James Collins, the former CEO of Honor Finance LLC, a subprime auto lending company based in Evanston, Illinois, has been sentenced to four years in federal prison. Collins was involved in fraud schemes that caused approximately $67 million in losses. From 2015 to 2018, he collaborated with others to submit false information to a bank that provided a $200 million warehouse line of credit to the company.
The fraudulent actions allowed Collins to avoid posting additional collateral and maintain funding from the line of credit. This false information also increased the amount of funding he received from a trust established by Honor and the bank to securitize loans and sell them as bonds. Collins included delinquent vehicle loans in the trust portfolio by concealing their ineligibility from the bank, bond investors, and rating agencies. As a result, the bank suffered losses amounting to approximately $62 million.
In another scheme, Collins misappropriated about $5.3 million from Honor Finance through a shell company called LHS Solutions. This company acted as an intermediary between Honor and a GPS device supplier, inflating prices for profit. Additionally, Collins diverted commissions from vehicle warranty sales meant for Honor.
Collins pleaded guilty in 2023 to federal mail fraud and agreed to bank fraud charges. U.S. District Judge Franklin W. Valderrama sentenced him on Wednesday and ordered him to pay around $67 million in restitution.
Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, announced the sentence alongside Douglas S. DePodesta, Special Agent-in-Charge of the FBI's Chicago Field Office. The U.S. Securities and Exchange Commission provided valuable assistance in this case.
Assistant U.S. Attorneys Matthew Getter and Paige A. Nutini represented the government in court proceedings. Robert DiMeo, former Chief Operating Officer of Honor Finance and co-defendant, pleaded guilty to mail fraud charges in 2022 and is awaiting sentencing.