Alan Fabian Pleads Guilty to Fraud and Tax Crimes in $40 Million Scheme
Defendant Admits Second $7.5 Million Fraud Scheme in Addition to $32 Million Scheme Charged Previously
Baltimore, Maryland - Alan B. Fabian, age 43, of Cockeysville, Maryland, pleaded guilty today to mail fraud and filing a false tax return in connection with a scheme to defraud his former employer, an equipment leasing broker, and several financial institutions of approximately $32,000,000 between 2001 and 2004, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Fabian also admitted that, between 2005 and 2007, he deceived two banks and an invoice discounting company into providing $7,500,000 in financing to entities he controlled, including the Centre for Management and Technology (“CMAT”), which is currently in bankruptcy.
United States Attorney Rod J. Rosenstein said, "Alan Fabian carried out brazen fraud schemes that involved cheating victims of nearly $40 million, spending criminal proceeds for his personal use, lying about the scheme in bankruptcy court and cheating on his taxes. After his $32 million scheme was caught in 2004, Mr. Fabian launched another scheme that netted $7.5 million. Fraud by corporate executives jeopardizes public confidence in our economy."
Special Agent in Charge C. Andre' Martin, IRS-Criminal Investigation Division stated "The prosecution of individuals who intentionally file false tax returns is a vital element in maintaining public confidence in our tax system. We should not expect the honest taxpayer to foot the bill for those who file false tax returns with the IRS."
According to the plea agreement, from March 2001 to July 2004, Fabian, once a certified public accountant, caused Strategic Partners International LLC and later, Strategic Partners International, Inc., companies that he formed (collectively, SPI), to enter into sale-leaseback transactions to purportedly purchase $32 million in computer hardware and software, when in fact SPI either never purchased such equipment or purchased substantially less expensive equipment. Fabian made numerous misrepresentations to the leasing company and funding sources to induce them to enter into these transactions. Fabian diverted substantial amounts of money provided to SPI by the leasing company for his personal benefit, including the purchases of real estate in North Carolina, to pay for private jet travel and to form and operate CMAT, a not-for-profit entity located in Baltimore.
Fabian defaulted on all outstanding leases in July 2004. On August 31, 2004, two of the funding sources filed a petition forcing SPI, Inc. involuntarily into bankruptcy. As part of his plea agreement, Fabian admitted that he obstructed justice in the bankruptcy case, by testifying falsely under oath in depositions in October and November 2004 and by filing a false Statement of Financial Affairs with the Bankruptcy Court.
False Tax Returns
Fabian admitted that he filed false tax returns for the 2002, 2003, and 2004 tax years. For 2002 and 2003, Fabian admitted that he failed to report on his individual income tax returns at least some of the income that he received from SPI. Fabian also admitted that for each of the three tax years, he overstated the amount of taxes that had been withheld on his behalf. For example, on his 2004 tax return, Fabian claimed withholdings of $504,000, when in fact only $28,985 in federal tax had been withheld. Fabian admitted that by overstating his withholdings, he willfully failed to pay approximately $475,000 in federal taxes due for 2004.
After leaving his employer in July 2004, Fabian worked full-time at CMAT and eventually formed several additional related entities. Beginning in April 2005, Fabian obtained lines of credit and equipment loans from two banks. Between April 2005 and June 2007, Fabian made misrepresentations and submitted false documents to the banks to support periodic increases to the loans and credit lines. By July and August, 2007 when the banks demanded payment of the credit lines and loans, Fabian’s CMAT entities were unable to pay the amounts owed. As a result, the banks sustained losses totaling $7,322,000. Fabian also admitted to defrauding an invoice discounting company, causing a loss of over $200,000.
As part of his plea agreement, Fabian agreed to forfeit his interest in a home in Cockeysville, Maryland; several beachfront properties in North Carolina; a Silverton yacht; three cars; and several companies.
Fabian faces a maximum sentence of 30 years in prison followed by five years of supervised release and a $1 million fine for mail fraud, and three years in prison followed by one year of supervised release, a $100,000 fine, and costs of prosecution for filing a false tax return. U.S. District Judge Richard D. Bennett has set sentencing to begin on September 22, 2008, at 10:00 a.m.
United States Attorney Rod J. Rosenstein praised the investigative work performed by the Federal Bureau of Investigation, the Internal Revenue Service - Criminal Investigation and the United States Postal Inspection Service. Mr. Rosenstein thanked Assistant U.S. Attorneys Tonya Kelly Kowitz and Jonathan Biran, who are prosecuting the case.