Press Release
Brooklyn Man Pleads Guilty In Manhattan Federal Court In Connection With Advance Fee Scheme
For Immediate Release
U.S. Attorney's Office, Southern District of New York
Octavio Lombardo, a/k/a “Otto Lombardo,” Admits to Defrauding More Than Thirty Small Business Owners
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that OCTAVIO LOMBARDO, a/k/a “Otto Lombardo,” pled guilty in Manhattan federal court to one count of wire fraud stemming from his scheme to defraud small business owners of more than $1 million through an advance fee scheme. In connection with the scheme, LOMBARDO induced more than 30 business owners to pay an upfront due diligence fee that was purportedly necessary to obtain loans for the business owners. Instead, LOMBARDO used the vast majority of the money he received from the business owners – over $1 million in total – on his own personal expenses, including rental payments, club dues, food, and other personal items. LOMBARDO was arrested on December 4, 2014, and pled guilty today before United States District Judge Jesse M. Furman.
According to the Complaint, the Indictment, and other statements made in open court:
From 2007 through 2013, LOMBARDO engaged in a fraudulent scheme to mislead small business owners into paying an upfront due diligence fee, typically in the amount of $25,000, in connection with loans that LOMBARDO promised to obtain for the small business owners. During this period, LOMBARDO convinced the business owners he had the ability and expertise to structure investment loans for their businesses through LOMBARDO’s purported exclusive relationships with small community banks across the United States. In fact, LOMBARDO had no ability to provide such financing, and none of the businesses at issue received a loan through LOMBARDO during this period of time.
In connection with the scheme, LOMBARDO made a series of false and misleading misrepresentations to the business owners, including: (i) that LOMBARDO could obtain interest-only loans in amounts ranging from $1 million to $75 million by consolidating the lending power of several small community banks into a trust, which he would manage through his holding company, Lombardo & Company; (ii) that, in order to structure the loan appropriately, LOMBARDO needed to conduct due diligence of the businesses, including by obtaining corporate and financial documentation, and by conducting site visits; (iii) that LOMBARDO required a non-refundable upfront payment – generally in the amount of $25,000 – to cover the expenses incurred during the due diligence process, including legal and other professional fees, taxes, appraisals, and the like; and (iv) that this fee would be incorporated into the final loan agreement, so that the business owners would ultimately “get back” the upfront payment once the financing was in place.
As a result of these misrepresentations, LOMBARDO obtained more than $1 million in so-called due diligence payments from more than three dozen business owners. LOMBARDO spent the vast majority of the due diligence payments on his own personal expenses, including, among other things, rental payments, club dues, food, and other personal items. For example, LOMBARDO spent more than $300,000 on rental payments for his residence in Brooklyn, more than $100,000 on membership dues for a private gun club located in Manhattan, and more than $50,000 on restaurants and purchases of wine and liquor.
Once he received the due diligence payments, LOMBARDO made a variety of excuses to the business owners – including, among others, that he was having health problems and had been hospitalized, that he was traveling, and that he had a new grandchild – in order to explain the delay in closing the loans.
Ultimately, LOMBARDO did not provide any of the loans to the business owners as promised.
* * *
LOMBARDO, 68, of Brooklyn, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. LOMBARDO is scheduled to be sentenced by Judge Furman on January 6, 2016 at 3:00 p.m.
Mr. Bharara praised the work of the Federal Bureau of Investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established 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, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Amy Lester and Damian Williams are in charge of the prosecution.
Updated September 21, 2015
Component