Former CEO Of Long Island’s Synergy Brands, Inc. Sentenced To 63 Months In Prison For Operating A Massive Check Kiting Scheme
Scheme Caused Losses of $26 Million Dollars to Signature Bank and Millions of Dollars to Investors
Earlier today in Brooklyn federal court, Mair Faibish, the former Chief Executive Officer of Synergy Brands, Inc. (Synergy), was sentenced to 63 months’ imprisonment for his role in defrauding Signature Bank out of $26 million through a massive check kiting scheme, making false statements to the United States Securities and Exchange Commission (SEC), and defrauding investors by overstating the value of the company. The sentencing proceeding was held before U.S. District Judge Eric N. Vitaliano. Faibish was convicted after a three-week jury trial in March 2014.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York.
“The defendant played fast and loose with the truth and with federally insured money, kiting checks back and forth across the Canadian border to defraud auditors, banks, and investors. His actions have now landed him in federal prison,” stated United States Attorney Capers. “We will aggressively investigate and prosecute those who exploit investors and banks.” Mr. Capers extended his grateful appreciation to U.S. Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI), which led the government’s criminal investigation, and the Nassau County Police Department.
Synergy was a publicly-held food products company that traded on the NASDAQ and Over-the-Counter exchanges and manufactured and distributed various food products. As proven at trial, Faibish and his co-conspirators, on behalf of Synergy, funneled approximately $1.3 billion in checks that were not backed by sufficient funds through Signature Bank, Capital One Bank, and various Canadian 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 shell companies. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ account balances. Faibish and his co-conspirators used Synergy’s 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 Faibish 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 millions of dollars in investor losses. On November 4, 2014, the Court ordered Faibish to pay $51,166,000 in forfeiture.
The trial evidence also 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.
This prosecution was the result of efforts 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’s 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. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, visit http://www.StopFraud.gov.
The government’s case is being prosecuted by the office’s Business and Securities Fraud Section. Assistant United States Attorneys Sylvia S. Shweder and Jack Dennehy are in charge of the prosecution. Assistant U.S. Attorney Brian D. Morris of the Office’s Civil Division is responsible for the forfeiture of assets.
Residence: Huntington Station, New York
E.D.N.Y. Docket No. 12-CR-265 (ENV)