Chief Executive Officer of Beauty Products Company Pleads Guilty in Manhattan Federal Court and Chief Financial Officer Arrested in Multi-Million-Dollar Accounting Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and Diego Rodriguez, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that EMANUEL COHEN, the former chief executive officer of a Florida-based company that was a wholesaler and distributor of beauty products (the “Company”), pled guilty yesterday in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn to orchestrating a fraudulent scheme to obtain millions of dollars in loans by making false statements and providing false and fraudulent documents concerning the Company’s financial condition to a commercial bank based in New York (the “Bank”). JAY SOSONKO, the former chief operating officer of the Company, was arrested this morning in Boca Raton, Florida, on a criminal complaint (the “Complaint”) for his role in the scheme. SOSONKO was presented today in federal court in West Palm Beach, Florida.
Manhattan U.S. Attorney Preet Bharara said: “As he has now admitted in court, Emanuel Cohen, the CEO of a cosmetics company, defrauded a bank of nearly $5 million by lying and fabricating key financial documents he needed to get loans. Cohen’s alleged cohort, Jay Sosonko, the CFO of the company, was arrested today and will face criminal charges for his alleged involvement in the scheme. We thank the FBI for their tireless efforts to ensure that those who cheat and exploit financial institutions are held accountable.”
FBI Assistant Director in Charge Diego Rodriguez said: “The plea by Cohen for his role in the scheme and the arrest of Sosonko for his alleged role should serve as a reminder that this type of creative accounting ends with handcuffs. The FBI is committed to working with our partners to investigate and bring to justice those who seek to profit illegally from our financial systems.”
According to the allegations contained in the Information to which COHEN pled guilty, statements made during COHEN’s plea proceeding, and the Complaint against SOSONKO unsealed today1:
From 2012 through March 2014, COHEN and SOSONKO engaged in a scheme to fraudulently induce the Bank to lend millions of dollars to the Company. Among other things, COHEN and SOSONKO knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated borrowing base certificates. Specifically, COHEN and SOSONKO falsely inflated the Company’s sales and accounts receivable on borrowing base certificates that were provided to the Bank pursuant to loan agreements between the Bank and the Company. COHEN and SOSONKO used those falsely inflated sales and accounts receivable to mislead the Bank about the Company’s true financial performance so that the Company could secure and draw down millions of dollars in loans from the Bank that the Company would not otherwise have been entitled to receive.
The Company ultimately defaulted on its loans from the Bank in about March 2014. At that time, the outstanding balance on the loans was approximately $4.8 million.
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COHEN, 71, of Boca Raton, Florida, pled guilty to one count of conspiracy to commit bank fraud and one count of bank fraud, each of which carries a maximum sentence of 30 years in prison. COHEN is scheduled to be sentenced on November 4, 2015, before U.S. District Judge Lewis A. Kaplan.
SOSONKO, 68 of Boca Raton, Florida, is charged with one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison.
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 the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Edward A. Imperatore is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and SOSONKO is presumed innocent unless and until proven guilty.
1As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.