Eagle Pass Businessman Pleads Guilty to Bank Fraud
|U.S. Attorney’s Office December 05, 2013|
In Del Rio today, 41-year-old Jose Flores, III, owner of Eagle Pass-based N5 Group LLC, (N5) pleaded guilty to a bank fraud scheme, announced United States Attorney Robert Pitman and FBI Special Agent in Charge Armando Fernandez.
According to court records, the defendant, through N5, attempted to serve as raw materials transportation providers to businesses in Eagle Pass and to companies operating in the Eagle Ford Shale in South Texas. In April 2011, N5 established a Large Fleet Accounts Receivable Financing agreement with TAB Bank Inc. in Utah. The primary purpose of N5’s account with TAB was to establish a factoring relationship between the two entities. In a factoring arrangement, a bank agrees, for a fee, to serve as the recipient of payments that are owed to a company. Once this agreement is made, the company will assign its accounts receivable to the bank. The bank will then advance a large percentage of the yet-unpaid accounts receivable to the business expecting payment. Thereafter, the bank will begin to collect payments from the customer indebted to the business. Ideally, the company expecting payment will benefit because it will obtain cash from the bank immediately and thus need not wait for its accounts to come due before receiving payment. The bank benefits as well because it charges a commission for its service as receiver of the outstanding accounts.
Appearing before U.S. District Judge Alia Moses, Flores pleaded guilty to one count of bank fraud. By pleading guilty, Flores admitted that in July 2011, he submitted to TAB Bank a forged invoice in the amount of $51,000 for work N5 was to perform for a customer. Pursuant to the factoring agreement, the defendant fraudulently received $35,000 from TAB Bank. When TAB subsequently began its efforts to collect payment from the customer, it found that N5 had never done any work for that customer. In fact, that customer owed N5 no money at all.
Flores faces up to 30 years in federal prison and a maximum $1,000,000 fine, as well as $35,000 restitution to TAB Bank. He remains on bond pending sentencing scheduled for May 12, 2014, before Judge Moses in Del Rio.
This investigation was conducted by the Federal Bureau of Investigation and the Texas Department of Public Safety. Assistant United States Attorney Timothy A. Duree is prosecuting this case on behalf of the government.