Newport Beach Attorney Headed to Federal Prison

A disbarred Newport Beach attorney who admitted orchestrating an investment fraud scheme that cost his 10 victims about $4.3 million was sentenced today to 70 months in federal prison.

Gerald M. Shaw, 63, of Covina pleaded guilty on July 9, 2010, to one count of wire fraud. He was indicted on 10 counts of wire fraud and two counts of money laundering, but the remaining charges were dismissed as part of the plea deal, Assistant U.S. Attorney Gregory Staples said. Shaw's attorney had recommended a 63-month prison term. But U.S. District Judge Cormac Carney cited the vulnerability of the ex-attorney's victims in handing down a stiffer sentence.

One of those victims had his life savings wiped out and cannot afford health care for his wife, who suffers from Parkinson's disease, and another man, who is an amputee, lost $215,000 and is on welfare because he cannot afford health care, Carney said. "I am struggling with showing him mercy because of the vulnerability of his victims,'' the judge said. Staples also noted how the victims were affected. "I find it ironic that one of his victims, who has Parkinson's disease, has no health care while he's about to go on government health care. That's a stinging irony,'' Staples said.

Shaw's sentencing had been rescheduled seven times since his guilty plea so he could try to repay his victims. But his claims regarding assets on which he could capitalize were "pipe dreams,'' and he has no ability to make restitution, Staples said. Shaw missed a Dec. 12 sentencing date when he went to his doctor for medical tests that morning and was ordered hospitalized because of an irregular heartbeat, defense attorney James Riddet said. Shaw suffered a stroke in March, according to Riddet. Staples said he doubted that Shaw had any life-threatening health issues and accused the former attorney of engaging in "stalling tactics.''

Carney issued an arrest warrant when Shaw failed to show for his sentencing hearing earlier this month. Shaw claimed he was unable to get a phone call out to his attorney from the hospital. He apologized to the judge and his victims today, blaming his crimes on his failed marriage. "In December 2004, I lost my wife and children through divorce after 21 years of marriage,'' he said. "I was emotionally destroyed and I was spiritually paralyzed. I just became paralyzed. I don't know how to put it in words, but I couldn't function. I would come into the office some days and I wouldn't even turn on the lights or answer the phones.'' Shaw said he also started drinking heavily. "I've lost everything and now I've lost my health,'' he said.

Several of Shaw's friends and family came to the hearing and spoke on his behalf. "Jerry was always there for us, so we want to be there for Jerry,'' the defendant's brother, Brian Shaw, said. "We just hope and pray you find it in your heart to find leniency.'' Carney, however, noted that Shaw committed his crimes while an attorney and said his "heart goes out to the victims because I think they were devastated and will continue to suffer for the rest of their lives.'' He ordered Shaw to pay $4.3 million in restitution.

Co-defendant Gregory De Lavalette, 55, of Rancho Santa Fe, pleaded guilty to wire fraud in February 2010. He has been waiting behind Shaw for sentencing. Shaw and De Lavalette, who worked for Shaw, falsely told investors that their money would be used in foreign-exchange investments in Europe, promising returns as high as 40 percent a week. Investors were told the money would be safely held as collateral, but instead it was used to cover business and personal expenses. De Lavalette defrauded four victims out of $415,000, Staples said. Shaw was disbarred on July 8, according to bar association records.

-City News Service