By Brian Dowling

Law360 (January 8, 2021, 2:02 PM EST) -- A former State Street Corp. executive convicted of stealing millions of dollars from the bank's clients will be released from prison early due to a coronavirus surge in the facility, a Massachusetts federal judge ruled Friday.

U.S. District Judge Leo T. Sorokin's order releasing Ross McLellan came after the Bureau of Prisons said the convicted fraudster could be sent to home confinement in February as part of a broader effort to reduce the inmate population.

"Even without court action, McLellan will spend most of the remainder of his sentence on home confinement," Judge Sorokin said in his order. "And, the only barrier to that transfer happening as scheduled is an alarming outbreak of a virus which poses a specific threat to McLellan given his documented and undisputed health conditions."

The decision changed McLellan's sentence from the original 18-month prison term to the amount of time he served after reporting to the central Massachusetts facility in July 2020. It also increased his supervised release term from two years to three years, requiring that he spend the next 10 months under home confinement. He is also ordered to do 50 hours of community service.

McLellan was convicted in 2018 on five counts of wire fraud, securities fraud and conspiracy for extracting undisclosed fees from massive transactions at State Street. McLellan was released pending an unsuccessful appeal of his conviction.

McLellan's arguments for compassionate release fell on deaf ears less than a month ago, when Judge Sorokin denied the former banker's request to get out of prison, saying he didn't face a substantial COVID-19 risk at the minimum security prison camp.

At a hearing earlier Friday, Judge Sorokin told lawyers in the case that the BOP's decision left him wondering "why shouldn't I" release McLellan.

Assistant U.S. Attorney Stephen Frank told the court that putting the prison's decision aside, the virus conditions haven't changed at McLellan's prison camp.

"We don't think there's been a change, certainly under the reasoning of the court's decision," Frank said. "The fact is if Mr. McLellan was released right now, he would literally be going the same or less time than the person who pled guilty, accepted responsibility and testified against him."

Judge Sorokin acknowledged that changes to McLellan's sentence aren't made in a vacuum.

"The pandemic raises deeply difficult questions of equity, fairness, humanity, justice and the rule of law," the judge said. "All of those things are very hard to reconcile in these cases."

McLellan's attorney Martin G. Weinberg told the court that although virus numbers at his client's prison camp remain low, the associated medical center has seen a remarkable spike in cases, raising the risk that it could spread to the camp as staff cycle through the two facilities.

"It's a catastrophic outbreak in a facility or in an environment where every judge who has examined it has recognized the difficulty of protecting oneself in a prison environment," Weinberg said, noting that the current situation isn't clear since inmates haven't been tested since December.

In addition to his criminal case, McLellan is looking to settle a parallel suit brought by the U.S. Securities and Exchange Commission. Last month, a different federal judge declined to sign off on a final judgment between the SEC and the former executive, saying he still needs to be convinced why McLellan should not be fined for what was a financial crime.

Federal prosecutors said McLellan worked with two lower-level directors, Edward Pennings and Richard Boomgaardt, to add basis points, pennies per transaction, to multibillion-dollar trades for overseas clients. The prosecution portrayed McLellan as the mastermind of the scheme.

Both Pennings and Boomgaardt pled guilty to conspiracy.

State Street admitted to the overcharges in 2017 and said it accepted responsibility for the actions that prosecutors attributed to McLellan, Pennings and Boomgaardt. The bank agreed to pay $64.6 million in criminal and civil fines to end federal investigations.

The government is represented by Stephen E. Frank of the U.S. Attorney's Office for the District of Massachusetts.

McLellan is represented by Martin G. Weinberg and Maksim Nemtsev of the Law Offices of Martin G. Weinberg PC.

The case is U.S. v. McLellan et al., case number 1:16-cr-10094, in the U.S. District Court for the District of Massachusetts.

--Additional reporting by Chris Villani. Editing by Stephen Berg.

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