Fmr. student finance chief sentenced

March 17, 2008 6:18:32 PM PDT
Former Student Finance Corp. chief executive Andrew Yao was sentenced Monday to a year and a day in federal prison for bankruptcy fraud. Yao, 46, expressed "deep remorse" for his crimes before being sentenced by U.S. District Court Judge Gregory Sleet.

Yao was convicted last year of two counts of bankruptcy fraud after lying about payments made to an ex-mistress, and to cover his gambling expenses.

Sleet ordered Yao to begin his sentence on April 21, following a federal trial scheduled to begin March 31 in Philadelphia on related charges including wire fraud and money laundering.

"I stand here to express my deep remorse for my conduct and to respectfully request that the court consider leniency in my sentence," Yao said before sentencing.

"I should not have lied. I should not have betrayed my family," he added.

Yao's sentence was within the 10 to 16 months called for under federal sentencing guidelines. Sleet rejected a prosecution request to go beyond the guidelines, saying the government failed to prove by a preponderance of the evidence that Yao lied during his criminal trial, in addition to lying during a deposition in the SFC bankruptcy case.

The judge also rejected a defense motion for a downward departure from the guidelines, a motion based on the argument that Yao had accepted responsibility for his actions.

"I respectfully ask the court to consider the punishment I have already incurred," Yao said, adding that his family had suffered "great shame."

"I am ashamed, I am humiliated, I am humbled," he added.

Sleet noted that Yao led a law-abiding "and even exemplary life" before his crime. He also cited Yao's charitable giving, as well as more than two dozen letters of support from his friends and family.

But the judge concluded that Yao had not adequately accepted responsibility for his crime and said he needed to "send a message to our community" that white-collar crime will not be tolerated.

"You must atone," said Sleet, who sentenced Yao to one year and one day in prison for each count, with the sentences to run concurrently. Yao also must serve three years of supervised probation after his release and pay a $3,000 fine.

Prosecutors dropped a request that Yao pay more than $800,000 in restitution.

Yao and his attorneys declined to comment after the hearing.

U.S. Attorney Colm Connolly, noting that Delaware is one of the largest bankruptcy venues in the country, said the government was pleased with the sentence.

"We are pleased with the message of deterrence," he said.

Last month, however, Sleet rejected efforts by prosecutors to subject Yao to a much harsher sentence.

In as presentencing investigation, officials initially used sentencing guidelines pertaining to fraud, which resulted in a recommended sentence between 51 and 63 months. Yao's attorneys objected, saying the charges against him simply recounted false statements that he made, and that sentencing should be based on guidelines pertaining to perjury. Applying those guidelines would result in a recommended sentence of between 15 and 21 months.

After Sleet sided with the defense, prosecutors filed another motion asking for an upward departure from the sentencing guidelines to punish Yao for his "egregious conduct."

Sleet rejected that request Monday as a rehashing of the government's previous arguments.

Yao's trial last year centered on a 2003 bankruptcy deposition during which he was questioned by an attorney for Royal Indemnity, a company that insured hundreds of millions of dollars in SFC student loans. Royal has alleged that Yao operated SFC, which specialized in making loans to students at truck driving schools, as a Ponzi-type scheme in which he conspired with schools to generate as many loans as possible, then fraudulently obtained new loans to pay down older loans that had gone into default.

In his deposition, Yao denied knowing the name of a person to whom he had wired $669,000 in 2001, suggesting that it might have been a person involved in maintenance of two SFC airplanes. He also testified that $150,000 he sent to two Las Vegas casinos was to cover lodging and gambling expenses of friends and relatives.

In reality, the $669,000 was wired to Yao's mistress at the time, former Playboy centerfold Alexandria "Lexie" Karlsen Wolfe. The $150,000 sent to the Mandalay Bay and Bellagio casinos was to cover Yao's own visits, during which he played high-stakes blackjack while accompanied either by Karlsen or another centerfold mistress.

Yao, who was SFC's sole shareholder, denied lying with the intent to deceive the bankruptcy court or creditors. He said he was simply trying to cover up his marital infidelity from his wife and family.