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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.
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 have our clients’ voices heard and secure favorable results on their behalf. We have offices in Los Angeles, Manhattan Beach, San Francisco, Las Vegas, San Rafael, Orange County, and Beverly Hills.
Do not hesitate to start protecting your future and reputation. Contact us today to start exploring your defense options.