Elliot Smerling, Charged In Manhattan Federal Court With Lying To Bank To Secure $95 Million Loan
Elliott Smerling Charged with Wire Fraud, Bank Fraud, and Aggravated Identity Theft for Falsifying Capital Commitments, Fund Finances, to Secure $95 Million Loan
Audrey Strauss, the United States Attorney for the Southern
District of New York, and William F. Sweeney Jr., the Assistant
Director-in-Charge of the New York Field Office of the Federal Bureau of
Investigation (“FBI”), announced today that ELLIOTT SMERLING was indicted this
morning on charges of wire fraud, bank fraud, and aggravated identity theft for
seeking and obtaining an approximately $95 million subscription-backed line of
credit for his $500 million private equity fund on the basis of a forged audit
letter, falsified subscription agreements, and falsified bank account
statements.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Elliot Smerling went to
elaborate measures to create a blatantly false picture of the financial
underpinnings of a private equity fund in order to obtain a $95 million line of
credit. Through a forged audit letter
and falsified subscription agreements and bank statements, Smerling allegedly
induced a California bank to make a loan commitment it never would have made
had it known the truth. Now, the truth
has landed Elliot Smerling in federal court.”
FBI Assistant Director William F. Sweeney Jr. said: “Falsifying information in order to secure a
loan, regardless of the amount, is a crime.
When the loan secured is nearly $100 million, the stakes are even
higher. As alleged, Smerling engaged in
illegal practices in order to benefit his interests. Today he’s learned the consequences of his
alleged actions.”
According to the Indictment filed today in Manhattan federal
court, and the Complaint[1] unsealed February 26, 2021, in the Southern
District of Florida:
From at least in or about December 2020 through at least in
or about February 2021, ELLIOT SMERLING, the defendant, solicited and obtained
on behalf of the general partner (“General Partnership-1”) of a private equity
fund (“Private Equity Fund-1”), a loan of approximately $95 million from a
commercial bank headquartered in California (“Victim Bank-1”), which was
secured by purported capital commitments made by the limited partnership of
investors in Private Equity Fund-1 (“Limited Partnership-1”). SMERLING obtained the approximately $95
million loan on the basis of falsified documents and material
misrepresentations, including: (1) a
forged audit letter, purportedly prepared by an international network of
accounting, audit, tax, and professional services firms (“Audit Firm-1”),
attesting to the audited financial statements of Limited Partnership-1; (2)
forged subscription agreements that falsely represented that the investment
fund of a private university based in New York, New York (“University Endowment
Fund-1”), and the chief investment officer of that fund (“Chief Investment
Officer-1”) had committed $45 million to fund Limited Partnership-1, and that
the investment management division of a banking and financial services firm
headquartered in New York, New York (“Investment Manager-1”), and the chief
executive officer of Investment Manager-1 had committed $40 million to fund
Limited Partnership-1; and (3) falsified bank records purporting to attest to a
$4.5 million wire transfer from University Endowment Fund-1 to Limited
Partnership-1.
On or around December 1, 2020, SMERLING contacted an
employee of Victim Bank-1 concerning SMERLING’s interest in acquiring an
approximately $95 million loan for SMERLING’s $500 million private equity fund,
Limited Partnership-1. The loan sought
by SMERLING would substitute for an existing line of credit SMERLING had
secured from a multinational financial services company (“Commercial Bank-1”),
where Limited Partnership-1 purported to have an existing line of credit with
an outstanding loan balance equal to the amount sought by SMERLING from Victim
Bank-1. The employee of Victim Bank-1
referred SMERLING to a director in the Global Fund Banking Group at Victim
Bank-1 (“Witness-1”).
Thereafter, in or around December 2020, Witness-1 requested
from SMERLING materials concerning Limited Partnership-1 and General
Partnership-1 in order to evaluate SMERLING’s loan request. In response, SMERLING sent Victim Bank-1
materially false materials, the veracity of which Victim Bank-1 relied upon in
ultimately deciding to make the loan sought by SMERLING, including:
i. An audit
letter (the “Audit Letter”), purportedly prepared by Audit Firm-1, attesting to
the sound finances of Limited Partnership-1.
ii.
