(Adds quote, charges of conspiracy to obstruct justice)
By Nate Raymond
NEW YORK (Reuters) - The founder of an Ohio firm that provided investment advice to the National Basketball Association players' union pleaded guilty on Thursday to a $3 million fraud scheme and lying to a grand jury.
Joseph Lombardo, 72, a founder and managing director of Cleveland-based Prim Capital Corporation, pleaded guilty to charges of mail fraud and conspiracy to obstruct justice in the U.S. District Court in Manhattan.
The plea followed the April arrest of Lombardo and Carolyn Kaufman, who served as president of Prim's advisory services component.
"Joseph Lombardo engaged in an elaborate fraud involving the creation of a fake contract with the professional basketball players who had entrusted him to manage their union's assets. He then lied to a federal grand jury about his illegal actions and told others to do the same," said U.S. Attorney Preet Bharara, based in New York.
Prim Capital had served from 2001 to 2013 as the primary outside investment adviser dealing with investments and finances for the New York-based National Basketball Players Association, which represents NBA players.
The firm managed up to $250 million of the NBPA's assets and reviewed players' investments and ran financial seminars for them, prosecutors said.
Prosecutors previously said that in May 2012, as part of a probe by the U.S. Department of Labor, Prim was asked to hand over copies of all of its agreements with the NBPA.
In response, Prim provided a 2005 contract showing its fees were $350,000 a year. Months later, after learning a law firm's review of the union was going to be made public, Prim produced another contract showing its annual fees over five years as $602,000.
But authorities said the signature from former NBPA general counsel, Gary Hall, on the contract was forged and the contract was created months after he died. Another employee's signature was also forged, prosecutors said.
The indictment also charged Lombardo and Kaufman with attempting to obstruct a grand jury investigation. Lombardo on Wednesday admitted to giving "untruthful testimony" to the grand jury.
"Did you know what you were doing was wrong and illegal?" U.S. District Judge Jesse Furman asked in court.
"Yes, your honor," Lombardo replied.
The judge scheduled sentencing for March 20. He faces 25 years in prison, although prosecutors agreed to accept a federal sentencing guideline that would provide for no more than 5-1/4 years in prison.
Charges remain pending against Kaufman, who faces trial on Dec. 2. A lawyer for Kaufman and a spokeswoman for the NBPA did not immediately respond to requests for comment.
The case is U.S. v. Lombardo, U.S. District Court, Southern District of New York, No. 13-cr-00411. (Editing by Jackie Frank)