Banking Blog

Finance Blogs » Banking » Feds punish bank fraud

Feds punish bank fraud

By Marcie Geffner · Bankrate.com
Thursday, September 29, 2011
Posted: 3 pm ET

Four years and $6 million.

That was the prison sentence and restitution demand recently imposed on a man who pleaded guilty to federal bank fraud charges.

Kwong Hung Lam, a.k.a. "Eric Lam," was the president and sole owner of New Century Enterprise, an importer and distributor of casual clothing headquartered in Farmingdale, N.Y., according to a statement issued by U.S. district attorney Loretta E. Lynch and Janice K. Fedarcyk of the FBI's New York field office. The sentence was imposed by U.S. District Judge Nicholas G. Garaufis, pursuant to Lam's Oct. 21, 2010, guilty plea.

So what happened?

According to court documents summarized in the statement, Lam entered into a written agreement for a line of credit with Bank Leumi USA, under which the bank agreed to extend funds and other financial accommodations, such as letters of credit, to New Century on a discretionary basis.

As part of the agreement, the company was required to give the bank a monthly certificate that showed the value of its inventory and accounts receivable, which were the collateral for the loan.

Between 2006 and 2009, Lam submitted numerous false certificates in which he inflated the value of the collateral. As of September 2009, he and his company owed the bank $5.8 million, and he had certified that the collateral was worth approximately $9 million.

A month later, Lam terminated the company's operations and authorized the bank to take possession of the collateral. It was only then that the bank discovered the inventory and accounts receivable were worth less than $100,000.

By way of comparison, $7.8 million, almost all of it in cash, was stolen during 933 robberies from federally insured commercial banks, savings and loans, and credit unions during April, May and June 2011, according to an FBI crime statistics report. That works out to $8,360 per incident, on average, nowhere near the $5.8 million loss Lam inflicted on one bank through fraudulent paperwork.

Follow me on Twitter: @marciegeff

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.