A federal court judge here sentenced a former Northwestern Mutual Investment Services adviser to 30 months in prison for stealing almost $2.8 million from four different clients, two of whom are family members.
John Charles Hanson, 42, pleaded guilty last year to wire fraud. Hanson lacked a criminal history and wasn’t viewed by prosecutors as a flight risk. He remained free until his sentencing hearing on June 8.
Hanson told U.S. District Court Judge Rosanna Malouf Peterson that his gambling addiction got out of control, and he stole to feed that addiction.
A date for when Hanson will enter prison hasn’t been determined.
Hanson, who had worked for 10 years in Northwestern Mutual’s office in the Marycliff Center, at 705 W. Seventh, has been ordered to pay $2.8 million in restitution to the company, which has paid back most of the four victims from whom Hanson stole money.
Northwestern Mutual contacted law enforcement when an investor notified the company of Hanson’s suspected thefts, Betsy Holyman, a Milwaukee-based spokeswoman for the company told the Journal last November.
His federal defense attorney, Amy Rubin, says Hanson wasn’t living a lavish lifestyle and claims he didn’t profit from stealing from his clients.
Hanson faced a sentencing range of four years to 20 years. Rubin asked the judge to consider a prison sentence of 30 to 60 days, followed by five months of weekends in prison, then concluding with four months of home confinement.
None of the victims testified in court. However, Charlotte Nemec, the daughter of one of Hanson’s former clients, said his betrayal was so profound that both she and her mother have had a difficult time trusting financial advisers.
Nemec told Peterson she’s personally known Hanson for 20 years and recommended him as a financial adviser to her parents. Nemec says Hanson met with her father a month before he died to ensure that his wife would be taken care of financially.
“He disrespected the memory of my papa. The way he abused the trust of us and the other investors is something he needs to pay for,” said Nemec, who used to live next door to Hanson.
In a phone interview later with the Journal, Nemec said her mother and other victims signed confidentiality agreements with Northwestern Mutual preventing them from discussing the terms of settlements reached with the company.
The Financial Industry Regulatory Authority began investigating Hanson in September 2014. FINRA said in its report that Hanson refused to cooperate with the investigation by failing to provide requested documents or testimony.
In November 2014, Hanson entered into a Letter of Acceptance, Waiver and Consent with FINRA in which he neither admitted nor denied the allegations against him. He is permanently barred from associating with any FINRA broker-dealer in any and all capacities, including as a security salesperson. The state pulled his license last August and released its findings shortly thereafter, FINRA says.
The majority of testimony at the sentencing hearing came from Hanson’s supporters.
One supporter, Jeff Morris, asked the judge to suspend time in prison in favor of 1,000 hours of community service.
Federal prosecutors sought a 40-month prison sentence.
“I appreciate the support that has been shown to you here today,” Peterson told Hanson. However, she said his “systematic preying on vulnerable individuals” during “vulnerable times” justifies sending him to prison.
Peterson said she was willing to impose a more lenient sentence than that sought by prosecutors because Hanson has completed inpatient treatment for gambling and has continued to participate in treatment.
“He hid his addiction for almost 10 years,” Rubin told the court. “A gambling addict doesn’t have the same signs as someone addicted to alcohol or drugs. You could walk into a room and never pick him out.”
Hanson became a stockbroker at 23. He said at his sentencing hearing that he almost immediately enjoyed a rush from betting on stocks to make money for his clients. Later, in 2004, Wells Fargo & Co. fired Hanson for check kiting, he told the court.
Hanson said he thought getting hired in 2006 at Northwestern Mutual as a financial adviser would remove him from the excitement of gambling he experienced as a stockbroker. However, casino and online gambling helped satisfy his gambling habit, he told the judge.
The start of the Great Recession, combined with the unexpected death of his father at the beginning of 2008, helped send Hanson into a gambling freefall, he said.
It became harder to find clients as many were withdrawing money from investments as the recession grew. Hanson says his failure to cope emotionally with his father’s death drove him even further into gambling.
Hanson made unauthorized withdrawals from his clients’ accounts, took out unauthorized loans against those clients’ life insurance policies, and sold fictitious investments to several clients and a personal acquaintance, federal documents say.
“I intend to pay as much restitution as I can in my lifetime,” Hanson told the court.
At the hearing, Hanson choked with emotion as he apologized to former clients, family members, and friends. Hanson has a wife and four children.
“I don’t take any of this lightly,” he said, fighting back tears.
Rubin told the judge a lengthier prison sentence will create a hardship on Hanson’s family and further delay his ability to pay restitution. Rubin told the court Hanson has been working as an “independent contractor” for 1½ years, earning roughly $4,000 per month. After the hearing, Rubin declined to reveal the nature of Hanson’s work.
Hanson’s boss, Tod Whitman, asked the judge to have leniency on Hanson.
Said Hanson’s older sister, Amy Condon, to the court, “J.C. is a good person, a good person who made some very bad choices.”