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Signature Bank/New York NY
Capital One Financial Corp
The former head of Synergy Brands Inc. (SYBRQ), a bankrupt baking mixes and spices company in Syosset, New York, was charged with a fraud that led to a $26 million loss for New York-based Signature Bank (SBNY).
Mair Faibish, 52, Synergy’s former chief executive officer, was arrested today and pleaded not guilty in federal court in Brooklyn, New York. The fraud arose from a check-kiting scheme meant to inflate Synergy’s sales, according to a statement from U.S. Attorney Loretta E. Lynch in Brooklyn. Faibish defrauded both Signature and McLean, Virginia-based Capital One Financial Corp. (COF), according to the indictment.
“The defendant allegedly defrauded an FDIC-insured bank out of millions of dollars through a massive check-kiting scheme, as well as fraudulently inflated Synergy’s financial statements in order to make the struggling company appear prosperous,” Lynch said in the statement.
Synergy Brands filed a Chapter 7 liquidation petition in January 2011 in Central Islip, New York. The petition listed assets of $21.7 million and debt totaling $44.7 million. The company was delisted from the Nasdaq in December 2008.
“These were complicated transactions and I think when comprehended it’ll be clear that they were not fraudulent,” Faibish’s lawyer, Bradley Simon of Simon & Partners LLP in Manhattan, said after the court hearing. “After it’s fully understood, we’ll be able to show that it’s not what the government alleges it is.”
Faibish kited about $750 million worth of checks not backed by sufficient funds through banks in the U.S. and Canada, according to the indictment. He had those checks deposited into accounts of associated food makers and distributors in Canada, which then sent checks in corresponding amounts back to Synergy in the U.S., prosecutors said.
Because the funds were immediately available, they artificially inflated Synergy’s bank balances.
Faibish is charged with securities-fraud and bank-fraud conspiracy, bank fraud and making false statements to the U.S. Securities and Exchange Commission. Assistant U.S. Attorney Ilene Jaroslaw said in court that Faibish faces about 20 years in prison under federal sentencing guidelines.
U.S. Magistrate Judge Viktor V. Pohorelsky released Faibish on a $1 million bond secured by two houses he and his wife own in Dix Hills and Monticello, New York. Faibish is a dual citizen of the U.S. and Israel, Jaroslaw said.
The case is U.S. v. Faibish, 12-cr-265, U.S. District Court, Eastern District of New York (Brooklyn).
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