Operation Decoy Delivery: A.G. Schneiderman Announces Prison Sentence For Insurance Fraud Ringleader

Defendant Jean Mythro Davilmar Will Serve 4 2/3 to 14 Years In Prison

Defendant Filed Forged and Falsified Documents to Fraudulently Obtain Commercial Car Insurance Policies with Limits Totaling $1 Million

   Attorney General Eric T. Schneiderman announced a state prison sentence of 4 2/3 to 14 years for Jean Mythro Davilmar, 68, of Brooklyn, NY. Davilmar was convicted after trial for his participation in a massive scheme to fraudulently obtain commercial car insurance policies and New York State vehicle registrations. Over an eight-year period, the defendant and his co-conspirators fraudulently obtained policies with coverage limits totaling over $1 million by registering over 100 cars with fake companies, including delivery services, prompting investigators to dub the case “Operation Decoy Delivery.” Davilmar and nine other co-conspirators filed forged and falsified documents with insurance carriers, the Kings County Supreme Court Clerk’s Office, and the New York State Department of Motor Vehicle (“DMV”).

“The defendants involved in this fraud falsely claimed to be driving delivery vehicles – but instead drove up insurance rates for hard-working New Yorkers,” said Attorney General Schneiderman. “My office will continue working with our partners in government to stop those who try to cheat the system and leave New Yorkers to foot the bill.”

“This sentence demonstrates how seriously New York takes the crime of insurance fraud, which results in higher premiums for law-abiding New Yorkers,” said Financial Services Superintendent Maria T. Vullo. “DFS is pleased to have partnered with the New York State Office of the Attorney General in assisting with the investigation and holding this defendant accountable for his actions.”

“The National Insurance Crime Bureau applauds the staff of the New York State Attorney General’s Office for their hard work and dedication in prosecuting insurance fraud in New York,” said Kevin Gallagher, Regional Director of the Northeast Region of the National Insurance Crime Bureau. “The cost of insurance fraud is shared by all consumers.  Commercial premium fraud enables unscrupulous individuals and businesses to gain an unfair advantage over those who follow the law. This prison sentence sends a strong message to other individuals who may be contemplating engaging in insurance fraud. We look forward to our continued partnership with the Attorney General’s Office in fighting against insurance fraud for the benefit of all New Yorkers.”

On December 7, 2017, after a trial that included the testimony of 26 witnesses and the admission of hundreds of documents, the Honorable Judge Danny Chun found the defendant guilty of two counts of Grand Larceny in the Third Degree (a Class C felony); 17 counts of Insurance Fraud in the Third Degree (a Class D felony); four counts of Offering a False Instrument for Filing in the First Degree (a Class E felony); five counts of Criminal Possession of a Forged Instrument in the Second Degree (a Class D felony); and one count of Scheme to Defraud in the First Degree (a Class E felony).

The evidence at trial showed that between May 2006 and June 2014, Davilmar and his co-defendants engaged in a complex scheme to obtain commercial auto insurance for themselves and others in the names of fictitious business partnerships by submitting falsified documents and making false statements to multiple governmental agencies and insurance carriers.

The defendants created fictitious business partnerships by filing false documents with the Kings County Supreme Court Clerk’s Office. The defendants then fraudulently obtained commercial automobile insurance for multiple vehicles under the names of these fictitious business partnerships. In order to obtain lower premiums, on the applications for commercial insurance, the defendants falsely represented that the vehicles insured under the policies would be engaged in low-risk businesses such as delivery, carpentry, or photography services. To further lower premiums, defendants made additional misrepresentations including providing false pedigree information for purported members of the business partnerships, falsely stating the geographical location where the vehicles were operated and garaged, and misrepresenting the actual operators of the vehicles.

After fraudulently obtaining insurance for vehicles under commercial policies, the defendants submitted false registration and title applications to the DMV, registering the vehicles under the names of the fictitious partnerships. These DMV applications included forged signatures, false addresses, and fictitious individuals listed as the buyers and sellers of the vehicles. The defendants also submitted copies of the fraudulently obtained insurance cards as proof that the vehicles had valid insurance in New York State, a prerequisite for the DMV to issue registrations and license plates. 

The evidence at trial further revealed that when a policy lapsed because of nonpayment or because the defendants could not maintain the facade that the cars were being used in low-risk businesses, the defendants opened another policy with forged documents and transferred the cars onto the new policy.  

