Dealer pleads guilty to Federal Check Kiting Charges

[XDCX]

News reports indicate a used car/RV dealer in Bordertown Township, PA plead guilty to Federal charges for check kiting. Here's a link to the full report - click here

The owner of the business acknowledged he deposited 125 checks with a total face value of $117 Million between three different accounts and transferred funds before the checks would clear. The owner also plead guilty to fraudulently obtaining a loan for $500,000 in an effort to cover the eventual overdrafts. The scheme lasted between March, 2008 and July, 2008.

While I'm not an expert, I was amazed that check kiting can still exist in today's electronic age. Additionally, I was surprised to see check kiting was prosecuted as a Federal case?

[XDCX]

Originally Posted by XDCX

While I'm not an expert, I was amazed that check kiting can still exist in today's electronic age. Additionally, I was surprised to see check kiting was prosecuted as a Federal case?

I read a follow-up report and it helped answer the two questions.

The reason it was a Federal Case was because the bank that incurred the loss, KeyBank, was part of the FDIC - making it a federally insured financial institution.

Concerning the dealer's ability to institute a check kiting scheme in today's electronic age, ironically, it was an advancement in technology that allowed him to complete his scheme. The dealer was provided with a check reader from KeyBank allowing him to electronically deposit checks without presenting the checks for deposit.

To the extent the scheme involved 125 checks with a face value of $117 Million drawn on only three or four accounts my bet is a teller at a bank would have become suspicious - so much for that safeguard....

On a final note, the $500,000 fraudulent loan was made by an individual who was providing the money so the dealership could purchase inventory.

[CUD]

125 checks for a total of $117 million!

That's an average of $936,000 per check. That has to be what triggered some flags at Key Bank.

[XDCX]

Originally Posted by CUD

That has to be what triggered some flags at Key Bank.

Based on what I've read I think the only red flag for KeyBank was the $7.4 Million overdraft. It appears all the damage was done by the time KeyBank figured out it was a check kiting scheme.

Here's a link to a report that provides more detail - click here

[CUD]

I was thinking may desparate times made him do this and felling sorry for the guy. Then I read the article and saw he was the only signer on the account. No respecable controller is going to allow an account to only have one signature. Seems like he had something planned from the start.

I can just imagine some banker going through the morning reports and seeing an overdraft of $7.4 million that's gott make your morning.