Cross sentenced to 24 months in prison
John Lewis “Jack” Cross, a Lake County businessman who plead guilty to wire fraud last year to defrauding over ten people in a Ponzi scheme, was sentenced in federal court on Friday to serve 24 months in prison. Along with his jail term, he will pay over $1.5 million in restitution to the victims. Chief Judge Dana L. Christensen ordered the sentence.
The sentencing took place in the Russell Federal Courthouse in Missoula on Friday morning. He was released and was instructed to self-report to state custody in 40 to 60 days. Cross and his attorneys waived the right to appeal the decision.
Once Cross is released, he will be placed under supervision for three years. This includes probation, regular drug and alcohol tests, and he will be required to notify state and federal governments if he opens any new lines of credit.
Cross’ two sons, Lewis and Jordon, sat quietly as they listened to the proceedings. His sister Sheryl was also in attendance, who sat behind the prosecuting attorney.
In addition to members of Cross’ family, victims of his admitted defrauding sat silently, and some held plastic bags filled with financial records to present to Christensen in case they were needed to show exact figures to the losses they suffered.
The sentencing was close to three hours. Much of the time spent was the determination of the exact amount Cross would be responsible to pay in restitution.
The nature of Cross’ defrauding scheme worked in two ways.
In some instances, Cross promised victims a return on investments tied to land and properties in Lake County. Other victims were led to believe the money they gave to Cross would be used in a “pool” with other investors. Cross would tell the victims that he would manage the money and invest it as he saw fit.
In both methods of fraud, Cross had no property to back up the investment, and there was no pool of investors. All of the money was being used by Cross to either “shuffle” money around, as the prosecuting attorney asserted, or that simply he was using funds for personal benefit.
When Cross plead guilty last year, he admitted he defrauded investors—some of whom were his close friends and people he had known for over 20 years.
Theo Green was one of victims who attended the sentencing. He volunteered to speak before Christensen and explain how much money he believed he was owed by Cross.
Green, who said he could not hear very well, stood at the podium in front of Christensen and explained his confusion about the total amount to the court. He said he gave Cross $205,000 as a personal loan to be used for business investments, which Cross promised to return with interest. In addition, Green said he gave $542,000 to be included with other investors Cross said he was in contact with.
“So it’s difficult…because there was no pool of investors,” said Green.
Another victim was Thomas Ides, whose money owed by Cross was disputed in court due to Ide’s investments being tied up with a trust indenture totaling $750,000. However, as Cross’ attorney pointed out, Cross’ name is nowhere on the document which was projected on screens in the courtroom.
“There’s no question Mr. Cross and Mr. Ides did business for a very long time,” Christensen said. “I’m looking at hard dollars to determine the correct amount Mr. Cross should pay you.”
The Judge Christensen stated that the burden rests on the US government to prove the exact figure, which in Ides’ case, could not be established without further examination.
After a brief recess, Christensen returned from chambers to list the full amounts Cross is responsible to pay in restitution. He gave a partial award to Ides, but deferred the matter for a hearing in 20 to 40 days to settle the matter.
Excluding Ides’ claim, the total restitution Cross will have to pay is $1,544,500. He will be ordered to pay a minimum of $1,500 per month upon release. At the bare minimum of payments, excluding any further restitution amounts, it would take roughly 85 years to repay the money lost.
Following this ruling came the matter of if Cross would serve time in jail and for how long.
According to state and federal statutes, the recommended jail sentence is 41 to 51 months.
Two of Cross’ friends and business associates, Karl Rosch of Arlee, and Bruce Severson, spoke on his behalf as character witnesses.
Rosch painted a picture of Cross as someone with whom he had done business, loaned money to and received payments to bring all ledgers even.
“Jack has never crossed me,” Rosch said. “Pardon the pun.”
Rosch said he had known Cross for over 15 years and if incarcerated, Rosch would be “losing a friend.”
Severson, a retired veteran who served in Vietnam and now lives in Kalispell, said Cross’ dealings with him—including construction funding and business loans—were honest and any illegal activity was “never an issue.”
“I find it hard to believe,” Severson said, when asked about Cross’ fraudulent activity.
“To me, Jack has always displayed an honest integrity.”
Finally, it was Cross’ turn to address Christensen.
Dressed in a yellow shirt and blue jeans, Cross explained, and apologized for his behavior.
“First of all,” Cross said, clearly emotional, “I realize I’ve affected people who placed their trust in me. I’ve lost their respect. I want to do everything to get it back. I made mistakes.”
Cross said he thanks his family, who he “embarrassed.”
“When things go wrong, it’s how you handle them to make it right is what counts,” said Cross.
Cross traces his mistakes to 2008, when the economy crashed. His business, the selling of fireworks, took a direct hit when the bank he used started calling in loans. He successfully paid $800,000 back in two years.
But that wasn’t enough to keep himself afloat. The fire years of 2012 and 2013 made it very difficult to turn a profit, which Christensen pointed out in the pre-sentencing report, outlining Cross’ finances.
“2014 was a great year,” Cross said, and I was able to pay people here and there.”
Cross asked Christensen not to be incarcerated so that he would be able to pay restitution.
“If I’m in jail, there’s no one to run the business. There isn’t a day that goes by that I don’t think of ways to pay back the victims.”
Cross said that if he were placed on strict house arrest, he could still run the fireworks business.
Cross’ attorney, Milton Datsopoulos, closed his remarks by asking the same request of Christensen. Datsopulos said it was a personal matter because he personally knew Cross.
“I’m asking Your Honor to make an exception,” Datsopoulos said, citing the non-violent history of his client and all the good works Cross had done in the community.
Before the Judge Christensen listened to the government’s recommendation, the Judge Christensen had a few words to say to Asst. US district attorney Timothy Racicot.
“I’m searching for the right word [for Cross’ fraudulent acts],” Christensen said. “These acts are abhorrent. The victims’ impact stories are heartbreaking.”
Racicot said in light of the victim’s suffering, “I can see no way Mr. Cross is not in custody for a period of time. This has been going on for years. Every time he’d promise someone—again with the fireworks business—it was always, ‘one more year will make it right.’ This is just one more promise Mr. Cross is trying to make.”
Christensen said there was no doubt that Cross was sorry and remorseful for his actions, and that he’d received numerous letters—from school principals, leaders in the community, and family members—praising Cross’ good works.
“It is will those good works in mind I have come to my decision. This case is the result of broken promises, misrepresentations, and lies.”
Judge Christensen said that although it would be attractive for the victims to get money as soon as possible by Cross being on strict house arrest, the Judge Christensen did not see a huge year in business that could a make difference.
“I am skeptical,” he said, “that the victims will see a penny.”
He sentenced Cross to 24 months in prison, below the recommended sentencing guidelines, in part because of Cross’ quick guilty plea. Cross was self-released and due to report to custody in about two months.
“In that time, I suggest you find a way for the business to carry on without you until you are released,” Christensen said.