eNews February 17, 2009

eNews Weekly Update - National Association of Credit Management
February 17th, 2009

News Briefs

  1. Recession Not the Time to Cut Training Costs
  2. Construction Industry Revving Up for Stimulus Package Investment
  3. FCIB NYC Roundtable Paints Stimulus As Tough But Necessary
  4. Salazar OCS Delay Garners Mixed Response
  5. In Honor of President's Day
  6. Fed Assault on Credit Aims to Bring Economy Back From the Edge
  7. IMF Urges Coordination in Global Response to Banking Crisis
  8. New Regulation Mandating Contractor Disclosures Cause for Unease
  9. Man Gets 18 Months in Attempt to Defraud Ex-Im Bank

1

Recession Not the Time to Cut Training Costs
While most companies across the U.S. are looking to cut costs and approach spending decisions with a "do more with less" philosophy, it's important to remember that tougher economic times aren't the time to underestimate the importance or proper workforce training. That was one of the tips offered by Don Gregory, chair of Kegler, Brown, Hill & Ritter's construction and litigation practice, in a recent podcast presented by the American Subcontractors Association (ASA).

"It perhaps gets lost sometimes in an economic slowdown," he said. "But challenging economic times are the wrong time to ignore training."

As companies in all industries, including construction and manufacturing, face today's grim prospects, they should recognize that their customers are facing the same cash-flow shortages that they are, meaning more buyers nitpicking about deductions, more bankruptcy filings and preference claims and more slowdowns in payment. A company whose workforce remains ill-prepared to manage these tasks may ultimately face a tougher time throughout the current recession.

Additionally, educational programs that offer a glimpse at current and future trends, like NACM's upcoming Credit Congress, can help a company emerge from this crisis more profitable than it was at the start. "Examine what kinds of training opportunities might be an important investment in your company's future, your workforce's future," suggested Gregory. "When there is some time, invest in that training, perhaps in an area that will bring new work or work with a bigger profit margin. Train for your current and more importantly your future markets."

In the end, it's important to remember that there's no substitute for solid credit management and the best way to ensure that is to ensure the highest quality education for your workforce.

NACM's 113th Credit Congress, to be held this year in Orlando, FL, offers members of the B2B credit community a number of different educational opportunities that focus on everything from new, cost-reducing technologies and credit management fundamentals to financial analysis and legal protection from bankrupt customers. For more information on this year's program, or to register, click here.

Jacob Barron, NACM staff writer

 

NACM Designee and GSCFM Alumni Event at Credit Congress

This year's designee and alumni event is being held at B.B. King's Orlando. This is a great networking opportunity in a great atmosphere. B.B. King's Orlando offers a variety of great Southern comfort food fused with flavors from around the globe and features nightly entertainment by the B.B. King All Star band. Other highlights include hand-painted table art by Memphis folk artists and musician portraits by Lamar Sorrento.

Click here for more information on this and other networking and optional events at this year's Credit Congress in sunny Orlando.

 

2

Construction Industry Revving Up for Stimulus Package Investment
Of the more than 3.5 million jobs that have vaporized over the last 12 months, nearly one-fifth have been in construction. Nonresidential builders, specialty trade contractors and heavy and civil engineering firms alone have slashed payrolls by 309,000 in the last year, accounting for 7% of their workforce. Not including seasonal adjustments, the unemployment rate in January for the construction sector spilled over 18%. However, according to the Associated General Contractors of America (AGC), if the new stimulus package included at least $150 billion in construction spending, many of these workers would be re-employed within a matter of weeks.

Currently, the legislation includes $29 billion for highway construction projects, $16 billion for public transit, $11 billion to renovate the electricity grid, $5 billion to weatherize low-income homes and $4.5 billion to make federal buildings more energy efficient. However, the move to leave out $24 billion in school modernization and construction funding resulted in some sour faces.

"Our analysis shows that without these funds, the total number of jobs that would be created or saved by this bill will decline by over 340,000," said Stephen Sandherr, CEO, AGC. Despite the school spending cuts, Sandherr stated the legislation does "save or create hundreds of thousands of jobs and give tens of thousands of companies an opportunity to survive these tough economic conditions while building a strong foundation for future economic growth."

