ELLSWORTH, Maine — A former Surry resident has been sentenced to serve five years behind bars for stealing from investors in his home loan business.

Eric S. Murphy, 48, was convicted by a jury late Wednesday afternoon of two counts of theft by deception, one count of securities fraud and one count of forgery. Justice Kevin Cuddy, presiding in Hancock County Superior Court, then gave Murphy an overall sentence of nine years behind bars, with all but five years suspended, and four years of probation upon his release.

Murphy also was ordered by the judge to repay $358,000 total to his investors. Murphy, who moved to South Carolina after allegations arose last year, began serving his sentence Thursday morning at the Maine State Prison in Warren.

Murphy was charged last year after state regulators revoked his loan broker’s license. State officials said Murphy duped his investors in a Ponzi-like scheme by spending hundreds of thousands of dollars of the investors’ money on personal and business expenses instead of using it to fund specific mortgage loans.

Doing business in Ellsworth as Murphy Home Loans, the former Surry man committed 11 separate violations of the state’s Consumer Credit Code by misapplying, misspending or losing track of investor funds, officials with the state Bureau of Consumer Credit Protection said when they revoked his license. In addition to re-voking his broker’s license, state regulators also ordered Murphy to pay $21,500 in fines and fees.

As for the criminal charges that followed, Murphy later reached a plea agreement with prosecutors that would have resulted in his serving 18 months behind bars and paying $570,000 to his victims, but Cuddy rejected the agreement in March. The case went to a jury trial this week.

Assistant Attorney General Michael Colleran, who prosecuted the case, said the difference in restitution amounts in the rejected plea agreement and in Wednesday’s sentencing reflect different victim totals.

One victim who would have received money in the initial $570,000 restitution order was not included in the subsequent $358,000 restitution order because the evidence supporting that victim’s claim was weak and was not presented at this week’s trial, Colleran said Thursday. Another victim who would have received money in the initial restitution order has since recovered some money from Murphy and so was not included in Wednesday’s restitution order, he added.

Colleran said the Attorney General’s Office was pleased with the verdict. He said the sentence imposed was “harsh but fair” and that Murphy was not an innocent victim of a bad economy as Murphy had claimed. Murphy’s criminal behavior spanned 18 months, he said.

Colleran said Murphy testified in his own defense and, at his sentencing, expressed regret but insisted he never meant to harm anyone.

“In the state’s view, he showed no remorse at trial,” the prosecutor said.

In a prepared statement about the verdict, Maine Attorney General Janet Mills said Murphy’s actions were a clear case of investment fraud.

“This was not simply a poor business decision,” Mills said in the statement. “This was cheating and stealing.”

Murphy’s defense attorney, Jeff Toothaker of Ellsworth, said his client was prepared for a guilty verdict.

“[The state] had a lot to work with,” he said. “We didn’t.”

Toothaker said the sentence of five years in prison was “a lot” but that he did not anticipate filing any appeals. He said that after Cuddy rejected the initial plea agreement, Murphy simply hoped to be able to explain to a jury how his financial obligations spiraled out of control.

“He got behind on one project and it just snowballed,” Toothaker said. “He didn’t intend to steal their money.”

Other people besides investors in Murphy’s business say they were victims of the former loan broker’s schemes.

One such person, Cyndee Carroll of Surry, has claimed Murphy left her $800,000 in debt after he partnered with her in an Ellsworth equestrian riding business on U.S. Route 1. Murphy was supposed to handle the business’s finances while Carroll, who lived on the stable property, was to oversee the horses and riding programs, she has said.

The 137-acre property was auctioned off in May for $401,000 after the previous owner foreclosed on it. The assessed value of the property, used by the city of Ellsworth to determine the property’s tax bill, is $516,500.

When contacted Thursday, Carroll said she had mixed feelings about Murphy’s conviction. She said he had been one of her best friends, before his scheme came unraveled.

“He has to pay for what he did,” Carroll said. “I feel bad for his family. I hate the thought of him going to [prison] because we were friends.”

Carroll declined to comment about the length of Murphy’s sentence, but said she has found a new place to live and a field where her horses can graze. She still is looking for a barn for her animals, she said, but is optimistic things will improve.

“It’s hard,” she said. “I’m putting this behind me.”

Bill Trotter

A news reporter in coastal Maine for more than 20 years, Bill Trotter writes about how the Atlantic Ocean and the state's iconic coastline help to shape the lives of coastal Maine residents and visitors....