Ringleader Davilmar, who testified at trial, admitted to forming fake companies in order to obtain insurance policies for multiple vehicles. The evidence at trial showed that Davilmar created over a dozen fictitious business partnerships, including Florist Locomotion, Landscaping Express, Cleaners Express, Mybeda Express, Bedamy Express, and Damybe Express. In total, Davilmar and his co-conspirators obtained over 20 commercial insurance policies for over 100 vehicles, with coverage limits of up to $50,000 per accident for each vehicle. On cross-examination, Davilmar admitted to repeatedly using the alias “Jean Claude Marcelin” on documents filed with the DMV, the Kings County Clerk’s Office, and multiple auto insurance carriers.

Davilmar’s conviction and sentence are the culmination of a long-term investigation conducted by Attorney General Schneiderman's Automobile Insurance Fraud Unit. The Attorney General thanks the Department of Financial Services, the DMV, the New York Automobile Insurance Plan, and the National Insurance Crime Bureau for their valuable assistance in this case. The Attorney General also thanks the New York City Marshal’s Office, Progressive Insurance Co., Maidstone Insurance Co., National General Insurance Co., Farm Family Casualty Insurance Co., Assigned Risk Solutions, American Transit Insurance Co., GEICO Insurance Co., Travelers Insurance Co., and the CARCO Group for their instrumental cooperation during this investigation. The Attorney General also thanks the King’s County Clerk’s Office, the Massachusetts Registry of Motor Vehicles, and the United States Social Security Administration’s Inspector General’s Office for their valuable assistance. 

A.G. Schneiderman & Comptroller DiNapoli Announce Felony Charges Against Mount Vernon Mayor Richard Thomas

Thomas Accused of Stealing Campaign Funds, Establishing a Slush Fund for Personal Use from His Inaugural Fund, and Falsely Filing Disclosure Reports with the State Board of Elections and Mount Vernon Board of Ethics

  Attorney General Eric T. Schneiderman and Comptroller Thomas P. DiNapoli announced the arrest of Mount Vernon Mayor Richard Thomas for allegedly stealing campaign funds and lying about money he diverted from his inaugural committee for personal benefit. Mr. Thomas was arrested on a felony complaint this morning after an investigation that exposed the theft of approximately $12,900 from his campaign committee, and the diversion of over $45,000 from his inaugural committee for personal use and his failure to disclose it.

“As we allege, Mayor Thomas used his campaign and inaugural accounts as personal piggybanks – part of a long-running scheme that began during his 2015 campaign and continued throughout his time in office,” said Attorney General Schneiderman. “As we detail in the felony complaint, Mayor Thomas treated these accounts as slush funds to pay off cars, dinners, and even a Chanel purse, and then lied about it in his filings. Public corruption strikes at the very heart of our democracy, and we’re committed to continuing to root it out across New York.”

“This official allegedly misused campaign funds and failed to report gifts,” StateComptroller DiNapoli said. “We will continue to fight public corruption wherever we find it.”

The felony complaint filed with the Court  charges Thomas with one count of Grand Larceny in the Third Degree (a Class D felony); two counts of Offering a False Instrument for Filing in the First Degree (a Class E felony); and two counts of Offering a False Instrument for Filing in the Second Degree (a Class A misdemeanor).

The complaint details a scheme through which Thomas allegedly stole approximately $12,900 from his 2015 mayoral campaign committee, the Friends of Richard Thomas (“FORT”). After winning the mayoral election, Thomas established the Richard Thomas Inaugural Committee (“RTIC”), ostensibly to fund an inaugural celebration, but instead allegedly personally profited from RTIC by diverting over $45,000 for personal use and failing to disclose it.

An investigation further revealed that Thomas allegedly lied on his 2016 annual statement of financial disclosure with the City of Mount Vernon when he did not reveal that businesses controlled by an individual referred to in the felony complaint as “Individual 1,” as well as RTIC, paid Thomas’ personal American Express (“Amex”) bills. After his inauguration, Thomas appointed Individual 1 to a high-ranking position with a City agency that deals with public safety, although Individual 1 had no prior law enforcement experience. Additionally, and during the pendency of this investigation (which Thomas was made aware of in December 2016), Thomas allegedly lied on his 2017 annual statement of financial disclosure with the City when he did not reveal various sources of funding he received during the reporting period, including a tuition payment made to New York University on his behalf.

