An Orchard Park man who gambled and lived beyond his means with other people's money was sentenced Friday to six years in prison for a scam that cost dozens of investors as much as $5.1 million over four years.
"I gambled. I played the stock market. And I drank," James E. Rotterman, 33, told U.S. District Judge Richard J. Arcara during the hearing. "I'm a convicted felon, and I deserve that title."
Arcara called Rotterman's crimes "a fairly egregious case" and ordered him to pay more than $4.5 million in restitution.
"How is he ever going to make restitution to all those people?" Arcara asked defense attorney Herbert L. Greenman.
"He doesn't have the money to give them back," Greenman said.
Three dozen victims lost nearly $4.6 million, said Assistant U.S. Attorney Gretchen L. Wylegala, who handled the case. Five others who lost money could not be found. Rotterman paid back six people about $1.5 million, she said.
Some victims lost more than others, with one person losing $1 million, Wylegala said.
None of the victims spoke during his sentencing. But some lost all of their savings, she said. "People are in very bad straits because of Mr. Rotterman's greed and his lies."
Rotterman pleaded guilty in May to wire fraud and tax charges.
Rotterman formed two companies, JRCG Holdings LLC and Warlord Media LLC, and advertised that he had businesses for sale on an Internet site,
The businesses Rotterman advertised were allegedly profitable merchant portfolio accounts, which were to provide a cash flow to the investor, according to the prosecution.
The businesses did not exist, but Rotterman attracted investors by using false financial documents, bank statements and tax returns to tout the fictional businesses.
Investors sent Rotterman more than $6 million between 2006 and 2010, Wylegala said, but all of his representations about the businesses for sale were false.
Any cash flow received by some investors was their own money, or other investors' money, she said.
Rotterman spent the rest of the money to support his lifestyle and to pay off large gambling losses, she said. Erie County's online property records show Rotterman as the owner of a 3,442-square-foot, two-story home on Sandpiper Court in Orchard Park, built in 2006 and assessed at $300,000.
In addition to the scam, Rotterman failed to account for income he received from the investors on his tax returns for the years 2008 and 2009. The tax losses totaled more than $387,000.
The FBI and the IRS investigated Rotterman.
"This case is another example of why it is so important for investors to do their homework," U.S. Attorney William J. Hochul Jr. said in a statement. "When making investments, the public should keep in mind that if it sounds too good to be true, it probably is."
Rotterman, who is married and is the father of a 6-year-old child, was allowed to voluntarily surrender at a later date.
Wylegala opposed that, saying she believed Rotterman has not been truthful about his assets. She said the government does not have "proof positive" that Rotterman is hiding money, but it is the opinion of authorities who interviewed him.
She argued for a harsher prison sentence because she said Rotterman has "never come clean" about how the scam began. "This was a fraud from the get-go," she said, not a case where his conduct faltered after a legitimate start in business.
Rotterman's sentence is roughly in the middle of federal sentencing guidelines, which call for 63 to 78 months. Rotterman got 72 months.
About a dozen of Rotterman's family members and friends watched the proceeding, outnumbering any victims who may have sat in the courtroom. Arcara noted the family support Rotterman has received - something other defendants do not have.
"He had a secret life," Arcara said of Rotterman, noting how he hid his criminal conduct from even his wife.
"I'm ashamed of what I did to the victims," Rotterman told the judge. "I'm remorseful and ashamed of the things I've done."