Three Individuals Charged with Defrauding Banks

Allison Tussey —  March 23, 2015 — Leave a comment

Brett C. Lillemoe, 45, Minneapolis, Minnesota, Pablo Calderon, 59, Darien, Connecticut, and Sarah Zirbes, 39, Minneapolis,  were charged by a federal grand jury with conspiracy, fraud and money laundering offenses related to a multi-million-dollar scheme to defraud banks.

The indictment alleges that the three defendants engaged in a conspiracy to defraud U.S. financial institutions that secured loans to Russian Banks based on altered documents. The loans were backed by a credit guarantee program run by the U.S. Department of Agriculture (USDA), and when the loans went into default and were subsequently not paid back, the USDA lost millions of dollars. Lillemoe was arraigned on March 13 in Bridgeport federal court. He entered a plea of not guilty to all of the charges against him and was released on a $250,000 bond. Zirbes was arraigned on March 6, 2015, pleaded not guilty and is released on a $100,000 bond. Calderon is scheduled to be arraigned this afternoon at in Bridgeport.

As alleged in the indictment, the USDA provides credit guarantees through the Export Credit Guarantee Program (GSM-102), which is designed to encourage financing of commercial exports of U.S. agricultural products. The GSM-102 program guarantees credit extended by U.S. financial institutions in the U.S. to approved foreign banks, including banks in Russia. As part of the program, the Commodity Credit Corporation (CCC), which is an agency and instrumentality of the USDA, enters into payment guarantees (“credit guarantees”).

The credit guarantees are designed to encourage exports to buyers in foreign countries—mainly developing countries. The program operates in cases where credit is necessary to increase or maintain U.S. exports to a foreign market and where U.S. financial institutions might be otherwise unwilling to provide financing without the guarantee. In providing the credit guarantee facility, the CCC seeks to expand market opportunities for U.S. agricultural exporters and assist long-term market development for U.S. agricultural commodities.

In connection with the GSM-102 program, a foreign importer that has contracted to buy U.S. agricultural products can apply for a letter of credit (“LOC”) from a foreign bank that has been approved by the USDA’s Foreign Agricultural Service (FAS). The foreign bank then issues a letter of credit in favor of the U.S. exporter. The U.S. exporter then, consistent with the requirements of the GSM-102 program, presents proper shipping documents to an approved U.S. financial institution, including a copy of an original bill of lading, certificate of origin, and evidence of export. The U.S. financial institution then provides funds to the U.S. exporter which, in exchange, assigns the rights to the proceeds payable under the letter of credit from the foreign bank to the U.S. financial institution in the same dollar-denominated amount, less any fees. If the foreign bank defaults on its payments to the U.S. financial institution, the U.S. financial institution may submit a claim to the USDA FAS under the guarantee for up to 98 percent of the payment amount owed at the time of the default.

The indictment alleges that between September 2007 and January 2012, Lillemoe, Calderon, Zerbes and others devised and executed a scheme to defraud various U.S. financial institutions, including Deutsche Bank A.G. and Colorado-based CoBank ACB, by presenting false and altered shipping documents, including altered bills of lading, in connection with securing funding on loans guaranteed by the GSM-102.

The indictment alleges that Lillemoe, Calderon, Zerbes established multiple entities with separate names for the purpose of obtaining a greater share of the allocation of guarantees from the GSM-102 program, and used multiple bank accounts in the names of the various entities in order to further create the appearance that the entities were operating as separate and unrelated entities. The defendants then, in various ways, paid for or otherwise acquired bills of lading and other shipping documents for shipments of agricultural products that they did not physically ship and for which they did not participate in the physical movement of the products in any capacity.

It is further alleged that Lillemoe entered into agreements with foreign banks, including International Industrial Bank (IIB) in Russia, to provide them capital that would be made available to them from a U.S. financial institution through the use of the GSM-102 program. Lillemoe subsequently obtained letters of credit from the foreign banks. Lillemoe, Calderon, and Zirbes and others then altered copies of certain shipping documents, including bills of lading marked “Copy non negotiable,” by whiting out portions of the documents, stamping the word “original” on the documents, and adding shading on certain sections of the bills of lading. The defendants also prepared and executed documents termed “commercial invoices” purporting to represent sales of agricultural commodities between entities that they controlled, as well as between entities that they controlled and other entities.

The defendants then used these fraudulent documents to obtain large amounts of capital from U.S. banks in connection with the GSM-102 program, and then provided the funds to the foreign banks in exchange for a percentage fee for themselves and their various entities. Although the foreign banks were obligated to repay the funds to the U.S. financial institutions by virtue of the letters of credit issued to the U.S. financial institutions, in a number of instances, the foreign banks failed to do so. Nevertheless, Lillemoe, Calderon, Zirbes and their various entities retained millions of dollars of fees they had collected in connection with the GSM-102 transactions.

Through this alleged scheme, the foreign banks defaulted on over $10 million of loans for which the USDA’s GSM-102 program had to pay out the guarantees. The indictment further alleges that, on November 17, 2011, Calderon stated to federal agents investigating this matter that Lillemoe was his “supplier” and that he, Calderon, “purchased commodities from Lillemoe.” In truth, Lillemoe was not Calderon’s supplier and Calderon did not purchase commodities from Lillemoe. Rather, Lillemoe was a partner and co-conspirator with whom Calderon orchestrated paper-only transactions.

The indictment charges Lillemoe, Calderon and Zirbes with one count of conspiracy to commit wire fraud and bank fraud, and multiple counts of wire fraud, offenses that carry a maximum term of imprisonment of 20 years on each count. The indictment also charges each defendant with one count of bank fraud, which carries a maximum term of imprisonment of 30 years, and one count of money laundering, which carries a maximum term of imprisonment of 10 years. In addition, Calderon is charged with one count of making a false statement to federal law enforcement, which carries a maximum term of imprisonment of five years.

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced the indictment.

U.S. Attorney Daly stressed that an indictment is only a charge and is not evidence of guilt. Charges are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation, Internal Revenue Service—Criminal Investigation Division and U.S. Department of Agriculture, Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorneys Michael S. McGarry and John H. Durham.

 

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Allison Tussey

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