Federal sting nets 23 in leasing scam
Capping an elaborate sting, federal officials said Wednesday that they had charged 23 people with operating a Southland-based equipment-leasing scam that generated at least $20 million in losses at some of the nation’s biggest financial institutions.
The scheme involved phony invoices and other fraudulent methods used to get funds from Citigroup Inc., Wells Fargo & Co., GE Capital, Bank of America Corp. and other lenders.
The FBI-operated sting, run out of an Irvine storefront with hidden cameras, targeted loan brokers, equipment vendors and employees of the lenders, attorneys involved in the case said.
The probe was continuing and losses could rise “a lot higher” than $20 million, Assistant U.S. Atty. Jennifer Waier said.
All but one of the defendants waived their right to be examined and indicted by a grand jury. They will appear in court in coming months on fraud-related charges, Waier said.
Defense attorneys said at least some defendants had agreed to plead guilty and cooperate with the investigation. The plea agreements were filed under seal, and Waier declined to comment on them.
Prosecutors said certain employees of CapitalWerks in Santa Ana, Brickbanc Capital in Costa Mesa and other loan brokers had played central roles in the scheme. Calls to CapitalWerks were not returned, and Brickbanc had no listed number.
Under the scheme, investigators said, the defendants offered cash loans to businesses with credit problems. But instead the defendants applied to lenders for funds to buy computers and other equipment that was to be leased by the businesses. But the gear was never purchased.
The equipment lease applications were inflated so the defendants could obtain lucrative commissions for themselves. The leases were easier to get because the qualifying criteria were less stringent than for a cash loan.
“Hundreds of bogus equipment-lease packages with fake invoices were presented to financial institutions,” prosecutors said in a news release.
To cover up the fraud, some bank officials were shown empty shells of computers with flashing lights -- “blinky boxes,” as one defense attorney called them.
CitiCapital, an arm of Citigroup, which lost $9.5 million, assisted the FBI after finding that one of its employees had played a role in the scheme, the FBI said. The employee, John J. Callaghan of Warminster, Pa., couldn’t be reached for comment.
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