Bank Leumi Loses About $5.8 Million In Retailer’s Fraud

Kwong Hung Lam, also know as “Eric Lam,” the president and sole owner of New Century Enterprise Inc., an importer and distributor of casual apparel headquartered in Farmingdale, New York, had been sentenced to four years of imprisonment for making false statements to a financial institution and ordered to pay $6,035,457 in restitution. 

According to his plea allocution and documents filed by the government in the case, in 2006, Lam, on behalf of New Century, entered into a written credit line loan agreement with Bank Leumi USA pursuant to which the bank agreed to extend funds and other financial accommodations, such as letters of credit, to New Century on a discretionary basis. As part of the loan agreement, New Century was required to provide Bank Leumi, on a monthly basis, with a borrowing base certificate (“BBC”), which certified the value of New Century’s inventory and accounts receivable, the collateral for the loan. Between 2006 and 2009, Lam submitted numerous false BBCs to Bank Leumi in which he falsely inflated the true value of New Century’s collateral for the loan. As of September 2009, Lam, who had personally guaranteed the loan, and New Century owed Bank Leumi $5.8 million, and Lam had certified that the value of New Century’s collateral was approximately $9 million.
 
In October 2009, Lam terminated New Century’s business operations, and thereafter authorized Bank Leumi to take possession of all New Century’s inventory and accounts receivable. Upon inspection of the collateral for the loan, however, Bank Leumi discovered that New Century’s inventory and accounts receivable were worth far less than Lam had represented in September 2009. In fact, the inventory was valued at far less than $100,000, and the accounts receivable balance was falsified and therefore uncollectible.