Former CEO Of Long Island’s Synergy Brands, Inc.Convicted Of One Billion Dollar Check Kiting Scheme
Scheme Caused Losses of $26 Million Dollars to Signature Bank and Hundreds of Thousands of Dollars to Investors
Mair Faibish, the former Chief Executive Officer of Synergy Brands, Inc., was convicted today by a federal jury in Brooklyn on all three counts of the indictment for defrauding Signature Bank out of $26 million through a massive check kiting scheme, for making false statements to the United States Securities and Exchange Commission (“SEC”) and for defrauding investors by overstating the value of the company. The jury’s verdict followed a three-week trial in United States District Court held before the Hon. Eric N. Vitaliano.
The guilty verdicts were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, James T. Hayes, Jr., Special Agent-in-Charge, Department of Homeland Security, Homeland Security Investigations (“HSI”), New York Field Office; and Acting Nassau County Police Commissioner Thomas Krumpter.
“Through lies and deceit, the defendant and his co-conspirators took advantage of banks, auditors and unsuspecting investors and stole millions of dollars. Their representations and assurances were not worth the paper the checks were written on. We will vigorously pursue and bring to justice those who would defraud FDIC insured banks and the investing public,” stated United States Attorney Lynch. Ms. Lynch thanked HSI and the Nassau County Police Department for their hard work and dedication through the course of the investigation and prosecution.
The evidence at trial established that Faibish was the former CEO of Synergy Brands, Inc. (“Synergy”), a publicly held food products company that traded on the NASDAQ and Over-the-Counter (“OTC”) exchanges and manufactured and distributed various food products. Together with his co-conspirators, Faibish executed a check-kiting scheme on behalf of Synergy to funnel approximately $ 1.3 billion worth of checks that were not backed by sufficient funds through Signature Bank, Capital One Bank and various Canadian banks. Faibish caused those checks to be deposited into bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, which were also not backed by sufficient funds, back to Faibish-controlled third party companies. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ account balances while the scheme was ongoing. The defendant and his co-conspirators used Synergy’s fraudulently inflated bank account balances to book millions of dollars in fictitious accounts receivable and revenue.
As a result of this fraud, FDIC insured Signature Bank lost approximately $26 million that the defendant and his co-conspirators had withdrawn before the bank uncovered the scheme. Following the scheme’s collapse, Synergy was taken into bankruptcy and its publicly traded stock became essentially worthless, causing hundreds of thousands of dollars in investor losses.
The trial evidence further established that Faibish falsely inflated the values of Synergy’s sales, cost of goods sold and pre-paid expenses in filings with the SEC for the quarter ending June 30, 2008. These material misrepresentations were breaches of the defendant’s fiduciary duties to investors.
When sentenced by Judge Vitaliano, Faibish faces a sentence of up to 30 years’ imprisonment for bank fraud and securities fraud conspiracy as a result of the check kiting scheme.
The government’s case is being prosecuted by Assistant United States Attorneys Sylvia S. Shweder and Jack Dennehy.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Residence: Huntington Station, New York
E.D.N.Y. Docket No. 12-CR-265Tweet
The Department of Justice believes that it is important to keep victims/witnesses of federal crime informed of court proceedings and what services may be available to assist you.