Thursday, January 23, 2020

Philadelphia man charged in $30 million loan fraud scheme

Gary Alan Frank, 47, of Philadelphia, Pennsylvania, was charged yesterday with one count of wire fraud in connection with a loan fraud scheme that defrauded multiple lenders out of more than $30 million, announced United States Attorney Louis D. Lappen.

The complaint alleges that from at least July 2014 through March 1, 2018, Frank defrauded and attempted to defraud various lenders and prospective lenders through his business, the Legal Coverage Group, Ltd., which contracts with employers desiring to offer their employees a legal plan as part of their employee benefits plans. According to the complaint, in late 2014 Frank secured a $30 million loan from two lenders, Prudential Insurance Company of America and Prudential Retirement Insurance and Annuity Company (collectively, “Prudential”), by making various false representations regarding the size and revenue of the Legal Coverage Group’s business. After obtaining these funds, Frank and the Legal Coverage Group continued to deceive Prudential and other lenders, including various individuals.

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When the relationship between Prudential and the Legal Coverage Group soured in 2017, Prudential sued the Legal Coverage Group and Frank in New York state court. Soon after Prudential brought this suit, Frank caused counsel for the Legal Coverage Group to provide fraudulent bank documents to Prudential. For example, on or about October 11, 2017, Frank caused the Legal Coverage Group’s counsel to email a false September 2017 bank account summary to Prudential’s attorney. The false account summary for the Legal Coverage Group reflected an ending balance of $1,526,322.12, even though the actual ending balance for this period was approximately $13,114.24.

Frank continued to make, and cause the Legal Coverage Group to make, misrepresentations to Prudential and the New York court as the litigation proceeded. For instance, in January 2018, Frank caused another attorney for the Legal Coverage Group to deliver three additional false Bank of America account summaries to an attorney for Prudential. Comparison of the three account summaries to authentic account summaries obtained from Bank of America reveals multiple falsities, such as the false ending balances set forth below:

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Furthermore, on January 26, 2018, Frank caused the Legal Coverage Group to file a fraudulent bankruptcy petition under Chapter 11 in the Eastern District of Pennsylvania. In addition, during the bankruptcy proceedings, Frank made and caused others to make additional material misrepresentations regarding the Legal Coverage Group, until at least March 1, 2018, when the government executed a court-authorized search of the company’s premises.

If convicted on this count, Frank faces a maximum possible sentence of 20 years imprisonment, a three-year period of supervised release, a $250,000 fine, a $100 special assessment, and the imposition of full restitution.

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The case is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Patrick J. Murray.

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