Leader Of Miami Crew Sentenced To 63 Months In Prison For Defrauding Banks And Cryptocurrency Exchange Of More Than $4 Million
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that PETER B. JOHNSON was sentenced to 30 months in prison for leading a scheme to defraud a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for his family’s cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”). JOHNSON pled guilty on March 9, 2018, to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution. The sentence was imposed by United States District Judge Jed S. Rakoff.
U.S. Attorney Geoffrey S. Berman said: “Peter B. Johnson conspired to defraud lenders by misrepresenting how much credit-eligible collateral his company had. When the company went bankrupt, it owed its lenders over $360 million. For his role in lying to lenders, Johnson has been sentenced to prison.”
According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:
Transmar was a closely held, family-run cocoa commodity trading company founded by the PETER B. JOHNSON’s father, Peter G. Johnson. PETER B. JOHNSON was an officer of Transmar, as well as responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”).
From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million. To secure and maintain these hundreds of millions of dollars in credit, PETER B. JOHNSON, Peter G. Johnson, Transmar’s Vice President of Finance, Thomas Reich, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.
The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension. The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks.
Beginning no later than 2014, Transmar employees, acting with JOHNSON’s knowledge and at his direction, manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending. The manipulation involved, among other devices, counting inventory that Transmar had already sold or was otherwise ineligible for inclusion, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions through which amenable third-party intermediaries agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar.
Following the discovery of the fraud, Transmar filed for bankruptcy in December 2016. At that time, the Company owed the Banks approximately $360 million.
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In addition to the prison term, PETER B. JOHNSON, 39, of Morristown, New Jersey, was also sentenced to two years of supervised release, and ordered to forfeit $1,790,000.
Peter G. Johnson, 69 of Harding Township, New Jersey was sentenced by Judge Rakoff on August 13, 2018 to three years in prison.
Thomas Reich, 60, of Montvale, New Jersey, pled guilty to the same offenses for his participation in the scheme to defraud the Banks. He is scheduled to be sentenced on September 21, 2018.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Benet J. Kearney and Daniel M. Tracer are in charge of the prosecution.