Theft from Campaign Committee and False Disclosures to the Board of Elections:

An analysis of Thomas’ personal and campaign committee bank accounts revealed that Thomas allegedly used FORT funds for personal use, stealing approximately $12,900.  

Thomas claimed on campaign filings that two separate payments that he issued to himself from FORT, totaling $8,900, were “reimbursements.” An analysis of Thomas’ personal bank accounts, however, revealed that Thomas never laid out any money warranting reimbursement; instead, records of Thomas’ personal bank account show that Thomas was low on personal funds at the time he received the so-called “reimbursements” from FORT. He allegedly used that money for personal expenses, such as rent for his family residence, car loans, and a payment for three automobile insurance policies for two vehicles on which Thomas was listed as the owner, and another vehicle registered to one of Thomas’ relatives. Thomas also allegedly took an additional $4,000 payment from FORT, not disclosed to the New York State Board of Elections, that he used for personal expenditures.

As alleged in the complaint, not only did Thomas falsely report money he took as reimbursements to the NYSBOE, but he also falsely disclosed meals during a family vacation as campaign expenses. That includes a family breakfast at JFK Airport that Thomas listed on FORT’s NYSBOE 2016 January Periodic filing as a housekeeping expense for “food”; Thomas falsely listed the restaurant’s corporate address, 352 Park Avenue in Manhattan, on the disclosure as the place of expenditure. The complaint also alleges that Thomas falsely disclosed a meal at a Bubba Gump Shrimp Co. restaurant in Mexico during a family vacation; rather than truthfully disclosing that the expenditure took place in Mexico, Thomas falsely used the address of the Bubba Gump restaurant located in Times Square in Manhattan and falsely designated the meal as a “volunteer appreciation” event.

Inaugural Committee Slush Fund:

Thomas also allegedly diverted over $45,000 from his inaugural committee for personal use and failed to disclose it.

After taking office in January 2016, Thomas allegedly used funds from the RTIC account to pay the monthly balance on his and his wife’s personal Amex. In mid-January 2016, a payment for $8,538.16 was made from the RTIC account to Thomas’ Amex; included in those expenses were charges incurred for a family vacation to Mexico. In late February 2016, a payment for $6,000 was made from the RTIC account to the Thomas Amex; included in this balance was the purchase of a Chanel purse that cost more than $2,000. In both March 2016 and May 2016, two separate $5,000 payments were made from the RTIC account to Thomas’ Amex, totaling another $10,000. In October 2016, a payment of $5,320.99 was made from the RTIC account to Thomas’ Amex account; in November 2016, another payment of $2,993.18 was made; and in December 2016, another payment of $3,685.14 was made.

As alleged in the complaint, Thomas took pains to conceal an additional $14,000 payment he received from RTIC by having two close personal relatives receive payments from RTIC and then kick those payments back to Thomas. Each of the two relatives owned companies that received payments from RTIC, ostensibly for services rendered relating to events sponsored by RTIC. According to the complaint, after receiving the payments from RTIC, the relatives then quickly issued checks to Thomas for close to the full amount paid to them.

Additional Ethics Violations:

According to the complaint, prior to Thomas filing his 2017 annual statement of financial disclosure with the City, he learned of the existence of the Attorney General’s investigation. In the 2017 annual statement, Thomas disclosed the RTIC payments to his American Express account as a “loan” from RTIC. Thomas, however, failed to disclose a $10,000 gift he received from a private individual that he had used to pay back the supposed RTIC loan. Additionally, he failed to disclose a $6,000 “gift” he received from another individual who paid his NYU Stern School of Business tuition bill.

The investigation is ongoing. The charges are merely accusations and the defendant is presumed innocent unless and until proven guilty in a court of law.

The Attorney General and Comptroller would like to thank the New York State Board of Elections Division of Election Law Enforcement.

STATEMENT FROM MAYOR DE BLASIO ON STATE ASSEMBLY PASSAGE OF DESIGN-BUILD AUTHORITY FOR NYCHA

  “Speaker Heastie and the State Assembly have the backs of NYCHA tenants. Today, they passed a bill giving NYCHA full design-build authority that will speed up critical repairs by more than a year. The rest of Albany needs to follow the Assembly’s lead: stop playing games and promoting gimmicks. Deliver the key investments and reforms NYCHA tenants are waiting for.”

