February 11, 2022
Fraud Friday – Private Equity Fund CEO Pleads Guilty to $140 Million Bank Fraud Scheme
“As he admitted today, Elliot Smerling used false documents and deceit to obtain over $100 million in fraudulent loans on behalf of his private equity funds. This Office is committed to protecting the integrity of the U.S. financial system, and going after fraudsters who seek to manipulate it for their personal gain. Thanks to our valued partners at the FBI, Smerling now awaits sentencing for his crimes,” says U.S. Attorney Damian Williams.
From January 2019 to March 2021, Smerling solicited and obtained bank loans through falsified documents and material misrepresentations. One of these loans was approximately $95 million from a commercial bank headquartered in California and would serve as a substitute for an existing line of credit that Smerling secured from a multinational financial services company. This existing line of credit supposedly had an outstanding loan balance equal to the amount he sought out from the California Bank.
The fraudulent documentation and misrepresentations he provided to the bank included:
• A forged audit letter that was said to be prepared by an international network of various professional services firms
• A forged subscription agreement falsely representing that the investment fund of a private New York-based university had committed $45 million to the private equity fund
• Another forged subscription agreement falsely representing that the CEO and investment management division of a New York banking and financial services firm committed $40 million to the private equity fund
• Falsified bank records attesting to a $4.5 million wire transfer from the investment fund of the mentioned private New York university and a $4 million wire transfer from the banking and financial services firm
• A “Capital Commitment Table” listing $500 million in paid and unpaid capital commitments made to the private equity fund
In connection to this bank fraud scheme and starting in January 2013, Elliot solicited investments in his private equity funds by providing misleading and false statements about the funds’ audited financial statements, limited partners, capital commitments, and holdings.
Elliot pled guilty to one count of bank fraud and one count of securities fraud. His sentencing is scheduled for May 13, 2022.