By Joel Rosenblatt
March 11 (Bloomberg) -- A California couple was charged by the U.S. with defrauding an eight-bank lending group led by Bank of America Corp. of about $130 million by exaggerating the financial status of their decorating business.
Thomas Chia Fu, 61, and his wife, Cheri L. Shyu, 48, were arrested at their Newport Coast home by federal authorities, according to an e-mailed statement yesterday by U.S. Attorney Andre Birotte Jr. in Los Angeles. They were indicted on nine counts of bank fraud and face as long as 30 years in prison if convicted, prosecutors said in the statement.
The couple imported home-decorating items from China and obtained a $130 million revolving line of credit from the banks, according to the indictment. They borrowed against the credit line by exaggerating the in-transit inventory and accounts receivable for their company, Anaheim, California-based Galleria USA Inc., according to the filing.
?Had Bank of America and other banks known the true facts, they would not have continued the revolving line of credit and loaned additional funds,? according to the filing.
Dave Wiechert, a lawyer for Shyu, and Steve Katzman, a lawyer for Fu, didn?t return calls seeking comment.
The Fus submitted their allegedly false reports from June 2008 through March 2009, prosecutors said. Bank of America became the lead bank in the lending group around May 2008, and the fraud continued through August 2009, the U.S. said.
Credit Crisis
That spans the height of the credit crisis, when banks were increasing their scrutiny of loans amid a surge in mortgage defaults. Bank of America took $45 billion in U.S. rescue funds. The bank agreed to purchase Merrill Lynch in September 2008 for $50 billion in stock, months after buying Countrywide Financial Corp.
?This is an ongoing investigation so we can?t provide any further details,? Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e-mailed statement. ?We have been cooperating with authorities on this matter and continue to do so. In fact the bank is a victim of this fraud.?
The case is U.S. v. Fu, U.S. District Court, Central District of California.
--With assistance from Hugh Son in New York. Editors: Michael Hytha, Peter Blumberg
To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net
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