Florida Man Sentenced 30 Years for $100 Million Fraudulent Loan Scheme

Inside Subprime: July 16, 2019

By Jessica Easto

A Key Biscayne, Florida, man has been sentenced to 30 years in prison for a $100 million fraud scheme that damaged several businesses, including one of Puerto Rico’s largest banks before its collapse. In addition to the prison time, the judge of the Southern District of Florida also ordered the man to pay $103,490,005 in damages to the bank via the FDIC.

After a three-week trial, the man was convicted in February on eight counts of wire fraud affecting a financial institution. He was the chairman and CEO of a publicly traded pharmaceutical manufacturing company from 2005 to 2007. 

According to reports, at the beginning of his tenure, the CEO “caused [the bank] to enter into a series of loan agreements in exchange for a security interest in the assets of [the pharma company] and its subsidiaries.” 

The CEO then directed several company employees to make fake invoices payable by customers in places like the UK and Sweden, which ended up totaling tens of millions of dollars. Under his direction, these fraudulent invoices were presented to the bank as real invoices, and thus the bank continued to loan the pharma company money. In an effort to support to purported validity of these invoices, the CEO falsely detailed to the bank that other lenders were set up to repay the loans and that the pharma company had additional valuable collateral in the form of mining operations, both of which were simply not true.

All in all, the CEO convinced the bank to loan the pharma company around $142 million, tens of millions of which he siphoned off for personal gain, purchasing expensive property such as luxury homes and cars, a personal jet, and expensive jewelry. 

The bank eventually declared the loans in default and ended up losing more than $100 million on them, which catalyzed events that led to the bank’s collapse in 2010.

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