The U.S. Attorney for the Eastern District of New York said Rodney Watts, the former chief investment officer of GDC Acquisitions, was sentenced in federal court to 37 months in prison to be followed by 5 years of supervised release.

As part of the sentence, Watts was ordered to pay more than $15 million in restitution and $18 million in forfeiture. In May 2013, the defendant was convicted, following three weeks of trial, by a federal jury on charges of bank, mail and wire fraud, conspiracy to commit bank, mail and wire fraud, and false statements. Watts also served as the chief financial officer of GDC at one time. These charges arose out of the defendant’s scheme to defraud Amalgamated Bank, GDC’s asset-based lender, of $21 million in fraudulent loans.

GDC, based in Long Island City, Queens, is a holding company that owns various subsidiaries, including JDC Lighting, a lighting distributor; Unalite Electric and Lighting, a lighting maintenance company; and Hudson Bay Environments Group, a furniture distributor. The defendant helped orchestrate a scheme to defraud Amalgamated Bank and C3 Capital, a mezzanine lender based in Kansas City, MS, by obtaining and attempting to obtain loans on the basis of false financial statements and other material misrepresentations. He and others gave Amalgamated Bank false financial information for GDC in which they had fraudulently inflated the company’s accounts receivable in order to obtain initially, and then maintain, credit lines totaling approximately $21 million.

The defendant and his co-conspirators inflated the accounts receivable by a variety of means, including by recording in the corporate books sales that had never taken place. For example, the defendant represented to Amalgamated Bank in writing in November 2009 that GDC had $25.2 million in accounts receivable when, in fact, it had only approximately $9 million. In addition, the defendant and others defrauded Amalgamated Bank by causing GDC to acquire a company covertly, contrary to the terms of their loan agreement, and by concealing the acquisition from the bank. The scheme unraveled when one of the accountants turned himself into the FBI and cooperated in the government’s investigation in an undercover capacity for approximately two months.

Watt’s co-defendant, Courtney Dupree, the former chief executive officer of GDC, was convicted by a federal jury in December 2011 of similar charges. In June 2013, Dupree was sentenced to 84 months’ imprisonment to be followed by 5 years’ supervised release. As part of the sentence, Dupree was ordered to pay more than $15 million in restitution and $18 million in forfeiture.

To read the entire U.S. Attorney for the Eastern District of New York news release, click here.