Former broker gets prison term

A former securities broker, who is assisting the FBI in its criminal investigation of Metropolitan Mortgage and Securities Co., was sentenced Friday to 30 months in prison for his organizing role in an unrelated $1.5 million investment fraud.

Lee Douglas Tusberg got entangled in the fraud scheme involving his own company, Trans-Link Research and Development Group, after leaving Metropolitan in 1995.

In the fraud scheme, 35 “unsophisticated, middle-class” investors from Spokane, Coeur d’Alene and elsewhere gave various amounts of funds, totaling $1.56 million, to Tusberg who signed promissory notes, said Assistant U.S. Attorney Tom Hopkins.

The investors had contact with Tusberg because he was an independent contractor for KMS Financial Services Inc., a respected broker-dealer firm based in Seattle.

Tusberg promised to use the investors’ money to secure cell-phone contracts in China. But Trans-Link “was simply a Ponzi scheme, a company that didn’t have a contract, an agreement or a productive relationship with any business entity,” Tusberg admitted in a plea bargain.

KMS Financial had no involvement in, nor knowledge of, Trans-Link, and its two bonding companies reimbursed the 35 investors defrauded by Tusberg actions, Hopkins said. The case was referred to state and federal investigators after one investor called KMS and asked about Trans-Link. The KMS official had never heard of the company.

Tusberg formed the company in 1996 after leaving his job as a licensed securities representative at Metropolitan Mortgage and Securities.

“He left Metropolitan Mortgage because there was a bad smell emanating from that operation,” his attorney, Donald Hackney, told Senior U.S. District Court Judge Frem Nielsen.

After being indicted in January 2004 with conspiracy and federal securities fraud for his Trans-Link operation, Tusberg “immediately began cooperating” with FBI agents, telling them what he knew about Metropolitan’s operations, Hackney told the court. He did not elaborate.

Tusberg also was questioned by U.S. postal inspectors in Oregon who were investigating Metropolitan Mortgage and its subsidiary, Summit Properties, Hackney told the court.

The defense attorney’s comments Friday were believed to be the first indication in open court that the FBI is investigating alleged criminal conduct at the bankrupt Metropolitan Mortgage.

So far, no criminal charges have been filed against anyone associated with Metropolitan.

The precise details of Tusberg’s assistance in the Metropolitan investigation are detailed in a Justice Department memorandum filed Thursday, telling the court why he deserved a lighter sentence. But the U.S. Attorney’s Office, represented by Hopkins, asked that the document be sealed from public inspection, and the request was granted.

At Friday’s sentencing, Hackney detailed his client’s “substantial assistance” to the FBI in an attempt to persuade the judge to give Tusberg a 16-month sentence, split between eight months in jail and eight months of work release.

Since his arrest, Hopkins has been working at a credit card payment firm, the court was told.

The prosecutor objected to the defense request that Hopkins only go to prison for eight months, saying the federal government already agreed to a seven-month “downward departure” in Tusberg’s sentence because of his cooperation.

Hopkins said Tusberg didn’t deserve any more of a break, given the scope of the fraud he carried out between May 1996 and February 2000.

Tusberg pleaded guilty on Sept. 2 to conspiracy to commit security fraud, which Hopkins said carried a standard sentencing range of 37 to 46 months in prison.

Hopkins recommended that Tusberg be given 30 months in prison and ordered to pay $1.87 million in restitution, which includes more than $290,000 in interest. The restitution would go to KMS and its bonding companies and attorneys’ fees for two defrauded investors.

The 58-year-old defendant told the court he “accepts complete and full responsibility” for his criminal conduct, but doubts he will live long enough to make full restitution.

“I am embarrassed,” Tusberg said. “I apologize to the public and my friends.”

Co-defendant Barbara Sue Edgemon is scheduled to be sentenced Monday.