Three former USA Dry Van Logistics executives may face up to 20 years in prison and fines for allegedly defrauding lender GE Capital of more than $26 million.
A six-count indictment charged Sergio F. Lagos, Aurelio Aleman and Oscar Barbosa with wire fraud in a scheme to defraud GE Capital by inflating the trucking company’s accounts receivable and falsifying documents and sales records.
In other words, they’re charged with cooking the books on a grand scale. The scheme is one of the largest recent allegations of trucking company fraud and provides insight into the collapse of a once fast-growing carrier.
Lagos, Aleman and Barbosa were arrested and charged following the return of the indictment Aug. 29. Each count in the indictment carries a maximum 20-year prison term and $250,000 fine, according to the U.S. Attorney’s Office in Houston.
Lagos is the former CEO of USA Dry Van and USA Carriers, founded in McAllen, Texas, to serve the cross-border maquiladora trade. Aleman and Barbosa are the former chief operations officer and controller of the company.
USA Dry Van, also known as USA Carriers, was founded in 2000 with two trucks and its sales topped $96 million by 2007, as cross-border trade with Mexico flourished.
The indictment claims that from 2008 through 2010, the trio swindled GE Capital by inflating USA Dry Van’s accounts receivable and borrowing hundreds of thousands of dollars a week against the inflated figures.
“This caused [USA Dry Van] to appear to be operating more profitably than it actually was,” the U.S. Attorney’s Office said in a statement released Sept. 4.
The indictment charges the former executives with booking fictitious sales, disguising funds as customer payments and falsifying the dates of sales. They then created false documentation for the fictitious sales, including fake invoices, bills of lading and proof of delivery documents, the U.S. Attorney’s Office claims.
Sergio, Aleman and Barbosa are charged with directing employees to manually invoice millions of dollars of fraudulent receivables so the company could borrow more money. The fictitious sales allegedly were tracked by invoice number in a separate ledger.
The indictment didn’t say how the defendants allegedly spent that $26 million, but USA Dry Van reportedly purchased a large number of trucks in 2008 and 2009, taking on substantial debt just as the recession and financial crisis hit.
“When the truth about USADV’s operations and finances were revealed, USADV went into [Chapter 11] bankruptcy” in early 2010, the U.S. Attorney’s Office said. Managers recruited by GE Capital replaced Sergio, Aleman and Barbosa.
USA Dry Van wrote in documents filed with the U.S. Bankruptcy Court for Southern Texas in 2010 that it was “extremely overleveraged” and operations were in “disarray.” In addition, the carrier admitted to “misstated or fraudulent invoices.”
USA Dry Van emerged from bankruptcy protection in November 2010 under new CEO Dennis Reilly. The company was sold to Celadon by GE Capital in 2012.