Former Rancho Santa Fe resident sentenced in fraud scheme


By Paul Anderson

City News Service

A 55-year-old former Rancho Santa Fe resident who helped a disbarred Newport Beach attorney orchestrate an investment fraud scheme that cost their victims millions of dollars was sentenced Feb. 13 to 15 months in federal prison.

Gregory De Lavalette, who pleaded guilty in February 2010 to one count of wire fraud, played a lesser role in the scheme than co-defendant and former attorney Gerald M. Shaw, 63, of Covina, who was sentenced to 70 months in federal prison in December.

De Lavalette was held responsible for ripping off four victims who collectively lost $415,000. He received a fraction of that money, with the rest going to Shaw, according to prosecutors.

Deputy Federal Public Defender Anne Hwang asked U.S. District Judge Cormac Carney to consider community service or home confinement for De Lavalette instead of prison.

Hwang noted De Lavalette has a job after years of unemployment and that her client, in interviews with probation officials, is not denying or minimizing his conduct. I think that shows he has learned from what he did. He recognizes this was a serious mistake.’’

She also argued that there was no way De Lavalette could have perpetrated the fraud without the help of Shaw, who was an attorney at the time.

Mr. De Lavalette alone could not have convinced these very sophisticated investors,’’ she said.

His role in the scheme was to reassure nervous investors, Hwang said.

De Lavalette declined to make a statement to the court.

Assistant U.S. Attorney Gregory Staples pointed out that he recommended 15 months, which was half of what De Lavalette would have otherwise gotten for pleading guilty to wire fraud.

I cannot see someone knowingly taking nearly half a million dollars and not getting jail time,’’ Staples said.

Carney agreed with the prosecutor, while taking into account that De Lavalette lost his parents in an explosion at a young age and was abused by an adoptive parent.

He has signaled he can live a righteous life and stay out of trouble,’’ Carney said.

But the extent of the fraud troubled the judge.

I’m really struggling with the $415,000 stolen,’’ Carney said,and I just believe with such a significant amount in an investment fraud scheme that a custodial sentence is required.’’

De Lavalette was ordered to pay back the $415,000 he stole, although he’s not in a position financially to do so, according to the judge.

De Lavalette will have to begin serving his prison sentence by March 19, and he will have to do at least 85 percent of the time.

Shaw was ordered to pay $4.3 million in restitution.

Shaw and De Lavalette falsely told investors that their money would be used in foreign-exchange investments in Europe, promising returns as high as 40 percent per week.

Investors were told the money would be safely held as collateral, but instead it was used to cover business and personal expenses, prosecutors said.

Shaw was disbarred last July, according to bar association records.