Prison For Oceanport Man Who Led Complicated Financial Scheme

OCEANPORT, NJ — An Oceanport man was sentenced Monday to 63 months in prison for defrauding lenders of $50 million dollars, U.S. Attorney Philip Sellinger announced.

Vincent Galano, 60, of Oceanport, led an invoice factoring scheme that continued for more than a decade before he was criminally charged, according to federal prosecutors.

He previously pleaded guilty to wire fraud.

Accounts receivable factoring, also known as invoice financing (factoring), is a financial transaction through which a company obtains cash by selling its unpaid invoices, ordinarily at a discount, to a factor. Factoring clients send their debtors notices of assignment naming the factor as the assignee of the debt owed on the invoices. The factor collects invoiced amounts owed by the clients’ debtors and, upon collection of the entire invoiced amount, pays its clients the balance of the invoice, deducting the factor’s fees.

Galano formed PF Funding LLC in 1996 for the purpose of factoring accounts receivables for various corporate clients, said federal prosecutors.

In 2007, PF Funding entered into a secured lending relationship with a single purpose entity created to finance PF Funding’s factoring business. Shortly thereafter, the factoring lender established a line of credit as a means to provide PF Funding capital to grow its receiveables portfolio.

However, beginning in 2011, Galano, through PF Funding, purchased increasingly greater numbers of invoices for which he was unable to collect the debt owed on the receivables. To justify PF Funding’s continued draws from the line of credit, Galano concealed this bad debt from the factoring lender by misrepresenting the bad invoices as collectible on reports he routinely provided to the factoring lender.

By engaging in this pattern of misrepresentation over nearly a decade, by 2020 PF Funding had ultimately defaulted under its loan obligations, owing approximately $50 million to its lenders, said federal prosecutors.

During a May 2020 telephone call with his lenders, Galano admitted that he had concealed significant losses suffered by PF Funding over many years. He admitted that he had routinely given his lenders fabricated reports that overstated the number and value of outstanding invoices.

A judge also ordered Galano to pay restitution of $50 million.