Thomas Donovan of Cold Spring Harbor sentenced to prison for cheating British billionaire out of $31 million

A Cold Spring Harbor man was sentenced Thursday to 4 years, 7 months in prison for cheating a British billionaire out of $31 million.

The victim of the scheme, Joseph Lewis, who lives on a yacht in the Bahamas, is reportedly one of the richest men in Great Britain.

Before he was sentenced in federal District Court in Central Islip, Thomas Donovan, 67, told U.S. District Judge Joanna Seybert: "If Joe Lewis were here, I would apologize to him directly. I'm sorry I let my ego [cause me] to do what I did. If I could undo it, I certainly would."

Donovan also was ordered by the judge to make restitution of the $31 million.

"Under the guise of rehabilitating and reselling distressed mortgages, Donovan lied to his investors and stole their money, acting Eastern District U.S. Attorney Kelly Currie said in a statement. "Donovan took advantage of the residential mortgage crisis for his personal financial gain."

The federal prosecutor in the case, Christopher Ott, declined to comment after the sentencing, as did Donovan's attorney, Randi Chavis.

Donovan was co-owner of a Jericho company, Private Capital Group, that invested in subprime mortgages.

The company anticipated making a profit of 20 percent to 50 percent by purchasing nonperforming mortgages, those in which the homeowners were not making their payments, at a steep discount from banks, according to court papers filed by Ott.

The Donovan firm would then get the homeowners to pay something on the mortgages, and then, as the economy improved, and as the home's value improved, refinance the mortgage with banks, in effect, reselling the mortgage note, Ott said.

The largest investor in Donovan's capital group was a Florida-based company named Ficus, which was controlled by Lewis, officials said.

In all, Ficus invested $300 million in Donovan's company, officials said.

But Donovan, who pleaded guilty to conspiracy to commit wire fraud, did not think he was making enough money from his relationship with Lewis, and instead of placing all of Lewis' money in the subprime mortgages, Donovan and associates set up a number of shell corporations.

Into the shell companies, they drained the $31 million, mainly in 2007, according to an FBI investigation.

When questioned by his own employees about what the $31 million was for, Donovan and his associates claimed they were personal loans, officials said.

John Cambria, an attorney for Lewis' company who was in court, declined to comment after the sentencing.

By Robert E. Kessler

Robert.Kessler@newsday.com

Bob Kessler covers federal law, including law enforcement agencies such as the FBI, DEA, IRS and ATF, as well as the federal courts.