Former Chief Investment Officer Of Construction Supply Company Convicted On All Counts By Jury In Bank Fraud Scheme
Defendant Rodney Watts Helped Mastermind $21 Million Bank Fraud
Earlier today, following three weeks of trial, a federal jury in Brooklyn, New York, returned a guilty verdict against Rodney Watts, the former Chief Investment Officer of GDC Acquisitions, LLC (“GDC”), on charges of bank fraud, false statements and conspiracy to commit bank fraud. Watts also served as the Chief Financial Officer of GDC at one time. These charges arose out of the defendant’s scheme to defraud Amalgamated Bank, GDC’s asset-based lender, of $21 million in fraudulent loans. When sentenced by United States District Judge Kiyo A. Matsumoto, the defendant faces a maximum sentence of 30 years’ imprisonment on the most serious charge. Watts’s co-defendant, Courtney Dupree, was convicted by a federal jury in December 2011, on the same charges. Dupree, who served as GDC’s Chief Executive Officer, is also awaiting sentencing.
The government has already won two appeals before the Second Circuit in the case. In one appeal, the government successfully defended its seizure of over $633,000 that Watts sought released to pay for his defense attorneys; that appeal was dismissed after a jury in the trial of Dupree determined that the funds were criminal proceeds. In the other appeal, the government successfully appealed a decision relating to evidence that Dupree committed a crime while out on bail.
The verdict was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York.
GDC, based in Long Island City, Queens, is a holding company that owns various subsidiaries, including JDC Lighting, a lighting distributor; Unalite Electric and Lighting, a lighting maintenance company; and Hudson Bay Environments Group, a furniture distributor. The evidence included the testimony of GDC’s former Chief Financial Officer and two GDC accountants, all three of whom had previously pleaded guilty to fraud charges arising from the scheme. At trial, the government proved defendant Rodney Watts and others gave Amalgamated Bank false financial information for GDC in which they had fraudulently inflated the company’s accounts receivable in order to obtain initially, and then maintain, credit lines totaling approximately $21 million. The evidence proved that the conspirators inflated the accounts receivable by a variety of means, including by recording in the corporate books fake sales that had never taken place. For example, the defendant represented to Amalgamated Bank in writing in November 2009 that GDC had $25.2 million in accounts receivable when, in fact, it had only approximately $9 million. In addition, the defendant and others defrauded Amalgamated Bank by causing GDC to acquire a company covertly, contrary to the terms of their loan agreement, and by concealing the acquisition from the bank. The defendant and others also sought to obtain an additional loan from C3 Capital, a mezzanine lender based in Kansas City, Missouri, based on GDC’s fraudulent books. According to the trial testimony, the scheme unraveled when one of the accountants turned himself into the FBI and cooperated in the government’s investigation in an undercover capacity for approximately two months.
“Using books and records that were no more than fairy tales, the defendant fleeced Amalgamated Bank of 21 million dollars. The jury saw through his creative writing and web of lies, and he will now be held to account for his crimes,” stated United States Attorney Lynch. “No matter their wealth, influence, or position, fraudsters can expect to be investigated and prosecuted to the full extent of the law.”
Ms. Lynch extended her grateful appreciation to the Federal Bureau of Investigation and the Postal Inspection Service, the agencies responsible for leading the government’s criminal investigation.
The government’s case is being prosecuted by Assistant United States Attorneys Michael L. Yaeger, Catherine M. Mirabile, David C. Woll and Brian Morris.
The 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. For more information on the task force, visit www.stopfraud.gov.