Subscription agreements purportedly signed by investors in the fund,
including an agreement reflecting a purported commitment of $45 million by
University Endowment Fund-1 and the purported signature of Chief Investment
Officer-1 (“Subscription Agreement-1”), and an agreement reflecting a purported
commitment of $40 million by Investment Manager-1 and the purported signature
of the chief executive officer of Investment Manager-1 (“Subscription
Agreement-2”).
iii. A table
(the “Capital Commitment Table”) listing $500 million in paid and unpaid
capital commitments purportedly made to Limited Partnership-1 as of December
13, 2019, including a purported $45 million commitment by University Endowment
Fund-1, consisting of a “call amount” of $4.5 million and an “unpaid
commitment” of $40.5 million as of that date, as well as a purported $40
million commitment by Investment Manager-1, consisting of a “call amount” of $4
million and an “unpaid commitment” of $36 million as of that date.
Following receipt of the materials, employees of Victim
Bank-1, including at least one employee based in Victim Bank-1’s office in New
York, New York, reviewed the materials as part of Victim Bank-1’s diligence
process.
On or around January 7, 2021, Witness-1 wrote an email to
the chief financial officer of Private Equity Fund-1, with a copy to SMERLING,
in which Witness-1, in substance and in part, advised that Victim Bank-1 was in
the process of finalizing its approvals for the loan. Witness-1 requested bank statements
“evidencing receipt of the most recent capital call.” On the same date, SMERLING replied with an
email to which he attached a December 2019 bank statement (the “Bank
Statement”) for an account purportedly held in the name of Limited
Partnership-1 at Commercial Bank-1’s Americas headquarters in New York, New
York. The statement reflected wires into
the account with a combined value of $50 million, including a purported wire of
$4.5 million from University Endowment Fund-1 and a purported wire of $4
million from Investment Manager-1.
The materials that SMERLING submitted to Victim-Bank-1 were
materially false. For example, the Audit
Letter was not prepared by Audit Firm-1.
Chief Investment Officer-1 of the University Endowment Fund-1 has no
knowledge of ELLIOT SMERLING, Limited Partnership-1, or General Partnership-1,
and the signature appearing on the Subscription Agreement-1 is not that of
Chief Investment Officer-1. University
Endowment Fund-1 has found no indication that it made the $4.5 million wire
transfer reflected in the Bank Statement or made any other investment or
capital commitment to ELLIOT SMERLING, the defendant, Limited Partnership-1, or
General Partnership-1.
Similarly, Investment Manager-1 has found no indication that
Investment Manager-1 in fact made the $4 million wire transfer reflected in the
Bank Statement or made any other investment or capital commitment to ELLIOT
SMERLING, the defendant, Limited Partnership-1, or General Partnership-1.
SMERLING was arrested and presented in the Southern District
of Florida on February 26, 2021, before United States Magistrate Judge William
Matthewman.
SMERLING, 52, of Lake Worth, Florida, is charged in three
counts, with wire fraud, bank fraud, and aggravated identity theft. Wire fraud affecting a financial institution
carries a maximum sentence of 30 years in prison, and a maximum fine of $1
million or twice the gross gain or loss from the offense. Bank fraud carries a maximum sentence of 30
years in prison, and a maximum fine of $1 million or twice the gross gain or
loss from the offense. Aggravated
identity theft carries a mandatory sentence of two years in prison consecutive
to any other sentence imposed and a maximum fine of $250,000 or twice the gross
gain or loss from the offense. The
maximum potential sentences are prescribed by Congress and are provided here
for informational purposes only, as any sentencing of the defendant will be
determined by the judge.
Ms. Strauss praised the work of the Federal Bureau of
Investigation.
This case is being handled by the Office’s Complex Frauds
and Cybercrime Unit. Assistant U.S.
Attorney Jilan J. Kamal and Timothy V. Capozzi are in charge of the prosecution.
The charges contained in the Indictment are merely
accusations, and the defendant is presumed innocent unless and until proven
guilty.
Comments
Post a Comment