Former Morris Co. Bank Employee Admits $8 Million Fraud Scheme: Feds

MORRIS COUNTY, NJ — A Morris County former bank employee admitted to committing bank fraud for more than five years totaling approximately $8 million and accepting bribes, prosecutors announced last week.

Kurt Phelps, 53, of Flanders, pleaded guilty to one count of conspiracy to commit bank fraud and one count of bank bribery via videoconference. Phelps' three conspirators had previously pleaded guilty in connection with the fraud.

Phelps' sentencing date is set for Oct. 3, U.S. Attorney Philip Sellinger said.

According to the indictment, from 2013 to 2019, Phelps and his conspirators perpetrated a scheme to defraud Phelps' employer, a bank. They obtained millions of dollars in bank credit for Starnet Business Solutions Inc., a now-defunct printing company in New Jersey where Phelps' conspirators worked.

Phelps’ conspirators paid him large cash bribes in connection with the fraud scheme, Sellinger said.

Starnet received a bank line of credit in 2013 after providing materially false financial information. The bank not only allowed Starnet to keep the line of credit but also increased it at various points, Sellinger said. The line of credit was worth approximately $8 million by 2018, and Starnet had not repaid it.

Prosecutors released the following statement about the allegations:

"Phelps was aware that financial information Starnet provided to the bank for the line of credit was materially false, and coached Starnet on how to defraud the bank. Phelps would review draft financial information for Starnet and provide feedback on how his conspirators should falsify the information before submission. Phelps also worked to ensure that the bank did not detect the fraud scheme by helping Starnet avoid audits and other quality control measures employed by the bank."

Over the course of the conspiracy, Phelps accepted hundreds of thousands of dollars in cash bribes, Sellinger said.

The charges of conspiracy to commit bank fraud and bank bribery each carry a maximum potential penalty of 30 years in prison and a $1 million fine, prosecutors said.