Daily News: September 5, 2013

GE Capital Takes $26MM Loss in Trucking Company Fraud

According to a news release from the U.S. Attorney’s Office, Southern District of Texas, three former executives with USA Dry Van have been arrested and indicted by the FBI in an alleged scheme to defraud GE Capital. According to the indictment, the amount of actual loss to GECC was more than $26 million.

Sergio Lagos, Aurelio “Jim” Aleman and Oscar Barbosa have been arrested following the return of a six-count federal indictment charging wire fraud and conspiracy to commit wire fraud, announced U.S. Attorney Kenneth Magidson.

Lagos was the former CEO of USA Dry Van Logistics (USADV), a cross-border trucking company that services the maquiladora industry, while Aleman and Barbosa were the former chief operations officer and former controller, respectively.

The indictment alleges that from March 2008 through the end of January 2010, Lagos, Aleman and Barbosa joined in a scheme to defraud and swindle GE Capital, fraudulently obtaining funds through a revolving line of credit. Lagos, Aleman and Barbosa allegedly schemed to conceal from GECC the truth about USADV’s declining operating performance and financial results. Rather than reveal USADV’s true condition, Lagos, Aleman and Barbosa allegedly misrepresented USADV’s true operating performance and financial results. According to the indictment, they misrepresented to GECC the nature of the USADV’s accounts receivable, against which GECC was permitting USADV to borrow hundreds of thousands of dollars on a weekly basis. This caused USADV to appear to be operating more profitably that it actually was.

According to the Indictment, Lagos and Aleman entered into a financing agreement with GECC under which GECC would issue a revolving line of credit which was secured by USADV’s accounts receivables. By January 2010, the maximum borrowing limit under the agreement was increased to $38 million. Pursuant to the agreement, USADV allegedly justified advances on the line of credit by submitting “borrowing base certificates” to GECC. Lagos, Aleman and Barbosa allegedly signed, prepared and/or directed others to prepare certificates that falsely inflated the amount of the company’s accounts receivables and caused them to be submitted to GECC to enable USADV to obtain more funds than otherwise would have been permitted. Lagos, Aleman and Barbosa allegedly perpetuated and concealed the scheme to defraud GECC by directing other employees to manually invoice millions of dollars of fraudulent receivables to inflate the borrowing base and to create false and forged invoices and support documentation for accounts receivables that did not exist. Lagos, Aleman and Barbosa also submitted false financial statements to auditors and GECC, according to the indictment.

When the truth about USADV’s operations and finances were revealed, USADV went into bankruptcy. The indictment alleges USADV successfully re-organized under Chapter 11 bankruptcy proceedings and is currently operating with new owners. Lagos, Aleman and Barbosa are no longer affiliated with or employed by the company.

Each of the six counts of the indictment carries a maximum punishment of 20 years in prison and up to a $250,000 fine.

To read the U.S. Attorney’s Office, Southern District of Texas news release, click here.