Naperville Accountant Sentenced to Prison in Financing Fraud Scam

Written by Shannon Antinori

An Oswego motorcycle and RV dealer and a Naperville accountant were sentenced to federal prison this week for running a $75.9 million financing scam that caused lenders to lose more than $58 million, the U.S. Attorney’s Office said Wednesday.

Russell Ott, 51, of Oswego, pleaded guilty to bank fraud and tax evasion and was sentenced Dec. 3 to 13-1/2 years in prison. He is scheduled to be remanded to federal prison on Jan. 20, 2015. His accountant, 55-year-old Brian McMahon of Naperville, was sentenced to 2-1/2 years for his role in the scam, beginning Jan. 21, 2015, according to the U.S. Attorney. McMahon was also ordered to pay $396,829 restitution to the U.S. Treasury.

Ott was the owner of Emily Inc., which did business as Pro Source, selling new and used motorcycles, ATVs, RVs, motor homes, boats and jet skis in Morris from 1995 to 2008. In 2007 and 2008, he was also part owner of Liberty Cycle and Huntley Chevrolet, both in Libertyville, according to the U.S. Attorney.

McMahon acted as CPA for Ott and Emily Inc., and was also the owner of Triumph Suzuki in Naperville for three years before selling it to Ott in 2004.

Eight other co-defendants who acted as straw buyers in sham vehicle sales were charged with Ott and McMahon in August 2013, the U.S. Attorney’s office said. All eight have pleaded guilty and have been sentenced or are awaiting sentencing.

According to court documents, Ott’s bank fraud scheme involved two prongs: in one, Pro Source Motorsports fraudulently obtained more than $31.3 million in direct financing through five lines of credit from Fifth Third Bank, which lost more than $27.1 million; and, in the second, individual straw borrowers obtained just under 200 fraudulent loans totaling more than $44.58 million, which resulted in 18 financial institutions losing more than $31.66 million.

Ott and the straw buyers fraudulently obtained money for their personal use and benefit, enabling them to maintain lavish lifestyles, operate various businesses and make investments, the U.S. Attorney’s Office said. The money they obtained created the false appearance of personal wealth and helped induce the lenders to advance funds more readily due to their misplaced confidence that the defendants had sufficient personal wealth to repay the loans.

According to the U.S. Attorney, Ott and McMahon fabricated false personal and business tax documents and financial statements and provided them to Fifth Third Bank, which funded traditional “floor plan loans.” Ott faxed false flooring requests with fictitious vehicle identification numbers for non-existent recreational vehicles, or real VINs for actual RVs but with dramatically inflated values. Ott sometimes “double floored” vehicles by obtaining separate financing from Fifth Third and a different lender for the same vehicle, the U.S. Attorney’s office said.

Ott also enlisted the eight straw borrowers to obtain fraudulent loan proceeds to share with him even though they did not actually purchase the vehicles ― usually very expensive RVs ― for which the loans were made, and the vehicles generally did not exist, the U.S Attorney said. The lenders generally deposited the loan funds into Emily Inc.’s bank account, and then Ott periodically disbursed the proceeds to straw borrowers to operate and support their own businesses and lifestyles, make investments and make monthly payments on some of the loans to perpetuate the scheme.

Ott used fraudulently obtained funds to operate Pro Source, which lost money from approximately 2001 through 2008, and to make lavish purchases, including a house in Elburn for approximately $679,491 and subsequent improvements that increased the home’s cost to more than $1.1 million. Other expenditures included a $258,000 vacation home in Butternut, Wis.; a $350,000 rental home in South Elgin; a Sky Hawk 172 Cessna airplane and hanger for approximately $200,000; and pick-up trucks and other vehicles for family members and employees of Pro Source, the U.S. Attorney said.

Ott also used the money to invest in and purchase other vehicle dealerships, including more than $3.6 million in Huntley Chevrolet, and more than $1 million in Liberty Cycle.