Baltimore Man Pleads Guilty to Fraud Scheme with Losses of More Than $600,000
BALTIMORE, MD—Curlee Smittie, age 42, of Baltimore, pleaded guilty today to wire fraud in connection with a scheme to defraud his bank and an automobile auction house of more than $600,000.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Stephen E. Vogt of the Federal Bureau of Investigation.
According to Smittie’s plea agreement, from April 2008 until January 2009, Smittie engaged in a scheme to fraudulently obtain checks from an automobile auction company, by buying cars he already owned, using the company’s short-term credit program.
The company operates auction houses for automobile dealers at locations throughout the United States. Automobile dealers must be registered with the company to buy or sell automobiles at its locations. An individual who wishes to sell an automobile must list the car for sale under the name of a registered automobile dealer. Smittie was registered as a buyer and seller under the company name Smittie Auto Brokers.
For buyers with an established track record of timely payment, which included Smittie Auto Brokers and Curlee Smittie, the company extended short term credit for purchases. Under this arrangement, the company issued a check for the proceeds of the automobile sale to the seller of the automobile on the day of sale. The buyer was allowed to take the automobile, with the promise to pay the purchase price to the auction company within two weeks.
Smittie admitted that to perpetrate the scheme, he would list an automobile that he already owned for sale under the name of another registered automobile dealer. Smittie then purchased the automobile in his own name or the name of Smittie Auto Brokers, using the auction company’s short term credit program. This created the appearance of an arm’s length transaction, when in fact, Smittie was merely “selling” the car to himself using the company’s money.
As the person who had listed the car for auction, Smittie accepted the seller proceeds check from the company, which was made out in the name of the automobile dealer that Smittie had used to list the automobile for auction. Smittie deposited those checks into his business checking account, held in the name of Smittie Enterprises, Inc. When the time came for Smittie to repay the short term loan from the auction company, Smittie sold another car to himself in the same manner, and used the seller proceeds to pay the previous debt.
As a result of the scheme, from April 2008 until January 2009, Smittie received a total of $2,126,997.50 in seller checks from the auction company and deposited them into the Smittie Enterprises account.
In January 2009, employees at the auction company learned of Smittie’s scheme and ordered its bank to stop payment on all checks to sellers from whom Smittie had purchased automobiles. Once all of the checks that had been recently deposited into the Smittie Enterprises checking account were reversed, the bank was left with a loss of $166,500.16 because the balance in the Smittie Enterprises account was not sufficient to cover the reversed checks.
When the auction company discovered Smittie’s scheme, Smittie owed the company a total of $702,956.28 for automobiles that he had purchased using the company’s short term credit. The company was able to recover $236,606.20 by repossessing some of the automobiles Smittie had purchased, but was left with a loss of $466,350.08.
Smittie and the government have agreed that if the Court accepts the plea agreement Smittie will be sentenced to 18 months in prison. As part of his plea agreement, Smittie will also be required to pay restitution of $632,850.24. Chief U.S. District Judge Catherine C. Blake has scheduled sentencing for March 27, 2015 at 2:00 p.m.
United States Attorney Rod J. Rosenstein commended the FBI for its work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorney Jefferson M. Gray, who is prosecuting the case.