CEO of Berlin, New Hampshire Business Pleads Guilty in Multi-Million-Dollar Bank Fraud Case
The Office of the United States Attorney for the District of Vermont stated that Arnold Hanson, 63, formerly of Berlin, New Hampshire, pleaded guilty before Chief Judge Christina Reiss yesterday to an information charging him with conspiracy to make false statements to a financial institution. The conspiracy charge alleged that Hanson and others agreed between 2007 and 2011 to submit inflated figures for assets of Isaacson Structural Steel, Inc., including inventory, to Passumpsic Saving Bank, and other banks participating in loans totaling over $12 million, including a $2 million loan guaranteed by the Small Business Administration in late 2010. Based on the plea, Hanson faces up to five years in prison.
Hanson was part owner and President of ISSI, which before its bankruptcy was one of the largest businesses in the North Country. ISSI fabricated steel used in commercial construction. It entered into construction contracts to provide not only the steel for commercial buildings but also to provide subcontractor services, principally the erection of the steel. ISSI purchased steel and fabricated the various pieces of steel needed for each contract at its Berlin, Hampshire location and then shipped the steel to building sites.
Between August 2007 and April 2011, ISSI officers regularly submitted false and inflated figures to the banks regarding the value of ISSI’s assets. ISSI submitted these false statements about assets in borrowing base certificates and financial statements. ISSI regularly inflated its assets by a million dollars or more. Mr. Hanson was not the primary officer responsible for the preparation of these asset representations to the banks. Nevertheless, both at the beginning of the period of the conspiracy and at the end, Mr. Hanson knew that the asset representations were false and participated in the submission of those false statements. For example, in August 2007, Mr. Hanson and other officers discussed, and then submitted to the bank, inflated figures for the amount of money owed to ISSI for work done in connection with 303 Third St., a construction project in Boston. In early 2011, Mr. Hanson participated in the submission of an ISSI’s draft financial statement for the financial year 2010, which contained significant overstatements about ISSI’s inventory. That financial statement had an inventory representation of approximately $12 million dollars. In fact, the value of the inventory was less than $2 million. Inventory was thus inflated by over $10 million. In April 2011, the banks learned about issues with ISSI’s inventory figures. By June 2011, ISSI was in bankruptcy, and its assets were later liquidated. In the end, the banks lost millions of dollars as a result of the fraud.
The United States is represented in this matter by Assistant U.S. Attorneys Paul Van de Graaf and Timothy Doherty. Hanson is represented by George Ostler, Esq. The investigation, which is ongoing, is being conducted by the Federal Bureau of Investigation, the Office of Inspector General for the Federal Deposit Insurance Corp., and the Office of Inspector for the Small Business Administration.