The Oregonian




Grayson's Son Gets 2 Years In Prison For Capital Consultants Role







U.S. District Judge Anna Brown sentenced a weeping Barclay L. Grayson to an unexpected 24 months in federal prison Tuesday for his role in the collapse of Capital Consultants.


The sentence drew gasps and cries of shock from Grayson and family members and friends who attended the hearing. The 31-year-old former Capital Consultants president had hoped that his close cooperation with federal prosecutors and lawyers for former Capital Consultants clients might keep him out of prison.


But Brown said the "enormity" of the white-collar crimes in which Grayson participated warranted the sentence, which was six months longer than the term recommended by federal prosecutors.


"The extent of harm of this criminal enterprise and the devastation is immense and needs to be put in the balance when I'm determining sentence," she said.


Grayson pleaded guilty last March to one count of mail fraud that the judge described as "part of a criminal enterprise of an extent previously unknown in this district, in this region."


Investors, including many union workers, lost an estimated $355 million in failed and allegedly fraudulent Capital Consultants investments. In response to lawsuits by the U.S. Securities and Exchange Commission and the Department of Labor, a federal judge put the company into the hands of a receiver in September 2000.


Conspicuously absent at Grayson's sentencing was his father, Jeffrey L. Grayson. Steven Ungar, Barclay Grayson's lawyer, said at the hearing that father and son have not talked in the 14 months since Capital Consultants' collapse and that the senior Grayson made no effort to assist in his son's defense.


Jeffrey Grayson, 59, founded Capital Consultants more than three decades ago and served as its chairman and chief executive officer. He pleaded not guilty last month to a federal grand jury indictment charging him with 22 counts of mail fraud, conspiracy, money laundering, witness tampering and paying an illegal gratuity to a union pension fund trustee.


Ungar portrayed Barclay Grayson as torn between the legal duty he owed Capital Consultants' clients and the love and loyalty he felt toward his father. Lynn Stafford, a Portland attorney and Barclay Grayson's maternal aunt, described the elder Grayson as domineering and said it was "not realistic" to expect the son to refuse to carry out his father's orders or quit the firm.


"Jeff Grayson ran a business that was highly respected and extremely successful," Stafford said. "He was also in declining health. You had Jeff Grayson telling Barclay that he needed to be around to take over the business."


Jeffrey Grayson suffers from multiple sclerosis.


The father-son relationship, she said, changed dramatically after Sept. 21, 2000, the day of Capital Consultants' demise. "I witnessed Barclay Grayson's realization that his father was instrumental in putting him in the position he now found himself in. I simply cannot imagine a father behaving the way he has. It just flabbergasts me."


The mail fraud charges against Barclay Grayson stem from Capital Consultants' statements to clients regarding the complex restructuring of its huge loans to the former Wilshire Credit Corp. After Wilshire Credit failed to repay $160 million it owed in the fall of 1998, Capital Consultants told its clients that three other companies, including Brooks Financial and Beacon Financial of Miami, had assumed the obligation.


In its September 2000 lawsuit, the SEC accused the Graysons of running a Ponzi-like scheme to conceal the losses by using new investor money to pay off old debts.


Assistant U.S. Attorney Lance Caldwell submitted a sentencing memorandum at Tuesday's hearing conceding that Barclay Grayson was largely controlled by his father -- but arguing that the son could not be excused entirely.


"Barclay Grayson," the memo said, "had a position of responsibility at the firm, and exercised some discretion in carrying out his father's orders. On those orders, Barclay Grayson arranged and implemented the complex series of funding of Brooks and Beacon that enabled Capital Consultants to maintain a flow of interest payments on the Wilshire loans. In doing so, he directed the work of numerous other persons at Capital Consultants and elsewhere."


Barclay Grayson read a statement saying, "I truly believed that my father's plan to save the Wilshire loans was legal and would work." But, he added, "I knew deep in my heart that the disclosures (to clients) were misleading. I made a major mistake following my father's direction instead of following my heart.


"It pains me greatly," he said, "to see the anguish that this whole event has caused. People who I care deeply about have been through a nightmare."


Barclay Grayson also said his relationship with his father appears over. "I don't know any other way to put it – I mourn the loss of my father," he said. "We have not spoken in more than a year, and we may never again."


Ungar called witnesses who testified that Barclay Grayson's cooperation in civil lawsuits against Capital Consultants had assisted greatly in efforts to recover funds for former clients. Caldwell agreed that Barclay Grayson provided key information that helped the government build its case against Jeffrey Grayson and former labor trust fund official John Abbott.


Abbott is scheduled to be sentenced in Brown's courtroom today on his guilty plea to tax evasion and taking payoffs from Jeffrey Grayson. A federal grand jury is still considering possible indictments against others.


Brown said she would recommend that Barclay Grayson serve his sentence at a minimum-security prison in Oregon, perhaps the Federal Correctional Institution at Sheridan, to allow him to remain close to his family. Because Barclay Grayson's wife is expecting their third child in February, the judge said he could delay reporting to prison until May 1.


Jeff Manning can be reached at 503-294-7606 or by e-mail at


James Long can be reached at 503-221-4351 or by e-mail at


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