A Morris County man was arrested and three co-defendants pleaded guilty today in connection with a conspiracy to commit bank fraud and bank bribery, U.S. Attorney Craig Carpenito announced.
According to Federal officials, Mr. Kurt Phelps, 52, of Flanders was charged by complaint with one count of conspiracy to commit bank fraud and one count of bank bribery. He made his initial appearance by videoconference today before U.S. Magistrate Judge Mark Falk and was released on $100,000 unsecured bond.
Three co-defendants pleaded guilty by videoconference before U.S. District Judge Kevin McNulty to their respective roles in the scheme: Douglas Arbolino, 59, of Central Valley, New York, and Gary Swenson, 59, of Hardyston, New Jersey, each pleaded guilty to informations charging them with one count of conspiracy to commit bank fraud and one count of bribery of a bank official; and John Scott Brink, 59, of Jackson pleaded guilty to an information charging him with one count of conspiracy to commit bank fraud.
According to documents filed in this case and statements made in court:
From 2013 through 2019, Phelps, Arbolino, Swenson, and Brink, conspired to defraud Victim Bank-1, Phelps’s employer.
The defendants obtained millions of dollars of credit from Victim Bank-1 for Starnet Business Solutions Inc. (Starnet), a now-defunct New Jersey-based printing company where Arbolino, Swenson, and Brink worked.
Arbolino, Swenson, and Brink paid Phelps large cash bribes in connection with the fraud scheme
In 2013, Starnet provided materially false financial information to Victim Bank-1 and received a line of credit.
Brink sent Victim Bank-1 inflated accounts receivable information, and Arbolino and Swenson provided other materially false financial information, such as semi-annual financial reports.
Victim Bank-1 not only allowed Starnet to maintain the line of credit, it increased the credit available at various times.
By 2018, the line of credit available to Starnet was worth approximately $8 million, and Starnet has not repaid it.
Phelps was aware that financial information Starnet provided to Victim Bank-1 was materially false. Phelps coached Starnet on how to defraud Victim Bank-1.
Phelps would review draft financial information for Starnet and provide feedback on how his conspirators should falsify the information before submitting it. Phelps also worked to ensure that Victim Bank-1 did not detect the fraud scheme by helping Starnet avoid audits and other quality control measures employed by Victim Bank-1.
Phelps solicited large cash bribes – tens of thousands of dollars at a time – from Starnet in connection with the fraud scheme.
Arbolino, Swenson, and Brink pooled cash to pay Phelps bribe payments, which were hand-delivered, and totaled hundreds of thousands of dollars.
The conspiracy to commit bank fraud, bribery of a bank official, 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.
Individuals who believe they may have information about this case may contact the FBI at 1-800-CALL-FBI (225-5324).