WASHINGTON (Legal Newsline) - The former accounting director and an outside auditor from American Mortgage Specialist have pleaded guilty in Arizona to obstruction of justice and conspiracy to defraud BNC National Bank.
Lauretta Horton, 45, and David Kaufman, 69, were charged with criminal information's unsealed on Oct. 2 before U.S. District Judge Daniel L. Hovland of the District of North Dakota, who took the pleas in Arizona federal court. The Department of Justice issued a release about the case Nov. 30.
AMS and BNC entered into a loan participation agreement in 2006. BNC then provided funding for the loans issued by AMS, according to the DOJ.
From February 2009 to April 2010 Horton, the director of accounting at AMS, conspired to defraud BNC by making false representations regarding the financial well-being of AMS in order for AMS to continue to obtain funding from BNC, according to court documents.
Horton admitted to inflating asset items and altering financial information in the AMS balance sheet which was provided to BNC and which falsely reflected AMS's liquid assets.
During the criminal investigation, Kaufman, a certified public accountant and the outside auditor for the annual financial statements of AMS, lied to federal agents and obstructed the grand jury investigation.
To conceal the truth of AMS's financial condition from BNC, Kaufman combined two expenses on AMS's financial statements, and later admitted denying to agents any conversations with an AMS executive regarding the statements.
"This is a significant case because it holds accountable an individual who participated in a scheme to defraud a member bank of the Federal Home Loan Bank System, and another individual who lied to federal investigators," Inspector General Steve Linick said. "This case is a reminder that there are consequences for giving investigators false information and manipulating numbers."
Despite BNC's holding company receiving approximately $20 million from the Trouble Asset Relief Program, they injected about $17 million of those funds into BNC and still incurred losses exceeding the $20 million received from TARP.
As a result for nearly two years BNC did not make its required TARP dividends to the Department of Treasury.
Individually Kaufman and Horton face a minimum penalty of 10 years and five years in prison. Sentencing is scheduled for May 6, 2013.