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TRENTON
– Attorney General Paula T. Dow and
Criminal Justice Director Stephen J. Taylor
announced that a Bergen County man was sentenced
to state prison today for his role in a
scheme to defraud creditors of their produce
company, Packed Fresh Produce Inc., out
of approximately $2 million through a planned
bankruptcy scheme or “bust out.”
According
to Director Taylor, Michael Fava, 53, of
Montvale, was sentenced by Superior Court
Judge Richard English in Monmouth County
to six years in state prison. Fava pleaded
guilty on Nov. 14, 2005 to money laundering
and witness tampering. He was sentenced
to six years on the money laundering charge,
and four years on the witness tampering
charge, with the sentences to run concurrently.
Fava was also ordered to pay full restitution
to the victims, for which he is jointly
and severally liable with the other defendants.
In
pleading guilty, Fava admitted that he,
Joseph Diorio, 48, of Colts Neck, and David
Menadier, 53, formerly of Eatontown, defrauded
creditors in the produce industry.
On June 6, 2008, Diorio was sentenced to
22 years in state prison and ordered to
pay a total of approximately $2 million
in restitution to his 16 victims. The sentence
followed Diorio’s conviction by a
Monmouth County jury on charges 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
Superior Court Judge Francis DeStefano in
Monmouth County.
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.
Diorio,
Fava and Menadier set up Packed Fresh Produce
to defraud creditors in the produce industry.
Both Fava and Menadier testified at Diorio’s
trial pursuant to their cooperating plea
agreements. The evidence at the 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 during Diorio’s trial 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.
Detective 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 Diorio’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.
Fava
and Diorio 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.
Menadier
previously pleaded guilty to money laundering
and perjury. He served 180 days in jail
and received two years of probation.
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