Debt Collection Execs Face 35 Years in Prison for TARP-Related Fraud

WASHINGTON — Two debt collection agency executives pleaded guilty Friday to charges stemming from a $10 million fraud scheme against Connecticut-based Webster Bank, a participant in the Troubled Asset Relief Program, federal officials said Tuesday.

Oxford Collection Agency Chairman Richard Pinto and his son Peter Pinto, the company's president and chief executive, admitted to collecting debts for various clients and routinely withholding those debts in a "client backlog," then using the funds for their own needs.

Each pleaded guilty to one count of conspiracy to commit wire fraud, bank fraud and money laundering, and one count of wire fraud. They face a maximum of 35 years in prison and a $20 million fine.

"The Pintos defrauded clients, investors, and Tarp recipient Webster Bank in a $10 million scheme in which they collected debts on behalf of clients, concealed what they truly owed those clients in return for their work, and used Webster Bank to fund their fraud," Christy Romero, the special inspector general for Tarp, said in a press release announcing the guilty plea. "Individuals committing fraud against TARP banks will be held accountable and brought to justice by SIGTARP and our law enforcement partners."

The $18.7 billion-asset Webster Financial Corp. received $400 million in Tarp assistance in November 2008, which it repaid in three installments before exiting the program in June 2011. A spokeswoman for Webster did not immediately respond to a request seeking comment.

Oxford Collection Agency collected debts on behalf of clients including Washington Mutual Bank, Dell Financial Services and Labcorp, and had offices in New York, Pennsylvania and Florida.

According to court documents, the Pintos secured a line of credit from the Waterbury, Conn., bank in April 2007 without informing the bank about its significant "client backlogs," or outstanding payroll taxes. They sent falsified financial statements to the bank to help boost their credit line to $6 million, and laundered funds from the credit line to promote the scheme, according to officials.

During the same period, officials said the Pintos also solicited millions of dollars from various investors without disclosing what they owed to clients, and even transferred some of the funds to Richard Pinto's personal account without investor knowledge. Clients, lenders and investors lost $10 million, according to the press release.

"These defendants carried out a significant fraud scheme through which they stole millions of dollars from their company's clients, lenders, and investors," U.S. Attorney David B. Fein said in the release.

The case was investigated by SIGTARP, as well as the IRS, FBI and Connecticut Securities, Commodities and Investor Fraud Task Force. It was prosecuted in cooperation with the president's Financial Fraud Enforcement Task Force.

The sentencing is scheduled for Sept. 13.

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