albany.fbi.gov | 11/9/09 | suspect: Paul Mammorella
Paul Mammorella, 54, pleaded not guilty today in United States District Court in Burlington to a charge of bank fraud for preparing fraudulent financial statements in an asset based loan fraud scheme.
Mammorella was the former director of finance for Speciality Filaments, Inc., a now-defunct company which at one time manufactured nylon and polyester filaments used as components in industrial and commercial brushes.
According to the indictment, Specialty Filaments, which at one time had plants in Burlington and East Middlebury, had a multi-million dollar line of credit with Wells Fargo & Company that was secured by SFI’s inventory and accounts receivables. Under the terms of the loan agreement, SFI could borrow up to a certain percentage of the value of its qualifying inventory and accounts receivables.
Mammorella, as finance director, had to prepare and submit to Wells Fargo periodic reports certifying the value of the collateral securing SFI’s loan. Beginning in approximately June 2006, according to the indictment, and continuing through December 2006, Mammorella caused SFI to send Wells Fargo financial reports which falsely inflated the value of the company’s accounts receivables and inventory.
This enabled SFI to draw significantly more money from the line-of-credit that it actually was entitled to receive. In early January 2007, SFI went out of business and Wells Fargo discovered that the real value of SFI’s collateral was substantially less than the outstanding loan balance. As a result, Wells Fargo and the Vermont Economic Development Authority, which guaranteed a portion of the loan, lost more than $1 million.