EDITOR'S NOTE:

  It seems that NYC Mayor Bill de Blasio has no idea how Albany runs. He as Mayor of NYC can not get things done in Albany by demanding that the State Senate and Governor Cuomo do what the State Assembly have done. That is not how things are done up there. 

  We only hope that the mayor has this same attitude when it comes to the renewal of Mayoral Control of the public schools. If so we can probably say good-bye to mayoral control, because Mayor de Blasio has shown all the reasons why it should be ended. 

COUNCIL MEMBER WILLIAMS PLEADS NOT GUILTY FOLLOWING DEPORTATION PROTEST

 Today at the New York County Criminal Court,

Council Member Jumaane D. Williams pleaded not guilty to charges of obstructing an emergency  medical vehicle stemming from the January 11 protest of the detention and imminent deportation of immigrant rights activist Ravi Ragbir.

Williams appeared before a judge today alongside sixteen other protesters who were arrested with the Council Member for their roles in the protest. Council Member Ydanis Rodriguez, who was also arrested during the protest, had his own court appearance at the end of February and pleaded guilty to disorderly conduct, a violation rather than a crime. The other protesters accepted an ACD (Adjournment in Contemplation of Dismissal) in the courtroom, while informing the court of their intention to continue to protest actions they find unjust. 

Council Member Williams pleaded not guilty, maintaining that his actions  were in opposition to the immoral deportation of Ravi Ragbir. The arrest and detention of Ragbir was later ruled unconstitutional by Judge Kathleen Forrest, who compared ICE's actions to "regimes we revile as unjust; regimes where those who have long lived in a country may be taken without notice...and sent away." Ravi's removal has currently been scheduled for May 11th, pending adjudications in multiple items of federal litigation pertaining to his removal order and ICE's retaliation against him. 

After his appearance, the Council Member joined his fellow protesters and Ragbir himself to speak out about the importance not only of elevating Ravi's case and the circumstances surrounding it, but also the cases of  immigrants across the nation who have not received the same level national attention. He intends to continue to raise issues of immigrant rights, deportation, ICE abuses, and sanctuary cities throughout the legal process.

In addressing the court, attorney Rhiya Trivedi said, in part "On January 11, 2018, at 26 Federal Plaza, not 6 blocks from where we stand today, Immigration and Customs Enforcement arrested nationally recognized immigrant rights activist Ravi Ragbir...These 17 individuals, among countless others, recognized what was happening to Ravi, for the grave injustice and illegality that is was. And so they stood up."

The Council Member is set to next appear at court on May 8th.

"I am proud today to stand with Ravi Ragbir and all immigrants under threat, as I stood with them in protest on January 11th. Today, we as advocates were joined by our friend, Ravi Ragbir. If we had not protested his immoral detention and deportation, this would not have been possible. Those of us with a public position and voice  have a moral obligation to defend communities who are disadvantaged and attacked." said Council Member Jumaane D. Williams. "My legal process will take place out in the open, a right that is often denied to immigrants who face immoral deportations. ICE operates in darkness. It is my hope that my case will shed light on ICE practices, the plight of immigrants who are being targeted by the Trump administration, and how we can be a sanctuary city and state. As voices across the city have risen to defend and support Ravi, we should not criminalize actions of protest taken in his defense." 

"I stand with my friend and colleague Jumaane Williams as he boldly moves forward with taking his case to trial. The fight for immigrant rights and their dignity did not end the day we were arrested in January. It continues every day. We will continue to raise our voices for immigrants, lift up their contributions to this country, and resist the denial of the long history of immigration that has shaped the United States," said Council Member Ydanis Rodriguez.

EDITOR'S NOTE:

We are sure that if an EMS vehicle was coming to a response from Councilman Williams that he would not want any EMS vehicle to be delayed or impeded by anyone. 

Councilman Williams should be an example for the citizens of his district and the city, and not have to be arrested for obstructing an Emergency Vehicle as he was. The same goes for Councilman Rodriguez. 

News From Councilman and candidate for Lt. Governor Jumaane Williams

WILLIAMS' STATEMENT RE: CORRUPTION TRIAL VERDICT

  "Today is a sad and unfortunate day for those of us in government and public service. Each time a government official is found guilty of corruption, it erodes the confidence of our citizenry. The truth is, there are far many more in government who serve with honor and professionalism each and every day than the few who lose their way. Effective governance by honorable public servants relies on maintaining public trust, and that trust has been greatly diminished in our state."

