Washington -- Westley Scher, a former executive of the now-defunct FSG Financial Services, was sentenced yesterday to 71 months in prison and ordered to return about $26.7 million to investors defrauded in connection with a scheme to sell bogus municipal bonds.

In handing down the sentence, U.S. District Judge William D. Keller called Mr. Scher and others involved in the scheme "the bottom of the barrel of humanity."

Mr. Scher had pleaded guilty on March 24 to a three-count indictment charging him with racketeering, securities fraud, and filing a false tax return. He could have received a maximum sentence of 28 years in prison and $54.5 million in fines.

FSG Financial was a Beverly Hills, Calif., investment firm accused by the government last year of marketing fake municipal bonds. It was created after First Securities Group of California was closed in 1987 by the National Association of Securities Dealers for making misrepresentations about bonds that the U.S. attorney's office called "worthless limited partnerships."

For five years, beginning in 1986, investors purchased about $35 million of the fake bonds, which purported to have a face value of roughly $45 million. Of that amount, FSG Financial sold about $19 million of worthless bonds with a supposed face value exceeding $22 million, the U.S. attorney's office said.

Assistant U.S. Attorney David J. Schindler described Mr. Scher as "the number two man" in the scheme, which targeted "elderly, wealthy and fixed-income individuals who were particularly interested in the high degree of security normally associated with municipal bonds."

Earlier this month Joan Kantor, the former president of FSG Financial, pleaded guilty in a Los Angeles federal court to two counts of securities fraud and one count of filing a false tax return. Ms. Kantor's sentencing is set for Nov. 18.

In his statement, Mr. Schindler said his office, the Federal Bureau of Investigation, and the Internal Revenue Service are continuing their criminal investigation of the financial services firm, while the SEC is pursuing a civil action.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.