A Morris County man was indicted for his role in a conspiracy to bilk millions of dollars from Bank of America.
Kurt Phelps, 53, of Flanders, New Jersey, is charged by indictment returned March 11, 2022, with one count of conspiracy to commit bank fraud and one count of bank bribery. Three of Phelps’ conspirators previously pleaded guilty in connection with the fraud scheme.
According to U.S. Attorney Philip R. Sellinger, documents filed in this case and statements made in court, Phelps and his conspirators carried out a scheme to defraud the bank where he was employed, from 2013 through 2019.
They obtained millions of dollars of credit from the bank for Starnet Business Solutions Inc. (Starnet), a now-defunct New Jersey-based printing company, where Phelps’ conspirators worked. Phelps’ conspirators paid him large cash bribes in connection with the fraud scheme.
In 2013, Starnet received a line of credit from the bank after providing materially false financial information. The bank not only allowed Starnet to maintain the line of credit, at various times it increased the line of credit. By 2018, the line of credit was worth approximately $8 million, and Starnet has not repaid it.
Phelps, a former New York-based Bank of America executive, was aware that financial information Starnet provided to the bank for the line of credit was materially false, and coached Starnet on how to defraud the bank.
Phelps would review draft financial information for Starnet and provide feedback on how his conspirators should falsify the information before submission.
Phelps also worked to ensure that the bank did not detect the fraud scheme by helping Starnet avoid audits and other quality control measures employed by the bank.
Phelps solicited large cash bribes – tens of thousands of dollars at a time – from Starnet in connection with the fraud scheme. Phelps’s conspirators pooled cash to pay Phelps bribe payments. Over the course of the conspiracy, Phelps accepted hundreds of thousands of dollars in cash bribes.
The conspiracy to commit bank fraud and bank bribery charges each carry a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gross gain or loss from the offense, whichever is greatest.