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TARP fraudsters get prison terms

By Marcie Geffner · Bankrate.com
Wednesday, March 27, 2013
Posted: 4 pm ET

Lying to a bank can be fraud, and fraud can land you in prison.

That's one lesson to be learned from the case of Thomas Chia Fu, 64, and his wife, Cheri L. Shyu, also known as Cheri Fu, 61, of Newport Coast, Calif.

The Fus were sentenced recently to federal prison for defrauding a consortium of seven banks, including Bank of America, in connection with a $130 million line of credit.

Thomas Fu was sentenced to 21 months; Cheri Fu, three years.

The couple also were ordered by U.S. District Judge Cormac J. Carney to pay $4.7 million in restitution.

Here's how the fraud worked. The Fus owned an Anaheim, Calif.-based company, Galleria USA, that imported home decor items manufactured in China. They obtained a $130 million revolving line of credit for the company from a consortium of seven banks. In connection with the credit line, they overstated the company's accounts receivables by tens of millions of dollars so they could continue borrowing funds, according to court documents.

When they pleaded guilty last year, they also admitted that they'd inflated the accounts receivables in Galleria's computer system to support the exaggerated numbers and hide the company's true financial status.

U.S. Attorney for the Central District of California Andre Birotte Jr. said in a statement that bank fraud is not a victimless crime and has detrimental effects on creditors and consumers.

"The Fus plundered a consortium of banks, which deprived legitimate customers from having access to the those funds and caused the financial institutions to suffer millions of dollars in losses. The prison sentences demonstrate our resolve to hold fraudsters accountable for their crimes," he said.

The banks lost $4.7 million on the credit line from October 2008 to July 2009, according to the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, the FBI and the U.S. Secret Service.

SIGTARP investigates fraud, waste and abuse in connection with the Troubled Asset Relief Program, or TARP, and investigated the case against the Fus.

SIGTARP Special Inspector General Christy Romero said the Fus defrauded the banks at a time when taxpayers were bailing out banks with TARP funds.

"The Fus fraudulently obtained funds from the TARP banks and other banks using a second set of books that overstated accounts receivables. They lived comfortably off the money, buying property and putting their daughter through college, when many taxpayers who funded the bailout were tightening their belts. Illegally profiting from the TARP bailout is reprehensible and will be met with swift justice," Romero said.

Did the Fus get what they deserved?

Follow me on Twitter: @marciegeff.

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2 Comments
Merl
April 17, 2013 at 8:03 pm

3 years, that's it?

Hell I might try it for awhile, only just get 500 or 600 thousand they probably won't even investigate that paltry amount.

Greg
March 28, 2013 at 7:38 am

The article fails to point out what "TARP banks" mean in relation to lending to what was believed to be a healthy company.

Is any bank that received TARP money a "TARP Bank", and any loan they made to anyone during the time they received the money a "TARP LOAN" ?