Former CEO And CFO Of Staffing Company Plead Guilty To Scheme To Defraud Bank And Investors That Caused $75 Million In Losses

Damian Williams, the United States Attorney for the Southern District of New York, announced the guilty pleas today of LOUIS LLUBERES and MOISES LLUBERES for their roles in orchestrating a years-long scheme to fraudulently boost the revenues of their staffing company (“Company-1”).  The scheme allowed Company-1 to fraudulently obtain hundreds of millions of dollars on its line of credit from a U.S. bank (“Bank-1”) and supported the sale of Company-1 to a group of investors (the “Investor Group”) at a grossly inflated price.  LOUIS LLUBERES and MOISES LLUBERES pled guilty today to conspiracy commit bank fraud and conspiracy to commit wire fraud before U.S. District Judge Vernon S. Broderick.

U.S. Attorney Damian Williams said: “For many years, the defendants perpetrated a massive accounting fraud scheme in order to deceive their lenders and investors.  In addition to causing more than $70 million in losses to victims, the defendants’ fraud jeopardized the livelihoods of hundreds of their employees.  The defendants used accounting tricks, thinking their fraud would go undetected.  They were wrong.  Thanks to the tireless work of the FBI and the career prosecutors from my Office, the fraud was halted, the defendants’ assets were seized, and the defendants will face tough consequences for their criminal conduct.” 

According to the charging documents and other filings and statements made in court:

LOUIS LLUBERES founded Company-1 in 1995 and served as Company-1’s Chief Executive Officer until March 2020.  Company-1 served as a staffing company, supplying other businesses with temporary and permanent labor.  MOISES LLUBERES, LOUIS LLUBERES’s brother, served as Company-1’s Chief Financial Officer. 

Company-1 had established a revolving line of credit with Bank-1.  Under the terms of the line of credit, Company-1 could only borrow up to a designated ratio of Company-1’s eligible accounts receivable (the “Borrowing Base”).  By its terms, invoices that had gone more than 90 or 120 days without being paid were no longer eligible to be considered as part of Company-1’s Borrowing Base.  Officials at Company-1 were required to submit weekly financial reports to Bank-1, which included information on Company-1’s sales and collections, among other items, that allowed Bank-1 representatives to calculate Company-1’s Borrowing Base.

Beginning in or about 2017, after losing significant business from major clients, the defendants began creating fraudulent invoices (the “Fictitious Receivables”).  The Fictitious Receivables, which were recorded on Company-1’s books, created the appearance that Company-1 was engaged in more business and would be receiving more client payments than Company-1 did in reality.  All told, the defendants created more than 2,000 such fraudulent invoices. 

By inflating Company-1’s Borrowing Base through the creation of Fictitious Receivables, Company-1 and the defendants were able to borrow more than $500 million from Bank-1 through a revolving line of credit.  Had Company-1 not deceived Bank-1 with the Fictitious Receivables, Company-1 would not have been entitled to borrow these funds under the terms of the line of credit.

In order to perpetuate their fraud, the defendants utilized two shell to disguise the loan proceeds before transferring those funds back to Company-1 and mischaracterizing the funds as client collection payments. 

Once the misappropriated funds had been returned to Company-1’s collections account, they were applied to aging accounts receivable, including the Fictitious Receivables.  This allowed Company-1 to maintain its Borrowing Base and continue borrowing from Bank-1 while artificially inflating Company-1’s revenues. 

Beginning in or about 2017, the Investor Group initiated negotiations to acquire Company‑1, and the Investor Group executed an agreement to purchase Company-1 in May 2018.  During those negotiations, LOUIS LLUBERES and MOISES LLUBERES actively concealed the fraud scheme, knowing that the fraud grossly inflated the value of Company-1. 

LOUIS LLUBERES was paid approximately $11.3 million on the day the Investor Group acquired Company-1.  LOUIS LLUBERES also received an additional approximately $6.2 million based, in part, on fraudulent representations to the Investor Group and Company-1.  In total, LOUIS LLUBERES made at least $17.5 million from the sale of Company-1, and he transferred approximately $716,000 of those funds to MOISES LLUBERES.

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LOUIS LLUBERES, 61, of Windermere, Florida, and MOISES LLUBERES, 60, of Winter Grove, Florida, each pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison.  Both defendants agreed to pay restitution jointly and severally in the amount of $75,460,611.  LOUIS LLUBERES was further ordered to forfeit $75,460,611, and MOISES LLUBERES was ordered to forfeit $1,063,342.45.  In addition, the defendants were ordered to forfeit properties in the U.S. and abroad.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge. 

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation. 

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Nicholas W. Chiuchiolo, Daniel G. Nessim, Rushmi Bhaskaran, and Kevin Mead are in charge of the prosecution.