In a stunning move, a D.C. federal court judge yesterdayremanded Nicholas J. Bush, former president of the Natural GasSupply Association (NGSA), to a halfway house pending sentencing ontwo felony charges for embezzling $2.8 million from the producergroup. Bush had pleaded guilty.

A U.S. marshal led a weary-looking Bush out of the courtroomfollowing his arraignment Thursday before U.S. District Judge EmmetG. Sullivan, who said he wanted to debunk the “perception” that”life goes on as usual” for white-collar criminals after they pleadguilty and sign plea agreements with prosecutors. “I don’t thinkI’m being unreasonable” by taking this action, he told Bush’sattorney, William J. Murphy of Baltimore. “Whatever time he servesnow would be credited against his sentence.”

Sullivan’s decision came as a surprise to Murphy, who had askedfor Bush to be released on his own recognizance pending sentencing.He said his client was a “long-standing member of his community,”had “cooperated fully with the government,” turned over his assetsas restitution to NGSA and posed no risk of flight.

Bush will remain at the halfway house, the location of which wasnot disclosed, until he is sentenced on Oct. 25th for one count oftax evasion and one count of mail fraud in connection with a phonyconsulting scheme that he carried out between 1983-1999 while hewas president of NGSA. Each count carries a maximum penalty of fiveyears in prison plus fines (a maximum of $5.6 million for the mailfraud charge alone). The U.S. Attorney’s Office in D.C. has agreedto waive any fines so that Bush can continue to make restitution toNGSA.

Under the federal sentencing guidelines, Assistant U.S. AttorneyVirginia Cheatham indicated that Bush could get as much as 41months in a “minimum security” prison. However, if it can’t beproven that Bush embezzled the entire $2.8 million-he contends hestole “slightly less” than $2.5 million-and that he abused aposition of trust, the former NGSA president could receive a lowersentence of 27 to 33 months, she said. There also is an unresolvedissue of “sophisticated concealment” related to the tax offensethat could affect his sentencing.

“We anticipate the guidelines to be 33 to 41 months” for Bush,Cheatham told reporters following the arraignment. Prosecutors planto argue that he stole “more than $2.5 million but less than $5million,” that his fraud offense involved “more than minimalplanning,” and that he abused a position of trust. But Bush’sattorney contends that his client’s “psychological makeup” and his”extraordinary effort” at restitution favor a lower sentence.

“This is going to be a complicated sentencing proceeding,”Sullivan said. He ordered the D.C. Probation Department to completea sentencing report within 70 days, and scheduled a hearing on thesentencing issues for Oct. 18th. Whatever term is decided, Sullivantold Bush “you probably will serve the entire sentence,” or atleast 85% of it.

At the arraignment, Sullivan accepted a plea agreement workedout between the U.S. Attorney Office and Bush’s attorney underwhich Bush waived his right to have the charges against himreviewed by a grand jury. The agreement, among other thing, alsopreserves Bush’s right to argue in the sentencing phase that theamount he stole from NGSA was less than $2.5 million. It furthersaid that no “promises” were made to Bush about a reduced sentence.

Sullivan quizzed Bush about his reasons for signing the pleaagreement. “Because I am…guilty of the charges,” said the54-year-old Bush, who noted he has been taking prescribedmedication for anxiety and has been in therapy for the past fourmonths. His involvement in the fraudulent consulting scheme wasuncovered about five months ago.

Upon reviewing all of the terms of the agreement, Sullivan askedBush if he still wanted to plead guilty to the two felonies. Indoing so, “you will never be allowed to vote again” or be a juror.”I’ll give you a fair trial,” he promised. Sullivan reminded Bushthat he would not be able to withdraw his guilty plea in the eventthe court decides to impose a sterner sentence than that suggestedunder the federal guidelines.

After Bush left the courtroom, Sullivan asked Cheatham if theU.S. Attorney’s Office had any idea of what happened to “this vastsum of money” that Bush embezzled. “We are attempting to track[that]” now, she said, adding that much of its was spent on”personal items,” such as “food, drink, travel and clothing-itemsthat do not retain value.”

Bush’s attorney told Sullivan that his client has been trying tomake restitution. So far, he has sold his house in Washington D.C.for about $800,000-$900,000. But after subtracting what was owed tothe mortgage company, only about $250,000 went to NGSA. Also “sortof an agreement in principle” has been worked out to turn over thefunds in Bush’s retirement and pension accounts, which wereestimated at about $1.5 million, to the producer group, accordingto Murphy.

However, after allowing for the penalties assessed by theInternal Revenue Service (IRS) for early withdrawal of the pensionfunds, NGSA again would get only a fraction of the amount. Furthercomplicating the matter is the fact that Bush’s wife, who has filedfor a divorce, owns an interest in the retirement money.

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