August 26, 2016
By Bob Coleman
Editor, Fraud Friday
Fraud Friday — Borrower Ensnared in SIGTARP Prosecutions Jailed for 5 Years
Sophisticated borrower photoshopping fraud continues to trip up lenders who rely too much of borrower documents instead of the first C of credit — borrower’s character.
A former vice president of Eastern Tools of Ontario, California, admitted that he and his co-conspirators defrauded East West Bank by making material misrepresentations about Eastern Tools’ accounts receivable and its financial statements to obtain and maintain a loan with the bank.
Louis Yeung created numerous shell corporations to act as purported suppliers and retailers doing business with Eastern Tools, when, in reality, these shell corporations were entirely under the control of Yeung and existed for the sole purpose of creating the illusion of revenues.
Yeung also admitted that the fictitious companies allowed Yeung to falsely inflate Eastern Tools’ accounts receivable and financial statements in representations to East West Bank. Yeung admitted that in order to further the scheme, he and others opened post office boxes, phone accounts and email accounts purportedly associated with the shell retail companies, and provided information about them to East West Bank auditors, to promote the illusion that these shell customers were independent entities.
“Yeung defrauded TARP-recipients East West Bank and United Commercial Bank, the latter of which failed less than a year after receiving nearly $300 million in TARP funds,” says Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program.
“He established fake companies to create the illusion that they were doing business with Eastern Tools & Equipment Inc. and then lied about accounts receivable and inventory to secure an $11 million line of credit with UCB. When Eastern Tools failed, UCB lost more than $9 million. SIGTARP will continue to aggressively investigate allegations where U.S. taxpayer funds may be put at risk.”
Louis received 63 months in jail and ordered to pay $9.6 million in restitution.