The former president of Interstate RV Center Inc. in Buda, Texas, was sentenced to five years in federal prison and was ordered to pay about $5 million in restitution for falsifying his company’s balance sheets to obtain loans, according to the Austin (Tex.) Business Journal.
Jim Wilson Rich also was ordered to complete 200 hours of community service and to serve three years of supervised release after his prison term is finished.
Federal investigators say Rich, 55, borrowed $7.5 million from Pacific Southwest Bank of Corpus Christi, Texas, in 1997 and 1998 and used his inventory of RVs as collateral.
The problem: Rich didn’t have nearly as many RVs as he led the bank to believe.
Interstate RV, which went out of business as a result of the fraud, had three sales lots. Two were between Austin and San Antonio in Buda and Seguin. The third was in Mission, a town in South Texas.
Jeremy Baker, Rich’s associate, also was sentenced for participating in the scheme. He received a two-year prison term from U.S. District Judge Lee Yeakel in Austin and was ordered to pay about $5 million in restitution. He also must complete three years of supervised release after his prison term.
Federal investigators say it was Pacific Southwest Bank that discovered the fraud in October 1998. The bank sent an employee to Rich’s lots to conduct an inventory audit. Once there, the bank employee found that Interstate RV had only about 50 RVs. It reported to the bank that it had 154.
Interstate RV’s true inventory left the bank with more than $4 million of bogus collateral, court documents state.
It took the bank several months to catch Rich with a false inventory. IRS Special Agent Mary Treviño says Rich fooled the bank’s auditors several times before. In at least one instance, she says, Interstate RV instructed customers to bring their RVs back to the company for maintenance on days when an auditor was scheduled to appear. Before the auditor arrived, Rich and his employees would remove the license plates, along with any personal belongings inside the vehicles,- to make it appear as though the vehicles hadn’t been sold.
The scheme wasn’t uncovered until Pacific Southwest Bank’s vice president personally audited Interstate RV in October 1998, the IRS says. Pacific Southwest Bank since has been acquired by First Capital Bank.
Rich was indicted after the FBI and IRS investigated the allegations. On March 29, a federal jury in Austin found Rich guilty on four counts of money laundering, one count of conspiracy to commit money laundering, one count of conspiracy to commit bank fraud and one count of aiding and abetting bank fraud.
Providing banks and other companies with fraudulent statements is the most costly form of occupational fraud, with a median loss of $4.25 million per scheme, according to the Austin-based Association of Certified Fraud Examiners. The association says the average scheme lasts about 18 months before it is detected.