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Former RAK Industries official gets prison time, to pay restitution

Rochester Business Journal
August 7, 2014

Convicted in April of fraud, Michael Kaufman of Pittsford was sentenced to 12 months in prison and ordered to pay restitution of $1.4 million by U.S. District Judge Frank Geraci.

Kaufman, 72, and his son, Richard Kaufman, 47, are former RAK Industries officials. Richard Kaufman at the end of last month was sentenced to a 46-month prison term and also ordered to pay $1.4 million in restitution.

The pair was accused of giving doctored financial statements to Key Bank N.A. and to the company’s outside accounting firm to obtain loans and using the borrowings to pay for personal luxuries, including expensive homes and country club memberships.

The false financial statements significantly overvalued the accounts receivable and inventory, which were the two assets Key Bank relied upon as collateral for a total loan credit of $2 million, officials said.

A dba of American Industrial Sales Corp. that sold highway-safety products, RAK Industries was taken over by Key Bank.

In loan applications made to the bank on RAK’s behalf from 2002 to 2007, Michael Kaufman claimed to be personally worth more than $4 million while Richard Kaufman claimed net worth topping $2.5 million. Most of the value they claimed was fictitious, court papers show.

While RAK was under Key Bank’s control, the father and son spent $53,000 of the firm’s receivables on themselves, costing the bank some $1.5 million, U.S. Attorney William Hochul said.

The father’s and son’s criminal convictions came six years after RAK Industries agreed to pay $375,000 to settle sexual harassment charges brought by the federal Equal Employment Opportunity Commission on behalf of 18 female employees.

In the sexual harassment case, the EEOC accused the Kaufmans and other male RAK employees of groping and making unwanted sexual advances to women workers and threatening to retaliate against those who resisted. 

(c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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