"The jury has spoken, and I don't believe this is an opportunity to score cheap political points at the expense of someone else's pain. However, I will say there are some lessons to learn from this far-too-long season of corruption that assails our government. There is a culture of corruption in Albany that has become too acceptable. The discussion regarding progressive government reform, transparency and accountability must continue with the sense of urgency it demands."

"I am reminded of the ancient Roman emperor and philosopher Marcus Aurelis, who was reported to have a servant whisper 'just a man' when he received adulation and applause. It is a cautionary lesson that each elected official would do well to take to heart."

GOVERNOR CUOMO TOURS NYCHA HOUSING

  "I am glad that the Governor was finally able to see a NYCHA development. Still, what NYCHA tenants who are struggling everyday need is not a photo op, it is crucial funding from the state. Touring a  NYCHA complex for the first time in recent memory, after seven years in office, he spoke today of the 'neglect' toward the housing, and it is certainly clear that NYCHA has been neglected. It is clear that the city's performance has been substandard, with many questions unanswered. It is also clear that for years, the state could have been a better partner and provided much needed support. NYCHA desperately needs the financial support of state government to provide relief for thousands of New Yorkers who are living in abhorrent and unsafe conditions. It does not need political games and one-upsmanship- in all of the jockeying for position, tenants in need are left behind. This is a course that must be corrected for the safety, well-being, and dignity of New Yorkers." 

"Here in New York City and across the state, we are facing an affordable housing and homelessness crisis, and meaningful solutions which provide homes with satisfactory living conditions will require a level of investment that the Governor has been unwilling to commit in the past. There are real, concrete steps that the state can take, including releasing millions in allocated funds, and expediting work on projects that have already been funded, or simply allowing the use of design build. New York State can and must be a real partner in improving NYCHA, but NYCHA funding directly from the state has fallen significantly under this Governor. I truly hope that the next time an elected official takes a publicity tour, they also bring with them a check."

EDITOR'S NOTE: 

While Councilman Williams seems to be minding the business of one former aide to the Governor, and questioning the Governor's intent towards NYCHA, we must remind Councilman Williams that he should be worried about the city with a mayor who is now traveling across the country to bolster his political ambitions on the backs of the NYC taxpayers. We also did not hear anything form Councilman Williams during that period where the 'Agents of the City' were being investigated, with the former U.S. Attorney stating that there was not enough evidence to indict the current mayor of NYC. 

As for the Governor's visit to a NYCHA complex in the Bronx, we wonder why there was no mention of Bronx Borough President Ruben Diaz Jr. While the mayor and Councilman Williams ignore the NYCHA problems in the Bronx, BP Diaz Jr. is trying to get the much needed help for the Bronx NYCHA tenants.

Mount Vernon Man Pleads Guilty To String Of Livery Cab Armed Robberies

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALLANMON MAVUMKAL pled guilty today to four counts of Hobbs Act robbery in connection with a spree in which he threatened livery cab drivers and robbed the drivers of cash, personal items, and their cabs.  MAVUMKAL pled guilty today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Allanmon Mavumkal terrorized four livery cab drivers with a knife, robbing them of their money and cars.  Now Mavumkal is facing significant prison time for his violent acts.” 

According to the Complaint, Superseding Indictment, and other statements made in open court:

On September 21, 2017, MAVUMKAL hailed a livery cab in the Bronx, and directed the driver to a particular destination.  After arriving at the drop-off location, MAVUMKAL threatened the driver with a large knife, which was captured on video footage from the cab, ordered the driver out of the cab, and then drove away in the cab.  The day before, on September 20, 2017, MAVUMKAL robbed three other livery cab drivers in the Bronx and Mt. Vernon in a similar fashion.

MAVUMKAL, 30, of Mount Vernon, New York, pled guilty to four counts of Hobbs Act robbery, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the efforts of the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the New York City Police Department in this case.

Virginia Man Sentenced To Two Years In Prison For Scheme To Manipulate The Market For Fitbit Stock

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY was sentenced today to 24 months in prison for manipulating the market for the stock of Fitbit, Inc. (“Fitbit”), by filing a sham tender offer with the Securities and Exchange Commission (“SEC”) in November 2016.  MURRAY’s sham tender offer resulted in a temporary change in Fitbit’s market capitalization of over $100 million.  MURRAY pled guilty on November 7, 2017, before U.S. District Judge Katherine B. Forrest, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Robert Murray manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer.  Hoping to take a quick profit from trading in Fitbit stock options, Murray’s attempt to game the system has instead earned him a federal prison sentence.” 

