By Hannah Albarazi

Law360, San Francisco (April 23, 2021, 8:33 PM EDT) -- A California federal judge said Friday she's inclined to grant an ex-wine country real estate lawyer's request for compassionate release amid the pandemic, but prosecutors and a deceased victim's sister urged the court to reconsider, arguing that the convicted ex-lawyer may have committed additional crimes around the time of his sentencing.

U.S. District Judge Susan Illston began a Zoom hearing Friday saying she plans to grant David J. Lonich's second request for compassionate release, stating that Lonich's health conditions are serious and that she doesn't think he's a threat to the community.

"I think the factors weigh in favor of compassionate release at this time," Judge Illston said.

But Assistant U.S. Attorney Robert Rees said Lonich "is really not the type of person deserving of this," reminding the court that Lonich has been convicted of obstruction of justice and that the U.S. Attorney's Office for the Northern District of California's financial litigation unit believes Lonich engaged in fraudulent transfer of assets right before he began serving his sentence.

Rees said Lonich is now accused of fraudulently transferring out assets even while he owes "a lot of restitution" to victims.

He said "it appears he may have committed crimes and done worse things that the court didn't even know about when it sentenced him." He said he thinks Lonich poses a threat and shouldn't be released.

Rees further argued that Lonich mooted his own motion, saying that because Lonich is appealing his conviction and his sentence to the Ninth Circuit, the district court thus lacks jurisdiction to grant such a motion at this time.

Rees also noted Lonich will be fully vaccinated in the coming week, which should greatly reduce his risk of falling seriously ill with COVID-19.

But Lonich's attorney, George Harris, argued that his client, even if vaccinated, could still fall ill with the virus, especially if he remains in custody.

Lonich, who is in his mid-60s, was convicted in 2017 on more than two dozen counts of conspiracy, bank fraud, money laundering and making false bank entries for his role in an excessive lending scheme that led to the demise of Sonoma Valley Bank.

He is serving an 80-month sentence in a federal prison in Montgomery, Alabama.

Prosecutors said Lonich helped his then-client, developer Bijan Madjlessi, obtain roughly $35 million in illicit bank loans that the developer knew he couldn't repay in the wake of the 2008 financial crisis. The scheme led to the local bank's demise in August 2010, and wiped out millions of dollars in bank-obtained federal aid along with it, the government said.

Madjlessi was initially included in the March 2014 indictment, along with former Sonoma Valley CEO Sean C. Cutting and former Chief Loan Officer Brian S. Melland, but the developer died in a single-car crash shortly after the charges were unveiled, according to court documents.

After a 31-day jury trial in 2017, a jury convicted Cutting, Melland and Lonich. The trio appealed their convictions to the Ninth Circuit, which heard oral arguments on the appeals in February and has not yet ruled.

In January 2020, Judge Illston denied the trio's requests for early release, finding they hadn't raised legal issues in their appeals that would likely reverse their convictions.

Lonich began serving his sentence in October 2018, but in May 2020, he asked Judge Illston to release him due to his age and health risks posed by contracting COVID-19 in prison. He noted that he had previously been diagnosed with prostate cancer, hypertension, high cholesterol and sleep apnea. Melland and Cutting made similar requests, but Judge Illston denied all three motions.

In late December, Lonich filed a second motion for compassionate release in his own handwriting, along with a letter to the court's clerk asking that his motion be delivered to prosecutors. He explained that he was representing himself at the time, had been diagnosed with COVID-19 days earlier, and therefore was being isolated and did not have access to a law library.

In March, Judge Illston expressed her inclination during a hearing to grant Lonich's request for compassionate release, but told his attorney to first ask prison officials if they would grant his renewed request. The prison officials denied his request.

At Friday's hearing, Judge Illston also heard from the sister of a now-deceased victim of Lonich's.

The victim's sister didn't identify herself by name, but told Judge Illston her sister's name and that she had lost her to cancer. She said Lonich "stole from my sister."

She told the judge she was struck that Lonich would have the "audacity" to seek early release for illness and said she found his motion extremely upsetting.

"He belongs in prison and I'm just asking that you keep him there. That's it," the sister told Judge Illston.

The sister also urged the judge to heed the government's concerns, saying the prosecutor had made it clear that Lonich may have tried to commit another crime while being sentenced for this one and that he is likely to commit additional crimes if released.

After hearing from the victim's sister, Judge Illston took the motion under consideration without issuing an order.

After the hearing, counsel for the parties didn't immediately respond to a request for comment.

The government is represented by Robert David Rees of the U.S. Attorney's Office for the Northern District of California.

Lonich is represented by George C. Harris of The Norton Law Firm PC.

The case is U.S. v. David John Lonich, case number 3:14-cr-00139, in the U.S. District Court for the Northern District of California.

--Additional reporting by Dorothy Atkins. Editing by Bruce Goldman.

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