The chief executive officer of consulting firm Cash Flow Partners LLC last week pleaded guilty to one count of conspiracy to commit bank fraud and one count of securities fraud in a multi-million dollar scheme operated through the company, according to a release shared Monday by the Federal Deposit Insurance Corp.’s (FDIC) Office of Inspector General (OIG).
The release, based on one issued by the Justice Department, says that Edward Espinal, 44, of Wayne, N.J., pleaded guilty by videoconference before U.S. District Judge Kevin McNulty. The conspiracy to commit bank fraud charge carries a maximum potential penalty of 30 years in prison and a $1 million fine. The securities fraud counts carry a maximum penalty of 20 years in prison and a $5 million fine. The release, which also credits the FDIC OIG and others for their part in the investigation, said sentencing is scheduled for Oct. 13, 2020.
The release states that:
- Beginning at least as early as in or about July 2016 through in or about September 2019, Espinal led and directed a bank fraud conspiracy designed to obtain millions of dollars in loans from banks on the basis of false representations. To attract customers, Cash Flow released internet advertisements and held seminars offering to assist customers with low-paying salaries in obtaining loans. These advertisements included promotional videos featuring Espinal and a former telenovela actor.
- Customers contacted Cash Flow and were routed to the company’s sales department, where employees encouraged customers to sign up for various loan programs that Cash Flow provided and to enter into contracts with Cash Flow. Under those contracts, employees would help customers obtain loans from banks. The Cash Flow contracts permitted customers to keep a portion of the loan proceeds and customers agreed to provide the remaining percentage of the proceeds to Cash Flow. Cash Flow agreed to pay off the loans on behalf of its customers.
- Cash Flow then used false information and fraudulent documents to obtain loans for its customers for which they otherwise would not have qualified, and posed as the customers in communications with the banks.
- From July 2016 through September 2019, Espinal obtained more than $5 million in investments from victim investors on the basis of false and fraudulent pretenses and representations. He solicited investments from prospective customers using a marketing campaign on Spanish language television channels and the internet, the “Cash Flow TV” YouTube page, and live presentations in Cash Flow’s offices and elsewhere. He also solicited investments from individuals who obtained loans through Cash Flow’s bank fraud conspiracy, encouraging loan customers to invest loan proceeds in Cash Flow’s investment program.
- Once investors agreed to invest in Cash Flow, Espinal issued “promissory notes” to investors that guaranteed monthly investment returns between 1.25% and 4%. The promissory notes stated that Cash Flow would return investors’ principal either one year from the date of the promissory note, or 60 days after investors demanded payment. Espinal and other Cash Flow employees signed the promissory notes on behalf of Cash Flow.
- Espinal made a number of misrepresentations to investors. He told investors that he would pool their funds with the funds of other investors in investments related to real estate, real estate companies, a gold mine in Ecuador, and construction projects in countries outside of the United States. In reality, Espinal used investor funds to pay returns to earlier investors, to pay for personal expenses for himself, his family, and another Cash Flow employee, to perpetuate the bank fraud scheme, and to market the bank fraud and investment scheme to future victims.