According to allegations in a Complaint and Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:

On November 8, 2016, MURRAY, falsely purporting to be an officer at a China-based entity called ABM Capital, created an account on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (or “EDGAR”) system.  The next day, MURRAY submitted a filing on EDGAR that reported that ABM Capital had offered to purchase Fitbit for approximately $12.50 a share, a significant premium to the price of Fitbit stock at the time.  This filing was made public on November 10, 2016, and, when it was, Fitbit’s stock temporarily increased in response to the news.  While Fitbit’s stock had closed at approximately $8.55 a share on November 9, 2016, it reached a high of approximately $9.27 per share, with significantly increased trading volume, after MURRAY’s fake tender offer filing was made public.  This resulted in a temporary increase of Fitbit’s market capitalization of around $100 million.  The tender offer that MURRAY filed, however, was entirely fictitious, and was instead meant only to increase the value of options in Fitbit stock that MURRAY had purchased just days earlier. 

MURRAY also took significant steps to hide his connection to the tender offer filing.  For example, he created a separate email account to register with the SEC and to file the sham tender offer, and took efforts to disguise his IP address when accessing that account. 

In addition to the prison sentence, MURRAY, 25, of Chesapeake, Virginia, was sentenced to two years of supervised release.  The Court further ordered MURRAY to forfeit a sum of $3,914.08. 

Mr. Berman praised the exceptional work of the Office’s criminal investigators, and thanked the U.S. Postal Inspection Service and the Securities and Exchange Commission for their assistance. 

Former Cocoa Company Executives Plead Guilty In Manhattan Federal Court To Defrauding Lenders Of $400 Million

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that PETER G. JOHNSON and PETER B. JOHNSON pled guilty today to defrauding a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for their cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”).  The defendants each pled guilty before U.S. District Judge Jed S. Rakoff.                                               

U.S. Attorney Geoffrey S. Berman said:  “As they admitted today, Peter G. and Peter B. Johnson, executives of a cocoa company that supplied some of the world’s largest chocolate companies, defrauded lenders out of hundreds of millions of dollars by continuously and repeatedly lying about the collateral According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:           

Transmar was a closely held, family-run cocoa commodity trading company.  PETER G. JOHNSON was Transmar’s president and chief executive officer.  PETER B. JOHNSON, the son of PETER G. JOHNSON, was an officer of Transmar, as well as responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”). 

From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million.  To secure and maintain these hundreds of millions of dollars in credit, PETER G. JOHNSON, PETER B. JOHNSON, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.

The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension.  The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks. 

Beginning no later than 2014, Transmar employees, acting with the knowledge and at the direction of PETER G. JOHNSON and PETER B. JOHNSON, manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending.  The manipulation involved, among other devices, counting inventory that Transmar had already sold or was otherwise ineligible for inclusion, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions through which amenable third-party intermediaries agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar. 

The defendants acknowledged their manipulative devices in internal Transmar correspondence.  For example, on or about July 31, 2015, PETER G. JOHNSON sent an email to PETER B. JOHNSON discussing the use of “multiple circles” or “borrowing games” in connection with the BB Reports, and suggesting that Transmar “clean the book of these in due course and before they get questioned and exposed.”  On June 14, 2016, PETER B. JOHNSON responded to an email regarding a circle transaction by lamenting, “this is the problem with fake circles and non-existent last minute intermediary deals, there is never a payment to settle them.”  PETER B. JOHNSON then suggested that Transmar “reissue the invoices (ie change the date of issuance” because “[t]here isn’t going to be an audit [of the BB Report] for a year and its [sic] causing huge problems to keep writing up fictitious contracts and paperwork.” 

Transmar filed for bankruptcy in December 2016.  At that time, the Company owed the Banks approximately $360 million.

PETER G. JOHNSON, 69, of Harding Township, New Jersey, PETER B. JOHNSON, 38, of Morristown, New Jersey, each pled guilty to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution.  That offense carries a maximum prison term of 30 years.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

The defendants are scheduled to be sentenced by Judge Rakoff on August 6, 2018.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.