FOR FURTHER INFORMATION CONTACT
AUSA VICKIE E. LEDUC at 410-209-4885
DECEMBER 5, 2005
FOR IMMEDIATE RELEASE
REINHARDT AND ALLEN SENTENCED IN COMPLEX FRAUD SCHEME TO OBTAIN MONEY FROM FINANCE COMPANIES
Millions of Dollars Obtained Through Fraudulent Computer Lease Applications
Baltimore, Maryland -United States Attorney for the District of Maryland Rod J. Rosenstein announced that today United States District Chief Judge Benson E. Legg sentenced Ernest Robert Reinhardt, age 35, to 70 months in prison followed by 3 years of supervised release and Byron Allen, age 35, both of Orange County, California, to 37 months in prison followed by 3 years of supervised release in connection with their conviction by a federal jury on January 26, 2005 of multiple counts of wire fraud arising from a complex scheme to obtain money from finance companies. Chief Judge Legg also ordered that Reinhardt pay restitution in the amount of $862,044 and that defendant Allen pay restitution in the amount of $712,865.
The evidence presented at the 9 week trial showed that from the fall of 1999 through the spring of 2001, the defendants were engaged in an extensive fraud scheme to obtain cash from finance companies through business leases for nonexistent computer equipment. The lease applications were submitted in the names of either fake companies or legitimate businesses, and requested financing for computer equipment allegedly purchased from companies controlled by Reinhardt in California. Reinhardt’s companies were actually Delaware shell corporations set up by Reinhardt and/or other coconspirators. These companies were represented in the fraudulent lease transactions as the purported vendors of the alleged computer equipment for which financing was being sought. In many instances, both the vendors and the lessees were made to appear legitimate by using false financial information, and, in some cases, means of identification misappropriated from various individuals.
Documents associated with the fraudulent transactions were submitted to the finance companies by members of the scheme through the mails or by facsimile wire transmissions. Each lease application was accompanied by a fake invoice generated by Reinhardt that itemized the computer equipment allegedly purchased by the purported lessee and the cost of the equipment. Payment for the alleged equipment was made by the finance companies directly to Reinhardt as the purported vendor; Reinhardt would then keep a portion of the monies and forward the rest via wire transfer or checks to his coconspirators who were the purported lessees. Many of the leases went into default for lack of payment, especially in Maryland. A number of the finance companies subsequently sued Reinhardt and certain of the lessees after detecting the fraudulent nature of the transactions.
The evidence at trial showed that during the scheme, defendant Allen assisted Reinhardt in the preparation and submission of the fraudulent lease documents to the finance companies. Allen obtained the necessary information from the various coconspirators who were being fronted as the purported lessees, passed that information on to the finance companies, and acted as a point of contact through the approval and funding process. He also faxed the fake computer invoices or other required paperwork to the finance companies for each of the transactions, as reflected in the lease documents admitted into evidence.
According to the evidence presented at trial, the defendants used various methods to facilitate their fraud, among them: the acquisition of shell corporations whose corporate histories could be used to legitimize the fake businesses in whose names the lease applications were filed; filing and creating fraudulent documents such as corporate resolutions, financial statements, tax returns and accounting firm opinion letters, all of which falsely represented the financial condition of the businesses making the applications; and forging the signatures of numerous individuals whose identities were misappropriated.
The fraud scheme involved approximately $1.6 million in unlawful proceeds obtained through the financing that resulted from the fraudulent lease applications. A significant amount of financial evidence was introduced at the trial that established that over the course of a one year period during the height of the scheme, defendant Reinhardt walked away with approximately $615,000 in illegal proceeds, much of which he used for personal expenditures.
The sentencings today end the investigation in this case which began in late 1999. Twelve other defendants charged in this matter entered pleas of guilty to various fraud charges and received sentences ranging from 5 months to 60 months imprisonment.
United States Attorney Rosenstein thanked the Federal Bureau of Investigation and the U.S. Postal Inspection Service for their investigative work. Mr. Rosenstein commended Assistant United States Attorney Christine Manuelian, who prosecuted the case.
This page last modifiedJanuary 31, 2006