Flanders, NJ Man Indicted In $8 Million Fraud Scheme: Feds

FLANDERS, NJ — Lines of credit based on false information were actually increased by a bank as a group of conspirators bilked millions over six years with the help of a Morris County man who coached others on how to defraud the bank, then bribed them, according to federal officials.

A Morris County, New Jersey man was indicted for his role in a conspiracy to take millions of dollars from a bank, U.S. Attorney Philip R. Sellinger announced on Wednesday.

Kurt Phelps, 53, of Flanders, New Jersey, was charged on Friday, by indictment, with one count of conspiracy to commit bank fraud and one count of bank bribery. Three of Phelps' conspirators previously pleaded guilty in connection with the fraud scheme after FBI agents in Newark, New Jersey investigated and brought evidence for the indictment, Sellinger's Office said.

According to documents filed in this case and statements made in court, from 2013 to 2019, Phelps and his conspirators carried out the scheme to defraud Phelps' employer, a bank. The U.S. Attorney's Office said they obtained millions of dollars of credit from the bank for Starnet Business Solutions Inc. (Starnet), a now-defunct New Jersey-based printing company, where Phelps' conspirators worked.

Phelps' conspirators paid him large cash bribes in connection with the fraud scheme, according to the documents.

In 2013, Starnet received a line of credit from the bank after providing materially false financial information. The bank not only allowed Starnet to maintain the line of credit, at various times it increased the line of credit. By 2018, the line of credit was worth approximately $8 million, and Starnet has not repaid it, the U.S. Attorney's Office said.

Phelps was aware that financial information Starnet provided to the bank for the line of credit was materially false, and coached Starnet on how to defraud the bank, officials said.

The U.S. Attorney's Office report explained that Phelps would review draft financial information for Starnet and provide feedback on how his conspirators should falsify the information before submission. Phelps also worked to ensure that the bank did not detect the fraud scheme by helping Starnet avoid audits and other quality control measures employed by the bank.

Phelps solicited large cash bribes — tens of thousands of dollars at a time — from Starnet in connection with the fraud scheme. Phelps' conspirators pooled cash to pay Phelps' bribe payments. Over the course of the conspiracy, Phelps accepted hundreds of thousands of dollars in cash bribes, according to the U.S. Attorney's report.

The conspiracy to commit bank fraud 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, whichever is greatest, according to the federal news statement.

The U.S. Attorney's Office credited special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, with the investigation leading to the indictment.

The government is represented in the case by Assistant U.S. Attorney Heather Suchorsky of the
Economic Crimes Unit.

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