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Relying on phony invoices and the help of a fraudulent equipment “supplier” that took a cut of the money,
Over an eight-year period, the duped financial institutions paid out more than
“This was a pretty sophisticated effort to commit fraud,” U.S. Attorney
From 2002 to 2010, Schwartz, of
Under those agreements, the financial institutions would purchase equipment from the supplier, then lease the same products to Schwartz and Allied, authorities said.
Once the supplier got payments from the banks, its owner — referred to by the government as “UC-1” — sent that money to Schwartz, minus a 3 percent to 5 percent cut, authorities said.
“This is certainly one of the larger schemes we’ve uncovered but by no means the biggest,” Fishman said yesterday. “It involved some real planning.”
Authorities said Schwartz and the unnamed supplier worked hard to deceive bank examiners who wanted to inspect the nonexistent medical equipment.
For instance, Schwartz directed employees at Allied to alter and create serial numbers — so those numbers matched with phony invoices — for ventilators it did actually have. Then, when financial institutions wanted to look at documents tied to Allied’s leasing of ventilators to its customers, Schwartz lied and said the information was protected by Health Insurance Portability and Accountability Act regulations, authorities said.
In classic Ponzi-scheme fashion, Schwartz used money hauled in by the scheme to repay bank loans attained under the scam, authorities said.
While Fishman wouldn’t comment on how the scheme was unearthed, he noted that a weak economy can lead to the undoing of Ponzi schemes.
“Ponzi schemes often depend on the infusion of fresh capital, whether it’s investments of dollars or loans,” he said. As those resources dry up, “it’s simply harder for the person to keep repaying the original financiers. It’s a little like the tide washing out.”
By last August, authorities said, several financial institutions had sued Schwartz, saying he owed more than
With the money he pocketed, Schwartz spent millions on 10 properties in
Schwartz faces a maximum of 20 years in prison when he is sentenced