Former Part-Owner of Litigation Funding Company Admits Defrauding Business Partners in $869,492 Kickback Conspiracy | WPN World People News

The former part-owner and underwriter for New York-based litigation funding company The Law Funder LLC admitted in Newark federal court to participating in a secret kickback scheme that defrauded his former business partners of approximately $869,492, U.S. Attorney Paul J. Fishman announced.

Mathew Sheldon, 39, of New York, pleaded guilty before U.S. District Judge Dennis M. Cavanaugh to a superseding information charging him with conspiracy to commit wire fraud through the deprivation of honest services.

The Law Funder, which extends loans to plaintiffs in pending civil litigation, did business with Montclair Funding Group LLC (“MFG”)—at one time headquartered in Union City, New Jersey—and its owner Rory Donadio, 43, of New York. MFG was a broker between plaintiffs seeking advances against potential recoveries in pending litigation and private entities such as Law Funder. In exchange for a broker’s fee, MFG would, among other things, gather necessary information and documents in support of funding opportunities so Law Funder could evaluate whether to fund a case and for how much. Sheldon was a 25 percent owner in Law Funder and supervised the underwriting process for the company.

Sheldon admitted that from approximately February 2005 through July 2009, he conspired with Donadio to design and execute a secret kickback scheme. Sheldon would offer certain of Law Funder’s investment opportunities to MFG in exchange for personally receiving a portion of each broker’s commission Law Funder paid MFG. Sheldon and Donadio agreed to conceal their fee-splitting arrangement from Law Funder and Sheldon’s three partners. The kickback scheme resulted in approximately $869,492 in fraudulent payments to Sheldon, which were paid by wire transfer and other means.

Sheldon also admitted that he and Donadio concealed the scheme by, among other methods, using code such as “Giants” or the letter “G” in records referring to related transactions. He acknowledged he regularly communicated with Donadio to identify the coded transactions and calculate the amount payable to Sheldon pursuant to the kickback scheme.

The conspiracy count to which Sheldon pleaded guilty carries a maximum potential penalty of 20 years in prison and a $250,000 fine or twice the gross amount of pecuniary gain or loss resulting from the offense. Sentencing is scheduled for October 7, 2013.

Donadio also has pleaded guilty in connection with the scheme and awaits sentencing.

Source: U.S. Attorney’s Office