CEO of Berlin, New Hampshire Business Sentenced in Multi-Million Dollar Bank Fraud Case And Outside Accountant Pays Civil Penalty
The Office of the United States Attorney for the District of Vermont stated that Arnold Hanson, 66, of Nashua, New Hampshire, was sentenced by Chief Judge Christina Reiss yesterday based on his conviction for conspiracy to make false statements to a financial institution. Chief Judge Reiss sentenced Hanson to six months of home confinement and six months of curfew as part of a three-year term of supervised release. The court also sentenced Hanson to pay $300,000 in restitution by January 1, 2017.
As part of the sentencing, Hanson admitted to submitting or causing to be submitted inflated figures for assets of Isaacson Structural Steel, Inc., including inventory, to Passumpsic Savings Bank, and other banks participating in loans totaling over $12 million, including a $2 million loan guaranteed by the Small Business Administration in late 2010. Hanson was part owner and Chief Executive Officer of ISSI, which before its bankruptcy was one of the largest businesses in the North Country. ISSI fabricated steel used in commercial construction. It entered into construction contracts to provide not only the steel for commercial buildings but also to provide subcontractor services, principally the erection of the steel. ISSI purchased steel and fabricated the various pieces of steel needed for each contract at its Berlin, Hampshire location and then shipped the steel to building sites. Several weeks ago, ISSI’s CFO Steven Griffin was sentenced to two years of home confinement based on his guilty plea to submitting false financial statements.
According to court records, between August 2007 and April 2011, ISSI officers regularly submitted false and inflated figures to the banks regarding the value of ISSI’s assets. ISSI submitted these false statements about assets in borrowing base certificates and financial statements. ISSI regularly inflated its assets by a million dollars or more. For example, in August 2007, ISSI officers discussed, and then submitted to the bank, inflated figures for the amount of money owed to ISSI for work done in connection with 303 Third St., a construction project in Boston. In early 2011, officers participated in the submission of an ISSI’s draft financial statement for the financial year 2010, which contained significant overstatements about ISSI’s inventory. That financial statement had an inventory representation of approximately $12 million dollars. In fact, the value of the inventory was less than $2 million. Inventory was thus inflated by over $10 million. In April 2011, the banks learned about issues with ISSI’s inventory figures. By June 2011, ISSI was in bankruptcy, and its assets were later liquidated. In the end, the banks lost millions of dollars as a result of the fraud. At the sentencing hearing, the government represented its view that Griffin was more culpable than Hanson. Indeed, at times, Griffin lied to Hanson when he asked about financial information.
At the sentencing hearing, Hanson asked the Court to sentence him below the advisory sentencing guideline range of 46 to 57 months in jail. The government also moved for a below guidelines sentence in light of Hanson’s substantial cooperation in the investigation and prosecution of Griffin. Chief Judge Reiss agreed that in light of a variety of factors a jail sentence should not be imposed. The Court imposed a limit on Hanson’s freedom by imposing a lengthy period of home confinement and curfew.
This week, David Driscoll, ISSI’s outside accountant, agreed to settle a related, civil bank fraud case. The government filed a civil complaint alleging that Driscoll participated in the filing of false financial information on behalf of ISSI. Driscoll had responsibility for the yearly audit of ISSI’s assets, and according to the complaint knowingly prepared audit information that he knew contained inflated assets. At the time, Driscoll also served as a member of the Passumpsic Savings Bank board of directors. Driscoll agreed to pay a total of $100,000 in penalties associated with his conduct as an outside accountant. The government gave Driscoll credit for other penalties and costs that Driscoll has paid in connection with his conduct, including a civil penalty paid to the Federal Deposit Insurance Corporation, which regulates financial institutions. Driscoll has paid the federal government an additional $37,000 to settle the pending civil case. As part of the settlement, Driscoll did not admit liability in connection with the allegations in the complaint, which has been dismissed in light of the settlement.
The United States is represented in this matter by Assistant U.S. Attorneys Paul Van de Graaf and Timothy Doherty. Hanson is represented by George Ostler, Esq. Driscoll is represented by Craig Nolan, Esq. The investigation was conducted by the Federal Bureau of Investigation, the Office of Inspector General for the Federal Deposit Insurance Corp., and the Office of Inspector for the Small Business Administration.