Former Ramona resident and financial planner Rollo Richard Norton II was sentenced Monday to two years in federal prison for mail fraud in which he defrauded investors out of $7 million.
Norton, 54, was allowed to remain free on $75,000 bond by U.S. District Court Judge Marilyn Huff and will surrender to a prison by Sept. 24. The judge ordered a restitution hearing for Sept. 20 for victims who have not received any settlement money.
The fraud initially was estimated at $20 million, but Assistant U.S. Attorney Lawrence Casper said it was eventually determined it was closer to $7 million. And some victims won settlements and a civil jury’s verdict, so the total loss now is $2,613,576, according to prosecution documents.
The $2.61 million is owed to five couples and seven individuals who have received nothing, according to Casper, who objected to the judge’s allowing Norton to remain free until Sept. 24.
“I don’t have any doubt he’s going to flee,” said the judge, citing Norton’s court appearances including his testimony in a lengthy civil trial that ended last month in San Diego Superior Court.
Huff said federal authorities take about six weeks to choose the prison where defendants will go, and it is better for Norton to surrender to the specific prison rather than be imprisoned sooner and then be transported far distances.
“He’s never been in a prison before and I’m sure it will be a shock to him, but it is appropriate,” said Huff.
Casper’s sentencing recommendation was filed under seal and he didn’t mention a specific figure in court. However, Huff revealed in court that Casper sought a 32-month sentence. The maximum sentence was 30 years.
Norton’s attorney, Tom Warwick, suggested no imprisonment, house arrest, or some other lesser amount, citing his client’s early cooperation with authorities.
Norton’s father was a trusted financial adviser in Ramona, and his son inherited some of his clients. In 1999, Norton bought some apartments to convert into condos, but he mismanaged the project, got unfavorable loan terms, and ended up borrowing money in the names of his clients without their authorization, according to court records.
Only one investor spoke during the sentencing. Steve Lilly told the judge he has known Norton since grade school and “the deception is the worst part of this.” Lilly said, “It’s like being betrayed by a brother.” He added that he got his mother and aunt to invest with Norton.
“Mr. Norton would look me in the eye every day and smile. This man has no heart whatsoever,” said Lilly angrily. “It’s about him making money, no matter who he hurt. All these years...it was one big lie.”
Lilly acknowledged he received some restitution stemming from lawsuits filed by many investors against Chicago Title Company, and Fidelity National Financial. Norton testified for days in May, and that was the reason his sentencing was delayed by several years.
Attorney Michael Kirby told the judge his firm represented 45 investors and he credited “enormous” help by Norton in agreeing to testify.
“Mr. Norton told the truth. He did provide assistance,” said Kirby.
Kirby said Norton looked at investors in the civil trial and said, “I’m sorry I betrayed your trust.” Kirby said many of the investors “have forgiven Mr. Norton.”
Chicago Title Company was a subsidiary of Fidelity National Financial, one of the largest title insurance companies, and did not report Norton’s lawsuits and fraud to its shareholders until 2009. They were sued by Norton’s investors, and a jury awarded damages to most of them.
Norton spoke briefly.
“I am truly sorry for my participation in this. I apologize for my actions,” he said to the judge.
Norton didn’t complete the condo conversion due to insufficient funds, so he obtained new mortgage loans in his investors’ names without their knowledge. He admitted he had signed the names of his investors on grant deeds and other escrow closing documents in a scheme that went from 2001 to 2005.
Awaiting sentencing on July 26 are two of Norton’s employees, Scott Greer and Todd Johnson, both of Ramona. Greer, 33, pleaded guilty to mail fraud and Johnson, 37, pleaded guilty to making a false statement on a loan application submitted to a bank. They remain free on $50,000 bond.
In a statement released Monday, the new U.S. Attorney in San Diego, Laura Duffy, said: “The investigation and vigorous pursuit of this matter triggered a series of events that ultimately led to the defendant’s accepting responsibility and to the recovery of a significant portion of lost investor funds through private, third-party civil settlements.
“Today’s events reflect this office’s unwavering commitment to pursue aggressively all types of financial fraud.”
Keith Slotter, special agent in charge of the San Diego FBI, stated, “The FBI will continue to work with the mortgage industry and our law enforcement partners to protect citizens from becoming victims of mortgage fraud crimes.”