| The former president and CFO of a Marlborough-based sea food distribution company pleaded guilty yesterday in federal court in Worcester in connection with a scheme to commit bank fraud.
James R. Faro, 61, of Dover, and John J. Crowley, 62, of Boca Raton, Florida, each pleaded guilty to conspiring to commit bank fraud. Their sentencings are scheduled for June 8 and June 13, 2018, respectively. Faro and Crowley were charged in January 2018.
Faro is the former owner and president of Sea Star Seafood Corp., a company previously headquartered in Marlborough that distributed frozen seafood products. Crowley is the former chief financial officer for Sea Star.
Sea Star maintained an asset-backed loan agreement from October 2010 until August 2012 whereby Commerce Bank agreed to loan Sea Star up to $6 million pursuant to a revolving line of credit. Sea Star pledged its assets – most notably its inventory and accounts receivable – as collateral for the loan.
Faro and Crowley conspired to intentionally overstate the value of Sea Star’s outstanding accounts receivable that it reported to the bank between November 2010 and August 2012. By doing so, Faro and Crowley fraudulently increased the level of assets against which Sea Star could borrow from the bank. Sea Star informed the bank that it had discovered a “discrepancy” of over $3 million in its reported versus actual assets in August 2012. Sea Star discontinued its business operations approximately one week later.
The charge of conspiracy to commit bank fraud provides for a sentence of no greater than 30 years in prison, five years of supervised release and a fine of up to $1 million.
