Motz sentenced to 8 years in federal prison

CENTRAL ISLIP—Former Quogue Village Mayor George Motz was sentenced to eight years in federal prison last week, months after pleading guilty to securities fraud for a scheme in which he bilked clients of his Manhattan investment firm out of $2.4 million.

According to federal sentencing guidelines, Mr. Motz, 68, could have received between 11¼ and 14 years in prison.

Mr. Motz, who was released after posting $1 million bond, now has until June 30 to get his affairs in order and surrender to authorities. He will begin his sentence at that time at an as yet unnamed federal prison.

“I am so, so sorry about all this,” Mr. Motz said in a brief statement to the court before his sentencing last Wednesday, April 28. “I don’t know what else to say. I feel horrible about it all.”

Sometime later this month, a judge will determine the amount of restitution that Mr. Motz must pay to his victims, along with additional fines. Due to a statute of limitations, the amount of restitution will be something less than the $2.4 million Mr. Motz stole, according to Judge Arthur D. Spatt.

Mr. Motz, who hung his head after Judge Spatt handed down the sentence at around 3 p.m. on April 28, declined to comment after leaving the U.S. District Court in Central Islip. About a dozen of his friends and family members, including his wife, Kittric, who serves as Quogue Village justice, embraced Mr. Motz as he was entering the courtroom’s gallery after the sentencing.

Judge Spatt ordered that Mr. Motz, who had been free on $500,000 bond since being indicted in August 2008, be confined to his Quogue home with an electronic bracelet until the start of his prison sentence. While Judge Spatt was deciding bail, Ms. Motz told the court that she was now in contract to sell the couple’s $2.5 million home, located on Bayview Drive.

It is unclear whether or not Mr. Motz will appeal his sentence. “I’m not going to comment,” said G. Robert Gage Jr., Mr. Motz’s attorney, as he was walking out of the courtroom after sentencing last Wednesday.

It was not immediately clear when Mr. Motz would be eligible for parole, or whether or not he will be able to knock off any time for good behavior. Those issues will be addressed after the amount of restitution is determined later this spring.

None of Mr. Motz’s estimated 240 victims attended last week’s sentencing.

Mr. Gage, an attorney with Gage Spencer & Fleming in Manhattan, spent several hours last week arguing that Judge Spatt should disregard the federal sentencing guidelines and issue a shorter sentence based on Mr. Motz’s community service and the nature of his crime.

Mr. Gage reiterated last Wednesday an argument that he made during a special court hearing for his client that was held in mid-April: that the five-year “cherry-picking” scheme that Mr. Motz ran at his firm, Melhado, Flynn & Associates (MFA), while illegal, had essentially no victims and resulted in no actual monetary losses. In fact, Mr. Gage argued, the accounts that Mr. Motz managed for his investors were profitable in the long run.

But Judge Spatt eventually sided with federal prosecutor, Roger Burlingame, and ruled that Mr. Motz did some $2.4 million in damage to his investors over the course of the scheme, which began in 2000 and lasted until 2005. The amount of money and the number of victims are factors in determining the sentence for securities fraud.

In October, Mr. Motz, who was still mayor at the time, pleaded guilty before Justice Spatt to one count of securities fraud, a felony. In a statement at that hearing, Mr. Motz, who was president and CEO of the now-defunct MFA, admitted to buying blocks of stocks and waiting until the end of the day to see if the trades were profitable. If the trades were profitable, Mr. Motz said he would assign them to the MFA proprietary account. If they were not, he assigned them to one of his clients’ discretionary accounts.

Judge Spatt said in court that one of Mr. Motz’s employees, who was not identified, tipped off the U.S. Securities and Exchange Commission to suspicious activity at MFA. A subsequent investigation by the commission led to Mr. Motz’s indictment in August 2008.

In court last week, Mr. Gage highlighted the fact that Mr. Motz did not “pocket” the money, but put it in MFA accounts in order to keep the firm afloat. Mr. Burlingame argued that Mr. Motz benefited indirectly by bolstering the company.

Mr. Gage also told the court, before the sentencing, that Mr. Motz’s service as mayor of Quogue Village, a post he held from 2002 until he stepped down in the fall following his guilty plea, should be taken into consideration. The attorney also pointed out that Mr. Motz served two years in the U.S. Army as a casualty notification officer during the Vietnam War—a fact that Judge Spatt said played heavily into his consideration of the sentence.

Mr. Gage noted in court that Mr. Motz has been unemployed for some time, and that his family is in a “very difficult financial situation.” Ms. Motz also told the court that she is selling the couple’s home.

Ms. Motz, who has not indicated if she plans to step down as village justice, declined to comment after her husband’s court appearance.

Four of Mr. Motz’s five children came to the courthouse to support him. Some friends and family members, including Ms. Motz, were crying during the sentencing, which lasted from about 10 a.m. to shortly after 3 p.m.

Peter Sartorius, who was serving as a Quogue Village trustee at the time of Mr. Motz’s guilty plea, was appointed to replace Mr. Motz as mayor in November.