Senior Managers of Holding Company Charged with Bank Fraud Conspiracy
Conspirators Used False Financial Statements to Obtain $21 Million in Fraudulent Loans
|U.S. Attorney’s Office July 23, 2010|
A criminal complaint was unsealed today in federal court in Brooklyn charging the senior managers of GDC Acquisitions, LLC (“GDC”) with bank fraud conspiracy arising out of their scheme to use false financial statements to obtain $21 million in loans from Amalgamated Bank, an FDIC insured institution. The defendants are Courtney Dupree, GDC’s president; Rodney Watts, chief investment officer; Thomas Foley, chief operating officer; and Frank Patello, former chief financial officer. GDC is a holding company that owns various subsidiaries, including JDC Lighting, a lighting distributor; Unalite Electric and Lighting, a lighting maintenance company; and Hudson Bay Environments Group, a furniture distributor.
The defendants were arrested earlier today, and their initial appearances are scheduled this afternoon before United States Magistrate Judge Ramon E. Reyes at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, George C. Venizelos, Acting Assistant Director-in-Charge, Federal Bureau of Investigation, New York, and Ronald J. Verocchio, Inspector-in-Charge, United States Postal Inspection Service, New York.
As alleged in the complaint, the defendants gave Amalgamated Bank financial statements for GDC on which they had fraudulently inflated the company’s accounts receivable in order to obtain initially, and then maintain, credit lines totaling approximately $21 million. For example, the defendants represented to Amalgamated Bank in writing in November 2009 that GDC had $25.2 million in accounts receivable when, in fact, it had only $9 million. The complaint alleges that the conspirators inflated the accounts receivable by a variety of means, including by booking fictitious sales. In addition, the complaint alleges that the conspirators defrauded Amalgamated Bank by causing GDC to acquire a company covertly, contrary to the terms of their loan agreement, and by concealing the acquisition from the bank.
“The defendants allegedly defrauded an FDIC insured bank out of millions of dollars by lying about their company’s financial condition,” stated United States Attorney Lynch. “Those who abuse their positions of influence and trust can expect to be investigated and prosecuted to the full extent of the law.”
“The defendants allegedly committed a multimillion-dollar accounting fraud. They accomplished this by a plan that was as simple as it was audacious. In plain language, they’re charged with cooking the books, grossly overstating receivables, and therefore the company’s bottom line. The alleged misrepresentation isn’t just lying. It’s stealing,” stated FBI Acting Assistant Director-in-Charge Venizelos.
“Postal Inspectors working with the United States Attorney and the FBI are committed to ensuring the integrity of the banking system by investigating and prosecuting those individuals who defraud financial institutions in New York for their personal benefit,” stated Postal Inspector-in-Charge Verocchio.
The charges are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, each defendant faces a maximum sentence of 30 years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorneys Michael L. Yaeger and Evan Weitz.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.