Alan Fabian Sentenced to 9 years in federal prison for fraud and tax crimes in $40 million schemes
Engaged in Two Separate Fraud Schemes Involving $32 Million and $7.5 Million;
Used Proceeds to Buy Beachfront Properties in North Carolina and for Private Jet Travel
Baltimore, Maryland - U.S. District Judge Catherine C. Blake sentenced Alan B. Fabian, age 44, of Cockeysville, Maryland, today to nine years in prison followed by three years of supervised release for 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 million 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.
Judge Blake also ordered Fabian to forfeit his interest in several beachfront properties in North Carolina, three cars and a limited liability company. Judge Blake is expected to enter an order at a later date requiring Fabian to make restitution to the victims of his offenses.
United States Attorney Rod J. Rosenstein said, “Alan Fabian stole a lot of money by gaining people’s trust and then fleecing them. His brazen fraud schemes 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.”
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 and court documents, 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 approximately 50 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 millions of dollars provided to SPI by the leasing company for his personal benefit, including the purchases of beachfront properties 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. In an effort to keep the millions of dollars that he pocketed from going back to SPI’s creditors, Fabian 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, failing to pay a total of $974,009.10 in owed taxes. 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.
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. According to court documents, by 2007, Fabian was paying himself an annual salary of $800,000. 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.
According to court documents and testimony at the sentencing hearing, Fabian continued to steal money and take loans that he could not repay even after he knew that a federal indictment was looming. Fabian took a lavish family vacation to Israel and Egypt in June 2007, leaving a small concierge service that arranged the trip with more than $100,000 in bills to pay. In late July 2007, he sold a non-existent receivable to a victim for more than $200,000, and in early August he fully drew down on a $1.15 million home equity line of credit from a bank, thereby increasing the bank’s losses.
After Fabian had been told that a federal indictment was imminent, he caused CMAT to borrow $500,000 from a fellow churchgoer, although Fabian knew that CMAT likely would not be able to repay him. In fact, CMAT did not repay any amount of the $500,000 loan.
After Fabian was indicted in early August 2007, CMAT was also placed into involuntary bankruptcy by its creditors, and faces creditor claims of approximately $30 million.
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.