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TRENTON
– Attorney General Anne Milgram and
Criminal Justice Director Gregory A. Paw
announced that a Colts Neck man has been
convicted at trial of 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 convicted yesterday 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 Superior Court
Judge Francis 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.
First-degree
crimes carry a maximum sentence of 20 years
in state prison and a $200,000 fine, which
increases to up to $500,000 for money laundering.
Second-degree crimes carry a maximum sentence
of 10 years in prison and a $150,000 fine.
Because he has two prior criminal convictions,
he faces a discretionary extended term.
Judge
DeStefano granted the state’s request
to revoke Diorio’s bail after the
verdict and ordered him jailed until his
sentencing, which is scheduled for April
25.
"Mr.
Diorio perpetrated a classic bust-out scheme,
siphoning money out of his company while
leaving the company’s creditors with
losses totaling roughly $2 million,”
said Attorney General Milgram. “This
defendant faces a lengthy prison sentence,
thanks to the skillful manner in which our
attorney and investigators handled this
complex financial fraud case.”
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.
Attorney
General Milgram credited William McGovern
for prosecuting the case. She thanked Hunterdon
County Prosecutor J. Patrick Barnes for
permitting McGovern to try the case for
the Division of Criminal Justice.
Attorney
General Milgram credited State Investigator
David Nolan for investigating the case.
She also credited Analyst Paula Carter and
Paralegal Melanie Malewicz for their work
in the trial.
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