AGC had testified that investment in construction from the stimulus bill would create more than 620,000 jobs in the nonresidential construction sector by the fourth quarter of 2010 and the impacts would be almost immediate. According to a survey of AGC members in December, 85% said they would be able to begin work within a month of a contract award, while 30% said they could begin within days. Stephen Fuller, Ph.D., of the Center for Regional Analysis at George Mason University testified before Congress that in a time of unemployed workers and excess capacity, for every $1 billion of investment in nonresidential construction, it translated into the creation or support of 28,500 jobs, increased gross domestic product by $3.4 billion and added $1.1 billion to personal earnings. One-third of those impacts are directly felt by the construction industry, while one-sixth of that total benefits suppliers and materials men, with half in returns to the economy at-large. Industrial producers of construction supplies are gearing up for a rebound after seeing a 14% drop in 2008. The sector suffered as long lead times transformed into layoffs.

Mary Filardo, executive director, 21st Century School Fund, chided the stimulus bill for failing to hit its mark and was distraught that $6.6 billion in PK-12 renovations and repairs, as well as $20 billion in tax incentives for qualified school construction borrowing, had been carved out.

"It misses an opportunity to maximize jobs in a way that could have begun to eliminate tremendous disparity in public school conditions experienced by our nation's public school children," said Filardo. "School facilities are a key part of our nation's public infrastructure and warrant federal investment, just like roads, bridges and transit."

From the manufacturing side, where companies have also been severely hurt and job losses have become necessary to stay financially stable, the stimulus bill is being welcomed.

Matthew Carr, NACM staff writer

 

Liens and Bonds: A Practical Approach

During tough economic times, credit managers need to be sure that their company's policies have a solid foundation built on the credit basics. Forms and contracts must be well written, there has to be an established threshold for notices and liens, the quality of job information must be top notch and professionals need to make sure that they're aware of notice and filing deadlines. Greg Powelson, director, NACM's Mechanic's Lien and Bond Services (MLBS), will walk credit managers through the fundamentals of successful lien and bond and construction credit processes and procedures during the NACM-sponsored teleconference "Liens and Bonds: A Practical Approach." With liens on the rise as the construction sector falters, credit professionals need to maintain the essentials, and to make sure that sales and management are engaged in the lien and bond process.

To register for this teleconference, click here.

 

3

FCIB NYC Roundtable Paints Stimulus As Tough But Necessary
"The U.S. economy is facing two shocks: to the housing sector and to the banking sector. It almost always has something to do with one of those," said Torsten Slok, Ph.D., director of global economics at Deutsche Bank AG New York. "We are in a very unusual situation where policy has to respond."

In his comments at FCIB's most recent roundtable, held at the Harvard Club in New York City and attended by top-level credit professionals from various industries, Slok minced no words with attendees, stating clearly that, despite some notable causes for dissent, it was his and his company's opinion that the passage of President Barack Obama's stimulus package was necessary to prevent a protracted recession. This particular roundtable also took place the day after U.S. Treasury Secretary Tim Geithner announced revisions to the implementation of the Troubled Asset Relief Program (TARP), part of 2008's original $700 billion stimulus plan, the Emergency Economic Stabilization Act (EESA). Slok's insights echoed Geithner's comments about where the economy's problems lie. "From a policy point of view, [Geithner] is realizing ‘I have to do something on these two fronts [housing and banking] because before we have done that, this economy will not be fixed.'"

Slok went through several slides showing statistic after statistic of negative trends and insisted that a Capitol Hill response was a good thing. "If we don't have any further policy action, there's a reason to believe that these trends will continue," he said, adding, "U.S. GDP growth in a normal environment grows at 2.5%. Now it's actually shrinking."

"If policy does something then we will get back on track sooner. If they don't do anything, it will take longer," he said, stressing, "Policy action is needed."

However, certain policies that have been proposed and considered by the world's legislators were treated with an air of skepticism by Slok, who singled out ARM loan modifications as a policy venture that may not be worthwhile, both as it applies to consumers and to banks. "You give people loan modifications and then you see how they do after you modify the loan," he said, referring to a study that showed a surprisingly large chunk of consumers with modified loans wound up going under anyway. "Of everyone who got help, 50% actually end up re-defaulting. You may help me as a homeowner, but if I end up re-defaulting then it might not have been a good idea to help me."

Throughout the downfall, many have wondered how much of the economic woe is strictly a product of the fear currently gripping consumers, businesses and banks. "I think a lot of this has to do with fear," said Slok, who noted that one way to measure this is by the fact that there's currently $4 trillion in money market mutual funds, with interest rates at 0%, meaning a 0% return. "Why do people have $4 trillion returning 0%? Something is totally wrong when people do that. They're just willing to say, ‘I'm not going to do anything.' It has nothing to do with rationality," he said, adding that this is an indicator he watches frequently to gauge the country's economic worries. "That's actually a weekly series that I watch, to see when fear turns to greed again."

