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US Based International Clothing Retailer Rips Off Israeli Bank

Owner of New Century Enterprises Sentenced to Four Years In Prison For Defrauding Israeli Bank

Loretta E. Lynch, the U.S. District Attorney Eastern New York and Janice K. Fedarcyk, the FBI’s New York Field Office’s Assistant Director, announced a four-year prison sentence handed down in the case against Kwong Hung Lam. On October 21, 2010, Lam, also known as ìEric Lamî, pled guilty to a charge of making false statements to a financial institution. As part of his sentence, U.S. District Judge Nicolas G. Garaufis also ordered him to pay $6,035,457 in restitution to Bank Leumi. Lam is the sole owner of New Century Enterprises, a clothing importer and distributor with its headquarters in Farmingdale, NY.

Had Lam not made a plea agreement, he could have faced up to 30 years on charges of bank fraud. As per the agreement, Lam admitted to entering a written agreement with Bank Leumi USA in 2006 to get a line of credit on behalf of New Century. Under the contract, the bank was supposed to extend funds and other financial accommodations to New Century, including documents that would allow the company to withdraw money or receive credit from other banks, to New Century on flexible terms. For their part of the arrangement, New Century was supposed to give Bank Leumi a borrowing base certificate every month that would show the official value of the companyís inventory and accounts receivable. This certificate was to act as proof of collateral for the loan. Instead of showing the true worth of the company, Lam submitted several fabricated borrowing base certificates to Bank Leumi between 2006 when he opened the line of credit and 2009 when terminated the companyís operations. In these certificates, he deceptively overstated the actual value of New Centuryís security for the loan. Lam, who had personally assured the bank that the loan would be paid, and New Century were in debt to Bank Leumi for $5.8 million by September 2009. Lam had falsely stated that New Centuryís collateral was worth about $9 million.

After Lam shut down New Centuryís commercial operations, he authorized Bank Leumi to take control of all of New Centuryís assets, including its inventory and any debts that its customers owed. When the bank looked closely at the records and the loanís collateral, Bank Leumi realized that Lam had misrepresented the values of New Centuryís inventory and accounts receivable. The inventory, in fact, was actually worth less than $100,000. Because Lam had fabricated the accounts receivable balance, there was no way to collect on any of those supposed debts.

U.S. Attorney Lynch thanked the FBI, the agency that led the governmentís investigation.

Kwong Hung Lam was originally arrested following a complaint of fraud brought by the bank after their investigation showed that there was no way for them to collect on the debt that his company owed. Their case was investigated by the FBI and several other agencies under a task force that the president created to look into cases of alleged financial crimes. In 2009, President Obama established this interagency task force which was to replace the Corporate Fraud Task Force of 2002 and build on the foundation that it had set and continue to fight crimes that would involve defrauding financial institutions. The task force’s objectives include looking into allegations of wrongdoing in the financial arena by corporations. In doing this, they intend to help avoid future financial meltdowns by stopping fraud before it becomes widespread.

Several other cases have been investigated and prosecuted with the help of the President’s task force. One such case is that of Martio G. Bernadel. Bernadel, a Hatian citizen, received a 17 year prison sentence after he was convicted on several counts of mortgage fraud in Phoenix, Arizona. Another case involved Mariana La Luz, whose ponzi scheme was discovered during an investigation known as Operation Broken Trust. During her plea allocution, La Luz admitted that her scheme cost 75 investors close to $2.9 million. She has to pay that money back in restitution as part of her plea deal.

Sources:

http://www.justice.gov/usao/nye/pr/2010/2010may12.html

http://www.sec.gov/news/press/2009/2009-249.htm

http://www.fbi.gov/sandiego/press-releases/2010/sd120610.htm


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Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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