Former star investment banker Nathan A. Chapman, who started the country’s first black-controlled, publicly traded financial services firm, was convicted of fraud on Aug. 12th.
Over 11 days, the federal jury in Baltimore heard testimony featuring a former Chapman mistress and allegations by his defense team that federal prosecutors targeted their client because of his close relationship with former Maryland Gov. Parris N. Glendening, and returned its verdict.
In total, Chapman, 46, was convicted of 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. He was acquitted on two wire fraud counts, four mail fraud counts, and one count of making false statements on tax returns. The jury deadlocked on two other counts charging him with false statements on tax returns.
Once heralded as a model for black success in the investment banking world, Chapman was undone by a scandal in which he was accused of improperly funneling about $5 million he managed for the State Retirement & Pension System of Maryland to his own company eChapman.com Inc. With more than 250,000 teachers, police officers, firefighters, and other state workers relying on those funds, he’s charged with doing this at a time when shares in his firm were plummeting.
Some of the 32 total charges claim Chapman compelled another black investment banker turned convicted felon, Alan Bond, to help him funnel pension system money into eChapman.com. Bond, who at the time was facing a federal indictment of his own, had lost most of his clients but was still a submanager on the pension account Chapman managed. Chapman instructed a desperate Bond to buy eChapman.com stock at $13 a share when it was only trading at $7 a share on the open market, Bond testified. In all, the state pension system lost $4.7 million in the scam.
Federal prosecutors argued that Chapman used his connections to Glendening to land the pension business. Chapman was an early financial supporter of Glendening’s gubernatorial campaign in the mid-1990s, and was later appointed chair of the state’s Board of Regents. No charges have been filed against Glendening.
Chapman’s lead defense attorney, Billy Martin, claims that Assistant U.S. Attorney Thomas DiBiagio, the prosecutor in the case, targeted Chapman initially as a potential witness against Glendening, but focused his sights on a case against Chapman when he could not find enough evidence to charge Glendening with corruption.
During a press conference in Baltimore on the day of the verdict, DiBiagio said, “He did it because he didn’t think anyone could stop him. He was wrong.”
Prosecutors also argued that Debra B. Humphries, a member of the pension system’s board with whom Chapman had an extramarital affair, helped him defraud the pension system. He was acquitted of fraud charges stemming from that accusation and of taking $500,000 in payments from his own company and using at least $200,000 of it to pay for gifts for mistresses