezes and Hodge -- are grappling with an additional, more serious charge that could spur the judge they will face, U.S. District Judge Nathaniel Gorton, to take a harsher stance.

“After Felicity Huffman got 14 days in prison, I expect what happened is defense lawyers said, ‘This is the time to cut a deal, because if you risk going to trial and are convicted of conspiracy to commit money laundering, you could be looking at serious prison time,’” said Peter Henning, a former federal prosecutor who’s now a law professor at Wayne State University.

“If I’m a defense lawyer, I’m telling my client to get out and get this behind you, and hopefully you can get a fairly light sentence,” Henning said. “It’s time to announce defeat and move on.” The “trial penalty” in this case could add up to a year or two behind bars, he said.

Earlier in the Case

Singer’s plot took some byzantine twists. Instead of paying Singer with cash to rig his daughters’ test scores, the U.S. says, Manuel Henriquez, the Hercules Capital founder, agreed to use his clout as an alumnus and former member of Northeastern’s board to get the child of another Singer client into the school.

In court on Monday, Henriquez, 56, acknowledged knowing that the test scores submitted for his daughters were fraudulent. But he said he thought $400,000 he separately paid to Singer’s foundation was a legitimate donation that would go to Georgetown’s tennis program and not a bribe to get one of the girls into the university as a tennis recruit.

After standing to enter his plea, he sat and wiped his eyes, shaking his head.

No doubt the parents now changing their pleas have learned the nuances of the federal sentencing guidelines, which grant wrongdoers a degree of leniency for accepting responsibility for their crimes. And because judges aim for consistency in sentencing, the new round of parents may be planning to argue that their punishment should be no harsher than what the others got.

“I think the message is out,” Henning said. “‘Cut your deal now and hopefully you’ll receive a lighter sentence.’”

The case is U.S. v. Sidoo, 19-cr-10080, U.S. District Court, District of Massachusetts (Boston).

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.