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As former owners of a Rochester firm that produced highway-safety and industrial products, a local father and son have been convicted of bank and loan fraud, federal officials said Monday.
Michael Kaufman, 72, and Richard Kaufman, 47, were officers of American Industrial Sales Corp., which does business as RAK Industries. The pair was accused by federal prosecutors in 2010 of falsely claiming assets to win approval for business loans totaling more than $3 million from Key Bank N.A.
They were found guilty by federal jury last week.
“Loan proceeds were used by the defendants to fund their personal lifestyles, including expensive homes, generous salaries and country club memberships,” Assistant U.S. Attorneys Bradley Tyler and Craig Gestring said in a statement.
The Kaufmans are slated to be sentenced by U.S. District Judge Frank Geraci in July. They could be sentenced to prison terms of up to 30 years and could be fined as much as $1 million each.
To convince the bank to advance money, the Kaufmans claimed personal net worth and value for their company far beyond what they or the company were worth.
In loan applications made to the bank from 2002 to 2007, the elder Kaufman claimed to be personally worth more than $4 million while Richard Kaufman claimed net worth topping $2.5 million. But most of the value they claimed turned out to be fictitious, Rochester FBI agent Kevin Black states in court papers.
According to Black’s testimony, the father included the $1.1 million value of a Brighton home that he had put into his wife’s name in 1992, while the son claimed to own mutual funds shares worth more than $600,000. The shares were worth less than $5,000.
Richard Kaufman declared bankruptcy in 2008. In that case, he stated a negative net worth of more than $100,000.
Key Bank took over RAK Industries in 2007 after the business defaulted on the loans. Charges against the Kaufmans include diversion of some $53,000 in receivables to their own use after the bank takeover.
The pairs’ fraud convictions come 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.
The commission accused RAK Industries’ owners and other male employees of groping and making unwanted sexual advances to women workers and threatening to retaliate against those who resisted.
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