SAN FRANCISCO — Jasper C. “Jay” Knabb of East Wenatchee was sentenced Thursday to 21 years in federal prison for a $30 million securities swindle.
Knabb, 45, of East Wenatchee pleaded guilty 10 months ago to securities fraud, conspiracy to commit securities fraud and maintaining false books and records as CEO of Pegasus Wireless. Knabb bilked investors in that publicly-traded tech firm by pumping up the stock price and secretly issuing shares to himself and a partner.
U.S. District Judge Jeffrey S. White’s sentence far exceeds the 6 1/2-year term that U.S. Attorney John Schmidt recommended when Knabb first entered his plea. It also overshoots a 17 1/2-year sentence recommended last month by a federal probation officer.
From the bench, White told Knabb he had caused “unspeakable … misery” to investors who’d lost their life savings, according to the San Francisco Chronicle. He ordered Knabb jailed immediately after the hearing.
“His instinct has always been to lie and cheat,” the judge said.
Knabb moved to East Wenatchee in 2010 after marrying former competitive skier Laura Valaas, with whom he has a young child. He headed Pegasus Wireless from 2005 to 2008, and scammed investors in the company with the help of chief financial officer Stephen Durland.
Knabb owes $41 million in a settlement with the Securities and Exchange Commission, which sued him in 2009. A shareholders’ lawsuit in California state court seeks a $1.45 million insurance settlement, which is still pending. Durland is now serving nearly three years in prison for his $2.1 million part in the scam.
In recent months prosecutors began to question Knabb’s candor and remorse in the fraud case, saying he was “evasive about the fluidity between his and his current wife Laura Valaas’ finances.”
While awaiting sentence, Knabb became heavily involved as an engineer in Valaas’ ski-goods manufacturing business, Skadi Nordic. Valaas told the court Knabb had no legal or financial standing in the company.
Still, Knabb assumed financial responsibility for wiring done for Skadi Nordic last summer, while the business was based in his and Valaas’ home. Contractor Jim Dorsey accused him of failing to pay for some $20,000 worth of work, and turned over records of the dispute to FBI agents.
Two days before sentencing, Knabb sued Dorsey for breach of contract and slander in Chelan County Superior Court, claiming the electrical work was defective and Dorsey spread false statements that harmed Knabb “in other legal proceedings.”
Federal investigators also questioned the indirect transfer of an Alaska-based trust from Knabb’s ex-wife, a fellow defendant in the SEC case, to Valaas. The trust held Knabb’s former home in Anchorage, which was encumbered by $98,000 in liens and property taxes. In March, Valaas asked the current trustee to step down and replaced him with her Skadi Nordic business partner, with a secondary trust named as beneficiary. Knabb and Valaas’ son is the beneficiary of that secondary trust, according to federal court documents.
Knabb faces five years of probation upon his release from federal prison. With presumed good time, he could serve as little as 17 years.
Jefferson Robbins: 664-7123