A former controller of Contrarian Capital Management LLC has been sentenced to four years in prison after he embezzled $9.2 million from the Greenwich, Connecticut hedge fund, federal prosecutors said on Monday.
Lawrence Herzing, 45, of Greenwich, was sentenced on Friday by U.S. District Judge Jeffrey Alker Meyer in Bridgeport, Connecticut.
Herzing was also ordered to pay full restitution, and has forfeited his home and funds seized from his accounts, totaling more than $5 million, U.S. Attorney Deirdre Daly said.
The defendant pleaded guilty on Jan. 29 to one count of wire fraud.
Prosecutors had recommended a prison term of 5 years, 10 months, the low end of the range recommended by federal guidelines.
"From the time of his arrest, Mr. Herzing cooperated with the government, and his cooperation has resulted in approximately $5.1 million being available for Contrarian," the defendant's lawyer Andrew Bowman said in a phone interview.
Prosecutors alleged that on 32 occasions from 2004 to 2013, Herzing used his position at Contrarian to improperly wire $9.2 million from his employer to accounts he controlled.
Contrarian oversees about $3.9 billion of assets, Barron's newspaper estimated in May 2014. The firm specializes in "distressed" investing in such areas as bank debt, bonds, debt backed by real estate, trade claims, and "rescue" financing.
Clients were not expected to suffer losses from Herzing's activity, a person familiar with the matter said in late October when Herzing was arrested.
The case is U.S. v. Herzing, U.S. District Court, District of Connecticut, No. 15-cr-00009.
