Owner of International Clothing Retailer Sentenced to Four Years of Imprisonment for Bank Fraud
Bank Leumi Losses Total Approximately $5.8 Million
Kwong Hung Lam, also know as “Eric Lam,” the president and sole owner of New Century Enterprise Inc. (“New Century”), an importer and distributor of casual apparel headquartered in Farmingdale, New York, was sentenced today to four years of imprisonment for making false statements to a financial institution and ordered to pay $6,035,457 in restitution. United States District Judge Nicholas G. Garaufis imposed the sentence pursuant to Lam’s October 21, 2010, guilty plea.
The sentence was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyk, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office.
According to his plea allocution and documents filed by the government in the case, in 2006, Lam, on behalf of New Century, entered into a written credit line loan agreement with Bank Leumi USA (“Bank Leumi”), pursuant to which the bank agreed to extend funds and other financial accommodations, such as letters of credit, to New Century on a discretionary basis. As part of the loan agreement, New Century was required to provide Bank Leumi, on a monthly basis, with a borrowing base certificate (“BBC”), which certified the value of New Century’s inventory and accounts receivable, the collateral for the loan. Between 2006 and 2009, Lam submitted numerous false BBCs to Bank Leumi in which he falsely inflated the true value of New Century’s collateral for the loan. As of September 2009, Lam, who had personally guaranteed the loan, and New Century owed Bank Leumi $5.8 million, and Lam had certified that the value of New Century’s collateral was approximately $9 million.
In October 2009, Lam terminated New Century’s business operations, and thereafter authorized Bank Leumi to take possession of all New Century’s inventory and accounts receivable. Upon inspection of the collateral for the loan, however, Bank Leumi discovered that New Century’s inventory and accounts receivable were worth far less than Lam had represented in September 2009. In fact, the inventory was valued at far less than $100,000, and the accounts receivable balance was falsified and therefore uncollectible.
Ms. Lynch expressed her grateful appreciation to the Federal Bureau of Investigation, the agency that led the government’s investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The government’s case was prosecuted by Assistant United States Attorney James G. McGovern.
Name: KWONG HUNG LAM
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