PORTLAND, OR—U.S. District Court Judge Michael Simon sentenced the former owners of D&R Auto Sales, D&R Motors, and D&R Ford/Mercury to federal prison for conspiring to defraud KeyBank in a car flooring loan scheme. On May 27, 2014, Judge Simon sentenced David Spangenberg, 55, to 18 months in federal prison, and sentenced Roger Spangenberg, 52, to one year and one day in federal prison. Upon their release, both Spangenbergs will serve a five-year term of supervised release. Judge Simon also ordered the brothers to pay $2.5 million in restitution to KeyBank.

The Spangenberg brothers owned the now-closed D&R automobile dealerships, formerly located in Hermiston and Enterprise, Oregon, and co-defendant Steven Johnson served as a manager. All three defendants have pled guilty to the bank fraud conspiracy. They have admitted that from January 2007 through August 2008, they conspired to defraud KeyBank in connection with a Floorplan Line of Credit and Security Agreement, known in the automobile industry as a “flooring loan.” KeyBank extended a line of credit to the D&R dealerships to purchase new inventory, but the Spangenbergs and Johnson failed to repay KeyBank after they sold the inventory. The Spangenbergs and Johnson deceived KeyBank into believing the dealerships had not yet sold inventory, including asking customers to return recently purchased automobiles to the dealerships to receive a free service on the day of an audit and misrepresenting to KeyBank that automobiles not present on the lot were being used as rental cars. The defendants also submitted false Vehicle Identification Numbers (VINs) to KeyBank to receive funding for inventory the dealerships never purchased and “double floored” vehicles with more than one financial institution. Steven Johnson is scheduled to be sentenced on July 9, 2014.

“Bank fraud victimizes not only the bank and its employees, but also every consumer in this district,” stated U.S. Attorney Amanda Marshall. “Fraudsters who steal from banks will find themselves in federal prison, alongside those who rob banks, for the harm is indistinguishable.”

This case stemmed from a joint investigation by the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation. The case was prosecuted by Assistant U.S. Attorney Stacie Beckerman.