The Department of Justice has announced that it has convicted Louis Yeung
of San Dimas, California for his orchestration of a $9 million bank fraud
scheme. Yeung, the former vice president of Eastern Tools and Equipment
Inc., pleaded guilty to creating shell corporations to fabricate transactions
on a company credit line with East West Bank of Pasadena.
As the DoJ press release reads, Yeung (real name: Chung Yu Yeung) pleaded guilty to one count of conspiracy
to commit bank fraud and four counts of bank fraud. Eastern Tools and
Equipment Inc. is a wholesale supplier of portable generators who had
a credit line with East West Bank. According to federal investigators,
between 2007 and 2009, Yeung and co-conspirators used a series of shell
corporations to act as "purported suppliers and retailers" and
provided false information and financial statements to East West Bank.
In reality, however, these shell corporations were under Yeung’s
control and allowed him inflate accounts receivable with the bank—
and ultimately extract $9 million. In his admission, Yeung also detailed
how he opened post office boxes and phone and email accounts to convince
East West Bank of the legitimacy of the corporations. He is scheduled
to be sentenced later this year.
What is a "shell corporation?"
The term "shell corporation" has been in the news a lot lately,
mostly due to the release of the controversial Panama Papers. That leak
exposed the fact that some political leaders from around the world are
hiding their wealth "offshore," including by using shell corporations.
Presumably, this is done to shelter those assets from taxation.
Shell corporations are morally ambiguous because they can allow businesses
and individuals to do illegal or untrustworthy things. Usually, they are
companies that are established purely to facilitate business transactions,
but don't actually have assets of their own (hence "shell,"
as in hollow inside).
So, are shell corporations illegal? No, they're not. While they are
chiefly associated with tax havens and underground economies, they are
not inherently illegal. In the case of Mr. Yeung, for example, he specifically
established shell companies to siphon money from a domestic bank. That is
bank fraud. In the corporate sector, however, shell companies can occur as the result
of other, legal financial actions and are used legitimately to hold stock
in other business entities, facilitate cross-border transactions and mergers,
and other reasons.
If you are facing a federal bank fraud accusation, the time to seek capable
counsel is now. At
Okabe & Haushalter, our dedicated and aggressive Los Angeles federal defense attorneys are
well-acquainted with our federal court system and know what it takes to
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