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TRENTON – Attorney General Anne Milgram and Criminal Justice Director Gregory A. Paw announced that a Colts Neck man was sentenced to 22 years in state prison today for conspiring with two other men to defraud creditors of their produce company, Packed Fresh Produce Inc., of approximately $2 million through a planned bankruptcy scheme or “bust out.”
According to Director Paw, Joseph Diorio, 46, of Colts Neck, was ordered by Superior Court Judge Francis DeStefano in Monmouth County to serve 22 years in state prison, with five years of parole ineligibility, and to pay a total of approximately $2 million restitution to his 16 victims.
On Feb. 22, Diorio was convicted by a Monmouth County jury of first-degree conspiracy, first-degree money laundering, second-degree theft by deception, and second-degree misconduct by a corporate official. The verdict followed a month-long trial before Judge DeStefano.
Former Deputy Attorney General William McGovern prosecuted the case for the Division of Criminal Justice. McGovern now works as an assistant prosecutor in Hunterdon County but agreed to try the complex case, which he handled while with the Division.
Diorio and two co-defendants set up Packed Fresh Produce to defraud creditors in the produce industry. The co-defendants, David Menadier and Michael Fava, testified at trial pursuant to their cooperating plea agreements. The evidence at trial established that the three men set up Packed Fresh Produce in order to purchase and resell produce on credit. It also established that they purchased and shipped large quantities of produce with the intention that they would ultimately file for bankruptcy without paying their creditors, suppliers and shippers.
The creditors lost approximately $2 million as a result of the fraud. Among the 23 witnesses called was an expert in financial fraud who explained to the jury how a planned bankruptcy or “bust-out scheme” works.
In addition, representatives from a number of the corporate victims traveled from California, Arizona, Missouri, and Illinois to testify. State Investigator James Blong III also provided expert testimony as a certified public accountant regarding his analysis of bank records, which revealed a correlation between certain checks in the defendant’s bank account and cash deposits into the Packed Fresh Produce bank account.
Packed Fresh Produce Inc. used a Mail Box Etc. box in Lincroft as a mailing address and an unrefrigerated warehouse in Lodi to receive shipments of produce.
The defendant and co-defendant Michael Fava ran businesses in the Paterson Market area, which were a short distance from the Lodi warehouse. Some of the produce was sold to produce companies in the Hunts Point Market in New York.
Fava faces seven to 10 years in state prison under his plea agreement, and Menadier faces five to seven years under his plea agreement. They are scheduled for sentencing on July 3.
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