By Brendan Pierson

(Reuters) - A former Manhattan restaurant owner was sentenced to five years in prison on Friday after pleading guilty to running a $12 million Ponzi scheme, in a case linked to a federal corruption investigation of the New York Police Department.

Hamlet Peralta, 38, was sentenced by U.S. District Judge Katherine Forrest in Manhattan, who also ordered him to pay $5.79 million in restitution to victims. Peralta's lawyer, Cesar de Castro, had asked for a two-year sentence, although Peralta gave up the right to appeal a sentence of less than five years and three months as part of a plea deal.

"What I have done is wrong," Peralta said in court before being sentenced. "I regret my actions. They have caused an immeasurable amount of pain to everyone around me."


Peralta, who owned the Hudson River Cafe in Harlem, admitted in May that he lied to investors, telling them their money would be used for a wholesale liquor business. In fact, according to prosecutors, Peralta bought no more than $700,000 in liquor and used most of the investors' money to pay back earlier investors.

Had the case gone to trial, court filings showed that one of the government’s key witnesses would likely have been investor Jona Rechnitz, a businessman who has pleaded guilty in connection with the police probe and is now cooperating with the government.

De Castro said at Friday's sentencing hearing that Rechnitz pressured Peralta to escalate his scheme, demanding regular payments and even threatening Peralta with physical harm. At one point Rechnitz pressured Peralta into buying a $3 million life insurance policy for himself, de Castro said.

Rechnitz is included in a list of victims who can now claim restitution from Peralta, according to de Castro.

Rechnitz was charged last year along with his business partner, Jeremy Reichberg, and several police officials with taking part in a bribery scheme involving prostitutes and luxury trips. Reichberg has pleaded not guilty.

Rechnitz and Reichberg helped raise money for New York City Mayor Bill de Blasio in 2013 and 2014, and were linked to an investigation by federal prosecutors of the mayor’s fundraising practices. That investigation did not result in any charges against the mayor.

"We are obviously disappointed with today's result," de Castro said in an email, adding that a shorter sentence would have taken into account "Mr. Peralta's characteristics of a good friend, son, brother, and member of the community."

(Reporting By Brendan Pierson in New York; Editing by Dan Grebler)