Flanders bank employee ran scheme to bilk $8 million from employer

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FILE PHOTO: The seal of the United States Department of Justice is seen on the building exterior of the United States Attorney's Office of the Southern District of New York in Manhattan, New York City

NEWARK, N.J. – U.S. Attorney Philip R. Sellinger announced a Morris County man was indicted for his role in a conspiracy to bilk millions of dollars from a bank, U.S. Attorney Philip R. Sellinger announced today.

According to the Department of Justice, Kurt Phelps, 53, of Flanders, New Jersey, is charged by an indictment returned March 11, 2022, 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.    

“From 2013 through 2019, Phelps and his conspirators carried out a scheme to defraud Phelps’ employer, a bank. 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,” U.S. Attorney Philip R. Sellinger said. “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 elaborate scheme required Phelps on the inside to avoid audits by the bank’s quality control measures.

“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. 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,” the DOJ said.

Court records show Phelps solicited large cash bribes – tens of thousands of dollars at a time – from Starnet in connection with the fraud scheme. Phelps’s conspirators pooled cash to pay Phelps bribe payments. Over the course of the conspiracy, Phelps accepted hundreds of thousands of dollars in cash bribes.