Daily News: January 21, 2015

Trucking Company CEO Pleads Guilty in A/R Fraud

According to a U.S. District Court, Southern District of Texas, Houston Division filing, Sergio F. Lagos, former CEO and director of USA Dry Van Logistics (USADV), was found guilty of committing $26 million in wire fraud in a case involving a $38 million accounts receivable financing agreement with GE Capital.

According to records, Aurelio Aleman, former chief operations officer and Oscar Barbosa, former controller, pleaded guilty to commit wire fraud in September 2013. Lagos is expected to be sentenced for his role in the scheme on April 13, 2015.

According to the indictment, USADV entered into a financing agreement with GE Capital 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.

At the plea hearing, Aleman and Barbosa admitted they schemed to conceal from GECC the truth about USADV’s declining operating performance and financial results. Rather than reveal USADV’s true condition, Aleman and Barbosa misrepresented USADV’s true operating performance and financial results to include 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. Aleman and Barbosa 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 would otherwise have been permitted. Aleman and Barbosa 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. Aleman and Barbosa also admitted to submitting false financial statements to auditors and GECC.

When the truth about USADV’s operations and finances were revealed, USADV went into bankruptcy. 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. According to the records, the amount of actual loss to GECC was more than $26 million.

Previously on abfjournal: GE Capital Takes $26MM Loss in Trucking Company Fraud, September 5, 2013