Anchorage Contractor Sentenced to Three years for Bank Fraud
Anchorage, Alaska – United States Attorney Karen Loeffler announced today, that John Evan Burns, 57, of Anchorage, was sentenced to three years in federal prison for defrauding Northrim Bank of $750,000. Burns was found guilty by a jury on September 11, 2009 of 24 counts of making false statements to a federally-insured bank.
United States District Court Judge Timothy M. Burgess, who imposed the sentence, cited Burns’ prior conviction for fraud as an aggravating factor, observing that this was not the defendant’s “first time around the block.” Burns was convicted of felony misapplication of property in Alaska State Court in 1988, and sentenced to 18 months of imprisonment. During his allocution to the court, Burns said that he was sorry that the bank lost money, but continued to deny any criminal responsibility or intent. In addition to the 36-month prison term, the court ordered the defendant to pay $763,671.40 in restitution to Northrim, but did not impose a fine. Upon release, the defendant will be subject to a period of five years of supervised release.
According to Assistant United States Attorney Tom Bradley, who prosecuted the case, the evidence presented at trial established that Burns did business as Central Construction, a sole proprietorship. Central Construction was engaged in the business of electrical contracting for large infrastructure improvement projects, such as roads, parks, and airports, owned by the State of Alaska as well as local governments. The specific projects in this case included the C Street/O’Malley interchange, Kincaid Park trail, Abbott Loop, the Anchorage International Airport taxiway, Glenn Hightway/Dogwood, Wasilla Fishhook Road, Taku Lake, and the Palmer Airport taxiway.
On April 27, 2006, the defendant, doing business as Central Construction, obtained a $500,000 working capital line of credit from Northrim Bank, secured primarily by accounts receivable. The terms of this loan were changed on June 8, 2006, to increase the credit line to $750,000.
Under the terms of the loan agreement the defendant was allowed to borrow up to 75% of the total amount of his accounts receivable (A/R), up to the maximum loan amount of $750,000. In order for defendant to access the entire credit line of $750,000, the total amount of his accounts receivable had to be in excess of $1 million. Burns was also required to file with the bank monthly accounts receivable “Job Current Aging” reports. These reports were to reflect the accounts receivable broken down by the age of the receivable, i.e., “Current”, “1-30 days”, “61-90 days”, etc. Between April 18, 2006, and April 12, 2007, nine “Job Current Aging” reports identifying Central Construction receivables, by project, were
submitted to Northrim Bank. The evidence at trial was that eight of the nine reports reflected receivables in excess of $1 million. The receivables contained on these reports were identified as having come from four companies: Quality Asphalt Paving, Wilder Construction, Construction Unlimited, and Chugach Electric Association. In fact, the evidence showed these reports contained significant overstatements of Central Construction’s true accounts receivable due from each company.
In addition to the aging reports, and for each advance requested against the line of credit, the defendant was required to submit a “Borrower’s Certificate of A/R.” These documents specifically referenced the falsely overstated total amount of the accounts receivable as set forth in the most recent submitted Job Current Aging report. Between the dates of June 8, 2006, and January 2, 2007, seventeen of these certificates were submitted to Northrim Bank, each signed by Burns. The purpose of these submissions was for Burns to obtain draws from Northrim Bank on the line of credit by means of submitting false accounts receivable aging reports and borrower’s certificates of accounts receivable, thereby misrepresenting the collateral for the line of credit and deceiving the bank as to the pledged collateral, and the permissible amount available to draw upon.
At trial, the government presented evidence that in April 2006, Burns’ actual accounts receivable were approximately $418,000, and that he inflated his stated accounts receivable by approximately $266,000 in that month’s Job Current Aging report to the bank. By the end of 2006 and in early 2007, the evidence showed that he was inflating the A/R’s by approximately a million dollars in his monthly reports. During the life of the scheme, the defendant received approximately $1.925 million in loan proceeds from Northrim. He did make interest and principal payments, but at the end the bank lost $750,000 on this loan.
Evidence presented at trial revealed that Burns had previously borrowed $500,000 from First National Bank, Alaska (FNBA), but that FNBA became suspicious in early 2006, that Burns’ stated accounts receivable were not trustworthy and told him to find another bank.
Pending surrender to the Federal Bureau of Prisons, the court allowed Burns to remain free on his own recognizance.
The Federal Bureau of Investigation conducted the investigation that led to the prosecution of Burns.