Hobbling the effort to erase the nation's fears and restore consumer and business confidence is the fact that regulators have fundamentally lost the country's trust, Slok noted. "Normally they have a lot of credibility," he said, "especially with the fed. But now, people won't listen. People want to know what they're going to do."

For more information on FCIB's upcoming events, including April's International Credit Executives (I.C.E.) Conference, visit www.fcibglobal.com.

Jacob Barron, NACM staff writer

 

 

Chaotics: The Business of Managing in the Age of Turbulence

Join FCIB at this year's International Credit Executive's (I.C.E.) conference for this timely keynote presentation and more. Speaker John Caslione, founder, president and CEO of GCS Business Capital LLC, will discuss the need for businesses to develop a new mindset, one that takes into account intermittent periods of disturbance, and still thrive while under the threat of global, industry, market or company chaos in this new age of increasingly frequent and intense periods of turbulence in the global economy. Chaotics presents a new system and set of strategic guidelines designed to help businesses navigate through the waves of uncertainty and chaos affecting customers, employees and other stakeholders.

Learn more here.

 

4

Salazar OCS Delay Garners Mixed Response
The attempts over the years to expand the nation's energy resource base by developing more domestic and unconventional sources has been enthusiastically backed by the supplier and manufacturing sectors. High costs for fuels such as oil and natural gas has often put a crushing burden on manufacturers since these resources are used in 97% of all manufactured goods in the U.S. Because manufacturers consume one-third of all energy in the country, the sector also suffers disportionate impacts when prices are high. The elevated costs over the last several years have pushed plants to reduce labor hours, trim output and even close doors or move overseas. During a six-year span, the forest products industry was forced to close 276 mills, and since 2006, 190,000 jobs have been lost—15% of the industry's total workforce. And though natural gas and oil prices have fallen dramatically from peaks seen just months ago to multi-year lows as the global slowdown sinks demand, there will eventually be a return to higher prices.

After the Congressional offshore drilling moratorium was allowed to expire in October, one of the final actions by the outgoing Bush Administration was to publish a new draft of the five-year plan for energy development on the nation's Outer Continental Shelf (OCS). The Department of the Interior (DOI), the U.S. Geological Survey (USGS) and the Minerals Management Service (MMS) have worked slowly on hammering out a direction for oil and gas drilling on the OCS, and the deadline for public comment on the latest proposal is set to expire March 23rd. Originally, the Energy Policy Act of 2005 outlined that the DOI craft rules and regulations on energy development on the OCS within nine months of the bill's passage, but the agency has languished for three years to simply submit a proposed plan for comment.

Interior Secretary Ken Salazar feels that the March 23rd deadline for public review on the current draft plan is inadequate, and has extended the public comment period by an additional 180 days; turning the 60-day comment period to a 240-day period. He is also asking for a detailed report, within 45 days, on conventional and renewable resources offshore, and 30 days after receipt of this report he plans to hold four regional conferences—Pacific Coast, Atlantic Coast, Alaska and the Gulf of Mexico—to review the findings.

"The additional time we are providing will give states, stakeholders and affected communities the opportunity to provide input on the future of our offshore areas," said Salazar. "The additional time will allow us to restore an orderly process to our offshore energy planning."

Though the recent MMS draft is the seventh five-year OCS plan developed by the agency, the move to delay the public comment period was met with mixed emotions.

"Clearly, consensus has developed around the need for OCS energy to be part of America's energy equation," said Cal Dooley, president and CEO, American Chemistry Council (ACC). "We cannot begin soon enough to reshape U.S. energy policy in a way that drives demand for American goods and services, including chemistry." The chemistry sector has been hit hard by high energy prices, and of the 120 chemical plants being built worldwide, 119 of them will be outside the U.S.

"Congress made the American people wait nearly 30 years to address our immediate energy challenges," said American Petroleum Institute (API) President Jack Gerard. "Secretary Salazar today told the American people they must continue to wait—even though more than two-thirds of them want to tap our vast domestic resources for the benefit of all Americans."

Gerard added the announcement could mean that development of "offshore resources could be stalled indefinitely." From Gerard's and many other industry leader standpoints, there have already been a record 120,000 comments collected on the OCS draft plan from state leaders, environmental groups, citizens and businesses, meaning the additional time for the comment period seems unnecessary.

The OCS represents an area roughly three fourths the size of the United States, totaling more than 1.7 billion acres. The area has been eyed for development because it is estimated to hold a massive cache of oil and gas, containing roughly 86 billion barrels of oil and some 420 trillion cubic feet of natural gas. Despite the restrictions in development over the last two decades, the OCS constitutes 27% of the U.S. oil supply and 14% of the country's natural gas supply. One of the largest areas affected in any future OCS drilling plan is the opening up of the Atlantic seaboard to development.

