Bloomberg News

New York Executives Go to Trial on $21 Million Fraud

December 09, 2011

(Corrects amount defendants allegedly tried to obtain from C3 Capital in 14th paragraph.)

Dec. 6 (Bloomberg) -- Two executives of a New York holding company that owned lighting and furniture dealers used false information to get $21 million in loans from Amalgamated Bank, a prosecutor said at the start of their trial.

Courtney Dupree, the former chief executive officer of GDC Acquisitions LLC in Long Island City in Queens, New York, and Thomas Foley, a lawyer in Hoboken, New Jersey, who was the company’s outside counsel and then became its chief operating officer, are charged with bank fraud, conspiracy and false statements.

“This is a case about lying to a bank to get money,” Assistant U.S. Attorney David Woll told jurors today in federal court in Brooklyn, New York. “It is about telling lies over and over again in order to grab millions of dollars of the bank’s money.”

Dupree and Foley ran a scheme to defraud New York-based Amalgamated, with $4.5 billion in assets, and C3 Capital LLC, a private-equity investment firm, from January 2007 to July 2010, according to prosecutors in the office of U.S. Attorney Loretta Lynch.

Amalgamated realized $16 million in losses due to the crime, Woll told jurors today.

Fundraiser

Dupree played basketball for the University of North Carolina at Chapel Hill and earned a master’s of business administration from the Wharton School at the University of Pennsylvania, according to Robert Nardoza, a spokesman for Lynch.

In 2008 at his Broad Street apartment in New York’s financial district, Dupree hosted Valerie Jarrett, an adviser to Barack Obama, for a $1,000-a-ticket fundraiser for the then-U.S. presidential candidate, according to Elle magazine.

U.S. District Judge Kiyo A. Matsumoto is presiding over the trial.

Dupree has been in custody since March when he was arrested again on new charges that he schemed to defraud Amalgamated. Prosecutors said he took about $331,000 in customer payments to a GDC subsidiary for his personal use.

In the original scheme alleged, in August 2008 several GDC units, with the parent as guarantor, reached an agreement with Amalgamated that allowed them to borrow up to $21 million, according to the indictment.

Fictitious Sales

The defendants lied to Amalgamated about GDC’s accounts receivable that secured the loan. They booked fictitious sales, prematurely recognized sales, re-dated sales and failed to reduce receivables after receiving cash from customers, according to the indictment.

They also hid from the bank the purchase of a subsidiary, Image Lighting, Woll said. In 2009 they told the bank GDC had $25.2 million in accounts receivable when it had only $9 million, the government said.

Amalgamated is the only union-owned bank in the U.S., according to its website. It said in September that Ron Burkle’s Yucaipa Cos. and Wilbur Ross’s WL Ross & Co. would each gain a 20 percent stake investing $50 million each.

The defendants also tried to get about $5 million in funding from C3 Capital by submitting reports that inflated GDC’s accounts receivable. C3 never gave GDC any money, according to court papers.

Outside Counsel

Foley, who has been out on bail, was GDC’s outside counsel until he joined the company in March 2010, according to court papers.

Another defendant, Rodney Watts, who was at different times GDC’s chief financial officer and chief investment officer, in October was granted a delay in his trial while he appeals a denial of funds he said he’s owed to use as part of his legal defense.

A fourth defendant, Frank Patello, a former controller and CFO of the company, admitted his guilt in September 2010 under a plea agreement.

All four men were arrested in July 2010.

Among GDC’s subsidiaries were lighting distributor JDC Lighting, lighting maintenance company Unalite Electric & Lighting and furniture distributor Hudson Bay Environments Group, according to the indictment.

The case is U.S. v. Dupree, 10-cr-627, U.S. District Court, Eastern District of New York (Brooklyn).

--Editors: Mary Romano, Glenn Holdcraft

To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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