False Financial Statements Underlie Indictment of Developer and Accountants

Rachel Dollar —  May 11, 2016 — Leave a comment

John D. Harrison, Jr., 53, Greenwood, South Carolina, Henry A. Dorn, 63, Greenwood, South Carolina, Kevin Dempsey, 45, Greenwood, South Carolina, and C. Jody Hazel, 42,Greenwood, South Carolina, pled guilty in federal court in Greenville, South Carolina, to conspiracy to commit bank fraud.  United States District Judge Bruce Howe Hendricks, of Charleston accepted the pleas and will impose sentence after she has reviewed the presentence report which will be prepared by the U.S. Probation Office.

Evidence presented at the change of plea hearing established that Harrison was a real estate developer who developed high end residential properties in North Carolina, South Carolina and Georgia. Dorn, Dempsey and Hazel were accountants for the accounting firm that prepared Harrison’s financial statements and tax returns. Dorn primarily serviced Harrison’s account.  Harrison obtained loans from numerous banks and individuals to fund his real estate developments. A review of Harrison’s financial statements that were provided to banks from August 31, 2000 until May 31, 2008, indicated that Harrison significantly understated his total debt—that is, the financial statements contained false information and this false information was material to the lenders and was meant to influence the actions of the lenders.  Dorn prepared these financial statements for Harrison. In essence, Dorn kept two sets of books for Harrison: one with false numbers and one with accurate numbers.

Harrison also entered into Accommodation Borrowing Agreements with Dorn, Dempsey and Hazel in which these three men served as straw purchasers for Harrison.  The agreements allow for Harrison to sell the property to Dorn, Dempsey and Hazel and continue to develop and sell the properties. The interest payments would be paid by Harrison and the loans would be paid off when Harrison sold the property. The profit or loss would belong to Harrison and Harrison would pay a fee to Dorn, Dempsey or Hazel totaling 3% of the loan amount. The agreements were not disclosed to the banks until after the loans went past due.

In addition to the undisclosed agreements, Dorn, Dempsey and Hazel all understated their debt when applying for their respective real estate loans—that is, the financial statements contained false information.  Law enforcement estimates that federally insured banks lost in excess of $10 million in scheme and artifice to defraud.

United States Attorney Bill Nettles stated the maximum penalty the Defendants can receive is a fine of $1,000,000 and/or imprisonment for 30 years, plus a special assessment of $100.

The case was announced by United States Attorney Bill Nettles and investigated by agents of the Federal Bureau of Investigation.  Assistant United States Attorney Bill Watkins of the Greenville office handled the case.

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Rachel Dollar

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