Salazar said that he intends to issue a final rule for offshore renewables in the coming months, "so that potential developers know the rules of the road."

Matthew Carr, NACM staff writer

 

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C4F: Employment Connections for the Business Credit Industry

 

 

5

In Honor of President's Day

A Collection Letter by George Washington, President of the United States

Philadelphia, June 30th, 1792.

Sir,

I little expected that I should have had occasion, at this time (after the pointed assurances you gave me more than three years ago, of discharging what was due to me, fully) to remind you that I have received only Three hundred and eighty pds. of the balance; and to ask what I am to expect from you in the future.—

I delayed from day to day while you were in this City (until it was too late) to apply to you on this subject, in hope, of an expectation that you would not have left town without mentioning it yourself.

Before I apply to the Executors of Colonels Taylor & Thornton who were securities for the money loaned to your deceased father, John Mercer Esqr. I will await the receipt of your answer to the letter which I hope will be given as soon as you can make it convenient.—

It has been of little avail hitherto, to inform you of the causes of my want of this money, although in more instances than one, I have done it with the utmost truth and candour; nor should I say anything further to you on this head now, were I not in a manner compelled to declare that from an occurrence which did not exist before have a call upon me, for a considerable sum, in a few months; against which it is indispensably necessary that I should be provided.—

I am—Sir

Your Most Obedt. Servant

G. Washington

To John Francis Mercer

(From Letters and Recollections of George Washington, New York, 1906.)

Source: Credit Monthly (now Business Credit magazine), February 1928

 

How Abraham Lincoln, the Lawyer, Answered a Credit Inquiry

Answering an inquiry from a New York concern, as to the credit standing of one of his neighbors, Lincoln, before his election to the Presidency, wrote the following letter:

Yours of the 10th received. First of all, he has a wife and baby; together they ought to be worth $500,000 to any man. Secondly, he has an office in which there is a table worth $1.50 and three chairs worth, say $1. Last of all, there is in one corner a large rat hole, which will bear looking into.

Respectfully,

A. Lincoln

Source: Credit Monthly (now Business Credit magazine), February 1926

 

Separating Fact From Fiction

Credit groups permit credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data as to the most recent payment practices. The purpose of exchanging information is to help group members segregate fiction from fact, so individually competent and realistic credit decisions about a customer can be made.

Managed and operated by NACM Affiliates nationwide, NACM-Canada in Canada and FCIB internationally, credit groups:

  • Provide unparalleled networking opportunities
  • Assist in the exchange of credit information on common customers
  • Facilitate the receipt of, and analysis of, information to make unilateral credit decisions
  • Provide the forum to discuss the latest developments on credit department procedures, equipment and other credit management functions
  • Support the discussion of account information and delinquent account reports
  • Adhere to federal antitrust guidelines

Click here to learn more about NACM credit groups and find the group for your industry.

 

 

6

Fed Assault on Credit Aims to Bring Economy Back From the Edge
In November, the Federal Reserve Board announced the creation of the Term Asset-Backed Lending Facility (TALF). The lending program was originally structured to help household and small businesses to obtain the borrowing they needed by supporting the issuance of $200 billion in securities backed by a variety of newly or recently originated loans, including Small Business Administration (SBA) guaranteed loans. The whole facility was leveraged by $20 billion from the Federal Reserve Bank of New York and the Central Bank stated it would "lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS."

With the economic outlook continuing to crumble, job losses mounting and Congress recently conferring a new stimulus package, the Fed decided that more drastic measures must be taken. Part of Treasury Secretary Timothy Geithner's Financial Stability Plan unleashed last week, the TALF will be substantially expanded to as much as $1 trillion, and its appetite of acceptable collateral will be broadened, with the program's leveraging power increased to $100 billion.

"Addressing our credit crisis on all fronts means going beyond simply dealing with banks," explained Geithner. "While the intricacies of secondary markets and securitization—the bundling together and selling of loans—may be complex, they account for almost half of the credit going to Main Street as well as Wall Street."

This is just one step of an escalating offensive against the credit crisis, targeting uncertainty, troubled assets, capital constraints and, most notably, accountability and transparency. The plan is to pump considerably greater sums into the financial mainline, while empowering investors and taxpayers, giving them a clear view into the workings behind any capital assistance.

