May 11, 2004 – LAWFUEL – Marcos Daniel Jiménez, United States Attorney for the Southern District of Florida, and Jonathan I. Solomon, Special Agent in Charge, of the Federal Bureau of Investigation, announced today that four defendants have pleaded guilty to their involvement in a $170 million scheme to defraud Espirito Santo Bank of Florida. Today, Dominick Parlapiano, and on May 5, 2004, Carlos E. Mendez, were each convicted of conspiracy, two counts of bank fraud, and wire fraud, in violation of Title 18, United States Code, Sections 371, 1344, and 1343. On May 6, 2004, Jeffrey Barnhill was convicted of conspiracy and bank fraud, in violation of Title 18, United States Code, Sections 371 and 1344, while on May 7, 2004, Otto Ambrosiani was convicted of conspiracy, in violation of Title 18, United States Code, Section 371.
The bank fraud and wire fraud charges carry maximum sentences of thirty years’ imprisonment and fines up to $1 million. The conspiracy charge is punishable by up to five years’ imprisonment and a fine up to $250,000. In addition, the four pleading defendants face orders requiring restitution payments to the victim of the fraud. They are scheduled to be sentenced later this summer. The five other defendants charged in the Indictment, Eduardo Orlansky, Hector Orlansky, R. Peter Stanham, Ariadna Puerto, and Howard Cantor, are scheduled to be tried in April of 2005.
The charges stem from the decades-long funding relationship between Espirito Santo Bank of Florida and the Bankest entities, a group of factoring companies owned by two other defendants, Eduardo Orlansky and Hector Orlansky. According to the Indictment, the Orlanskys and their co-defendants committed fraud on the bank over the course of that relationship.
All four pleading defendants admitted that they schemed to misrepresent the value of Bankest’s accounts receivable to Espirito Santo Bank and to independent auditors in order to obtain funding through the bank. The bank funded over $170,000,000 in reliance on the fraudulent representations.
At their change of plea hearings, the defendants admitted that Bankest employed numerous sophisticated mechanisms to further, conceal, and disguise this fraud, including creating and using false invoices; changing dates on old receivables to make them appear current; creating false checks; redacting monthly board meeting minutes before producing the minutes to auditors; cycling money from Bankest to its factoring clients and back again to create the false appearance that the clients were paying down real receivables; and many other techniques and machinations. As a result, monthly reports provided to the bank, as well as the annual audited financial statements for Bankest, were materially false. In their plea agreements, the four defendants agreed to cooperate in
efforts to obtain restitution for the victim.
Dominick Parlapiano was a director of Bankest, and managed significant aspects of the fraudulent scheme under the direction of his co-defendants Eduardo Orlansky, Hector Orlansky, and R. Peter Stanham. One of the acts Dominick Parlapiano committed in furtherance of the fraud was to cause hundreds of thousands of dollars to be wire transferred from Bankest to Enterprise Network Applications (“ENA”), a Georgia company. The purpose of the wire transfers was to place funds in ENA’s account so that ENA could, in turn, transfer those same funds back to Bankest. This created the false appearance on Bankest’s books that ENA was actually making payments on its accounts receivable balance. In truth, the “payments” were a ruse – carried out by the cycling of funds – designed to conceal the fact that ENA’s accounts receivable balance had been fraudulently inflated by tens of millions of dollars.
Carlos Mendez was a vice president of Bankest, whose role was to conduct the finances of Bankest in such a way so as to make the false representations about the value of the accounts receivable possible. Otto Ambrosiani handled information technology and computing systems for Bankest, and his role in the fraud included manipulating computer accounting data in such a way that the bank and the auditors would not discover the fraudulent schemes.
Jeffrey Barnhill was an owner and executive officer of Joy Athletic, Inc., a company engaged in the clothing business that purported to have a factoring relationship with Bankest. He schemed to fraudulently inflate the value of Joy’s receivables by over $50 million to defraud the bank and obtain financing for Joy through Bankest.
“These first four guilty pleas are an important success and a significant development in this case, one of the largest bank and corporate fraud cases ever prosecuted in South Florida,” said Mr. Jiménez. “The terms of the plea agreements include stipulations by the defendants that the loss caused by the fraud exceeded $50 million (as to Barnhill) and $100 million (as to the other pleading defendants), sentencing enhancements based upon the sophisticated nature of the fraud, and agreements requiring the defendants’ full cooperation with efforts to obtain restitution for the victim. Our continuing efforts to bring to justice all those involved in this nearly decade-long, $170 million fraud scheme, demonstrate the emphasis this Office, the Federal Bureau of Investigation, and the Department of Justice place on stopping corporate fraud.”
Mr. Jiménez commended the investigative efforts of the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorneys Stephen Stallings and Caroline Heck Miller.