Seattle entrepreneur Mark Phillips was sentenced Friday morning to four years in prison for defrauding MOD Systems and lying to the court in a complex fraud case that has dragged on for more than three years.
In issuing the ruling — about half of what federal prosecutors recommended — U.S. District Judge John Coughenor said that the conduct of the 36-year-old father was “deficient, dishonest, imperfect and wrong.”
Though often described as a genius, the tech entrepreneur lied and stole, and his fall in the community was “swift and steep,” Coughenor said.
But the judge also added that Phillips, who has been cleaning bathrooms while incarcerated at the Sea-Tac detention center, returned the $1.5 million that he stole almost immediately.
“He’s no Bernie Madoff,” Coughenor said.
In remarks to the court, former MOD Systems CEO Anthony Bay and Julia de Haan — the accountant for MOD investor Robert Arnold — argued that Phillips had yet to learn his lesson. As recently as two months ago, Bay noted that Phillips was doing everything he could to sabotage the company.
“He’s not the injured party here,” said Bay, noting that his personal reputation and others associated with MOD has been damaged by Phillips’ fraud. “I think the last thing this world needs is a more ruthless and uncaring Mark Phillips.”
de Haan noted that Phillips played “Mr. Arnold for a patsy” and “still does not understand that he committed a crime.” In remarks to GeekWire, de Haan said that the 82-year Arnold has suffered great “emotional stress” as a result of the case and has ceased making angel investments in the Seattle area due to Phillips’ actions.
“If it can happen once, it can happen again,” de Haan said.
MOD Systems, a maker of digital media kiosk technology which raised $35 million from Toshiba, NCR and others, shut down earlier this month. Its assets are in the process of being sold, said Bay.
Peter Mair, the attorney for Phillips, suggested a prison term of 28 months. He argued that the entrepreneur — while brash and error-prone — is full of ideas and creativity. In his remarks to the court, Mair worried that imprisoning Phillips for an extended sentence would be “wasting an asset that our economy needs.”
After the sentencing, Mair said that he respected Judge Coughenor’s decision even though it came above his personal recommendation. And he suggested that Phillips — who declined to address the court today — had learned his lesson.
“He’s in jail. You know what the federal detention center is like?” said Mair, adding that Phillips’ job at the prison involves cleaning bathrooms. “You’d have to be a blithering idiot not to get it, and he’s not a blithering idiot.”
Phillips was convicted on four counts of wire fraud, one count of mail fraud, and two counts of money laundering earlier this year.
Federal prosecutor Aravind Swaminathan argued for 97 months in prison, saying that Phillips is dangerous because of his ability to gain the trust of smart people.
“He then abuses that trust to get what he wants,” said Swaminathan, adding that the entrepreneur remains “trapped in his deception.”
“This is a defendant who has yet to appreciate the gravity of what he has done,” said Swaminathan. “At the end of the day, he lied to get money.”
In addition to the four year prison sentence, Phillips must serve three years of supervised release and pay a $15,000 fine. He’s also being recommended for the federal prison’s drug treatment program.
