Tyrone Herman — a St. Anthony businessman who stole $20 million from investors in a rudimentary Ponzi scheme and blamed a gambling addiction for his downfall — was sentenced Tuesday to 10 years in prison.
Appearing before U.S. District Judge Joan Ericksen, he tearfully apologized for his transgressions and admitted: “I don’t like myself at all.”
“I have never felt so much shame, regret and embarrassment,” said Herman, in a courtroom with at least one victim in the audience.
Many of Herman’s 51 victims were family and friends, and seniors who were living on retirement funds, according to court documents.
For more than a decade, Herman, 56, promised investment returns of as much as 30 percent. He allegedly told his victims that he purchased small appliances at below retail levels and sold them with a 35 percent markup. He even created false invoices and phony bank statements to make the plan look believable. But there were no real transactions.
When some clients demanded their money back, Herman paid them with funds obtained from new investors.
He used the proceeds from his ruse to fund his lifestyle, which included a 2007 Chevrolet Corvette sports car, and to support a gambling habit that was driven in part by his hope for a big score to repay his victims.
Herman, a Mankato native who once pitched in the minor leagues for the Boston Red Sox, pleaded guilty to one count of wire fraud in October after the scheme collapsed.
Jacqueline Steele, a victim who was in court on Tuesday, said her elderly in-laws lost “a substantial sum.”
“You don’t ever do these things to people who are vulnerable, ill or can’t speak for themselves,” Steele told the judge. “These people birthed us and went through wars for us. These things are wrong and should be punishable to the full extent of the law.”
Defense attorney Eric Olson portrayed his client as a man who grew up in an abusive home where he had to protect his mother from beatings from his father.
“It was an unstable environment, and he began to try and appear to have things he didn’t have and that led to his gambling addiction,” said Olson, who added that Herman was a good father to his two sons and volunteered as a youth baseball coach.
Assistant U.S. Attorney Karen Schommer dismissed the family man argument.
“He was doing this [fraud] on the backs of innocent investors. They trusted him, believed in him,” Schommer said. “The defendant needs to understand and learn that his kind of fraud will be prosecuted.”
Herman is the latest in more than a dozen investment advisers in the last year who have been prosecuted by the U.S. attorney’s office and the Minnesota Commerce Department.