During an emotional court case yesterday, a federal judge sentenced 71-year-old former planner Judith Zabalaoui to 97 months in prison for using a Ponzi scheme to embezzle millions from clients in the New Orleans area.

Citing the severity of the offenses, Federal District Judge Mary Ann Vial Lemmon also ordered Zabalaoui to pay $3,255,000 in restitution and a $100,000 fine. Zabalaoui also will be under federal supervision for three years after her prison term.

Zabalaoui founded the financial advisory firm Resource Management Inc. in Metairie, La., in 1974. By the time she left the firm in 1991 to set up her own business, Zabalaoui, a certified financial planner, was regarded as one of the pioneers of the financial advisory profession and among the first advisors to transition to a fee-only model in the early 1980s. However, she never joined the National Association of Personal Financial Planners and allowed her CFP license to lapse several years ago. Resource Management has denied any involvement with Zabalaoui since she left the firm and has not been accused of any wrongdoing.

According to a report on the sentencing in The Times-Picayune, Zabalaoui told the judge that she "got hooked as any addict on my drug of choice," but she realized her mistakes after undergoing therapy and "soul-searching." The newspaper also reported that a reverend from Zabalaoui's church spoke on her behalf, saying he believed she was "filled with remorse" for the elaborate ruse used to swindle investors.

The paper also reported that seven clients spoke to the judge and urged her to be tough in her sentencing. Clients called her a predator who posed as a trusted advisor and friend. One client said he lost money in trust for his sister, who Zabalaoui knew had Down's Syndrome.

U.S. Attorney Jim Letten said in an interview today that his office estimates 35 people were victims of Zabalaoui's scheme, and many lost their life savings.

"It was a strong sentence that I think sends a strong signal," Letten said. The prison term Zabalaoui got was the most severe based on recommended sentencing guidelines, which considered the amount of the victims' losses at the time of her plea. When Zabalaoui pleaded guilty in February, about $3 million in losses to clients had been identified, Letten said. But the investigation continued with her cooperation and the actual losses to victims was later determined to be about $5 million, he said.

"This was a very egregious offense. The scheme was very complex and very sophisticated, like the Bernard Madoff scheme but on a smaller scale," Letten said. "Fake companies were set up, and fake communications were used, as in the Madoff case. It was a very deep level of deceit."

Zabalaoui spent her ill-gotten gains on clothing; credit card balances; mortgages; medical care for her family, her husband's family, her assistant's family and others; rent and living expenses for apartments for friends and family; food for her family and others; and vacations.

From 1993 until late 2007, Letten says, she created a scheme to defraud numerous clients and guaranteed them between 13% and 26% if they invested in two companies, Paragon Company and Omni Clearing. Unbeknownst to the clients, these companies were both fraudulent.

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