19 July 2004 – LAWFUEL – Read PRESS RELEASES for today’s law announcementsA San Gabriel man pleaded guilty today to federal fraud and tax charges for orchestrating a scheme in which he fraudulently obtained a $9 million line of credit from HSBC Business Credit.
Co Tro (“Sammy”) Lam, 49, pleaded guilty this morning to three counts of wire fraud and one count of tax evasion arising from an accounting fraud scheme involving his former company, Nikko Importer, Inc. (dba Wing Shing Food Company).
While serving as president of Nikko in the late 1990s and early 2000s, Lam entered into a series of financing agreements with HSBC Business Credit. Under the terms of the agreements Lam was required to provide detailed and certified Borrowing Base Certificates, or “BBCs,” to provide the lending institution with information about Nikko’s accounts receivable, inventory and other financial indicators. Based upon the information contained in the BBCs, HSBC would then wire money to Nikko according to a formula established in the financing agreements.
However, Lam and others working with him routinely inflated the information contained in the BBCs. Lam also set up fictitious companies that served no purpose other than to pose as sources of accounts receivable for Nikko and to facilitate financial transfers for Lam’s benefit. Lam cycled funds he received from HSBC through the fictitious companies, as well as through accounts of his own customers, using a system bank professionals refer to as “lapping.”
The scheme resulted in losses to HSBC of approximately $9 million, of which approximately $8 million remains outstanding (HSBC recouped some of its losses after a court-appointed receiver took over Nikko’s operations in 2002).
Lam’s tax evasion involved using the fictitious companies to issue $450,000 in checks for Lam’s personal benefit and intentionally omitting those sums from his federal income tax returns, resulting in an underpayment of approximately $169,000 in federal income taxes.
Lam is scheduled to be sentenced by United States District Judge Robert M. Takasugi on October 18. At sentencing, Lam faces a maximum possible sentence of 20 years in federal prison.
Lam’s prosecution is the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation Division.