Lawyer admits guilt in fraud
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By Alan J. Keays Herald Staff - Published: February 2, 2006
A former lawyer for a bankrupt debt-reduction firm in Bennington is heading for a month in federal prison on fraud and tax evasion charges.
"I am so sorry," Thomas J. Daly, 44, of Bennington, told Judge J. Garvan Murtha on Wednesday in U.S. District Court in Rutland. "I did commit these crimes. I'm sorry for it."
"You certainly played a role in the victimization of the people who depended on you to do something for them," Murtha told Daly, who worked as an attorney with the now-bankrupt Law Centers for Consumer Protection in Bennington.
The judge then sentenced Daly to one month in prison followed by three years of supervised release, with three months of that time to be served on house arrest. In addition, Daly was ordered to pay $200,000 restitution.
Daly was ordered to begin serving his prison sentence Feb. 28.
A former attorney in New York and Vermont, Daly has been disbarred.
Daly had pleaded guilty last year to federal charges of interstate transmittal of stolen money and tax evasion. Daly's plea deal called for a maximum sentence of two years in prison. However, Murtha cited Daly's cooperation with federal prosecutors in related cases involving the defunct Law Centers.
"If you hadn't cooperated," the judge told Daly, "your sentence would be substantially more."
Daly's convictions stemmed from the operations of the Andrew F. Capoccia Law Centers, a debt reduction business based in Albany, N.Y., with clients in a number of states, and from the Law Centers for Consumer Protection, a successor law firm that moved to Bennington.
In March 2002, FBI agents and New York State authorities raided the Vermont offices amid allegations that partners, employees and others connected to the firm took part in a scheme to divert millions of dollars in client funds from the Law Centers accounts to accounts controlled by Capoccia's wife.
At about the same time, U.S. marshals seized about $2.6 million from several of those accounts.
The Law Centers closed in January 2003 after clients sued, placing it in bankruptcy. When it closed its doors, it owed clients about $23 million it didn't have, federal prosecutors said.
In March 2003, a federal grand jury indicted Daly, Andrew Capoccia, Howard Sinnott of Bennington, and several others on federal fraud charges accusing them of embezzling millions of dollars from the Law Centers. Daly and several others have pleaded guilty.
Capoccia was convicted last year of 13 fraud counts following a five-week jury trial. He is set to be sentenced Friday.
Sinnott, a former state representative, was sentenced late last year to three months imprisonment and a further three months of home confinement. He had earlier pleaded guilty to two counts of interstate transmittal and transportation of stolen money. Sinnott will also have to make restitution of $500,000.
In his plea agreement, Daly acknowledged that he accepted nearly $200,000 in bonuses — in addition to his $200,000 salary — at a time when clients were demanding refunds of at least $1 million and creditors of the firm were seeking even more.
The money for the bonuses came from an escrow account and the firm's general accounts. According to federal prosecutors, Daly knew or should have known that the firm was not capable of supporting those payments, given that the firm had been embezzling client money to pay its day-to-day expenses.
Daly pleaded guilty to tax evasion for only reporting $20,000 of the $177,500 bonus he was paid by the Law Centers in 2001. He later learned he was under investigation and tried to file an amended return that declared bonus income of $55,000, but his now-estranged wife refused to sign the return, according to prosecutors.
Attorney Bradley Stetler, representing Daly, said in court Wednesday that his client's life had been ravaged by alcoholism, contributing greatly to his legal problems.
"He willingly turned a blind eye to the activities of the Law Centers, positioned as he was to stay at home and drink and get paid for it. That was where he wanted to be and what he wanted to do," Stetler wrote in a sentencing memorandum.
"On the occasions that he showed up at the office he was often drunk, and his stay was cut short so that he could resume drinking. All that he knew was wrong about the operation of the Law Centers fell sway to his drinking."
Stetler said in court Wednesday that Daly has since taken part in "exceptional" alcohol abuse rehabilitation. Stetler said his client has actively participated in Alcoholics Anonymous, and now also serves as a sponsor to other members.
"There really has been an exceptional, wholesale transformation of his life," Stetler said.
At one point in the hearing, Murtha asked Daly how he intended to pay off his $200,000 restitution.
"I haven't yet figured out my second career," Daly replied.
Contact Alan J. Keays at alan.keays@rutlandherald.com.
Once again,Judge Murtha lets the guilty off easy.Daly says I am sorry and gets only 30 days.Howard Sinnott and others did the same thing.
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