Typically, one of the most troublesome spots has been with banks that make loans to small businesses for commercial real estate or automobiles that they then are usually able to bundle and sell on a secondary market. This instantly recycles money back to financial institutions, enabling them to make additional loans to other worthy borrowers. What has happened over the last two years is that those markets have iced over, and the ramifications have rippled through the financial system. Unable to sell loans into secondary markets, lenders have put a freeze on activity and rates have spiked. Between 2006 and 2008, there was a net $1.2 trillion decline in securitized lending in the secondary markets.

"If we want to thaw the credit markets for small businesses, we absolutely have to get the secondary market for small business loans moving again. TALF is a critical element in doing that," said SBA Acting Administrator Darryl Hairston. "We're glad the TALF is moving forward with some changes we asked for that will make SBA lending more attractive for 7(a) and 504 program lenders."

Geithner's new plan also makes sure that banks wanting assistance from the government must provide a plan on how they intend to utilize the funds to preserve and strengthen their lending capacity. If the bank is ultimately provided funds, the Treasury Department will then make those submitted plans public. Firms will then have to submit a monthly report to the Treasury Department detailing how many new loans they provided, as well as what category of loan it was. These reports will then also be made public and published on a website for all to see. The new motto for the agency is "Taxpayers have the right to know" and any information disclosed or reported to the Treasury Department by capital investment recipients will be made public and posted on the website www.financialstability.gov.

"Our economy is heading off a cliff and our financial and credit markets are frozen," said Representative Carolyn Maloney (D-NY) chair, Congressional Joint Economic Committee. "The key issues are whether financial losses are accurately measured, and that support to banks and other financial firms is provided effectively and with accountability."

Matthew Carr, NACM staff writer

 

 

Get Ready for the FTC's Red Flag Regulations and Guidelines


After a six-month delay, the May 2009 deadline for companies to be in compliance with the Federal Trade Commission's (FTC) "Red Flags Rules" is fast approaching. The regulations will require most creditors and financial institutions to adopt a written program to detect, prevent and mitigate identity theft in connection with the opening of a covered account or any existing covered account. The ambiguous wording of the FTC regulation means its jurisdiction can be far-reaching, and NACM is advising members to proactively develop their own "Red Flags" program. In the March issue of Business Credit magazine, NACM provides members a detailed explanation and breakdown of the rules' tenets, as well as a sample policy that credit managers can use as a guide to construct their own "Red Flags Program."

Not a subscriber? Click here for the NACM Bookstore to start your subscription now.

 

 

7

IMF Urges Coordination in Global Response to Banking Crisis
Managing Director of the International Monetary Fund (IMF) Dominique Strauss-Kahn recently issued a global call to action to regulators still on the fence about responding to the worldwide banking crisis, citing a fundamental loss of confidence by investors, employers and consumers as the central problem. "Our central goal should be to restore it. At a global level, this means that governments and central banks need to act decisively so that investors once again feel confident about the solvency of financial institutions," said Strauss-Kahn. "And they should credibly commit to measures sufficient to eliminate the risk of a repeat of the Great Depresssion."

Strauss-Kahn's comments were made in an address at a meeting of the South East Asia Central Banks (SEACEN), and stressed both the dire consequences that face the global economy if the world's policymakers fail to act and the importance of coordination among said policymakers in their efforts to contain the crisis. "We saw in 2008 that piecemeal responses are not enough," he said. "This does not mean that all countries should do the same things, or that there is a ‘one-size-fits-all' solution, but policy responses have to take into account the interconnectedness of national economies, and the fact that decisions taken in one country have profound effects on others."

As many have noted, Strauss-Kahn blamed the current crisis on opaque financial markets, greed and regulatory complacency. Moving forward, he said, policymakers should take action on three fronts: financial market measures in order to restart the flow of credit; monetary and fiscal policy measures aimed at offsetting the abrupt fall in private demand; and liquidity support for emerging market countries in order to reduce the risk that growth in these countries comes to a startling halt if financing runs out.

"Of course, not every country can undertake fiscal stimulus. Some countries—both emerging and advanced economies—cannot finance higher deficits without great risk to their creditworthiness," said Strauss-Kahn. "Some will need to contract their budgets rather than expand them, but the fact that some advanced and emerging economies cannot or should not engage in fiscal stimulus makes it all the more important that other countries do their part."

For more information, visit www.imf.org.

Jacob Barron, NACM staff writer

8

New Regulation Mandating Contractor Disclosures Cause for Unease
On December 12th, 2008, the new provisions of the Federal Acquisition Regulation (FAR) went into effect for federal contractors. Under the new provisions, these contractors must disclose to the government when there is "credible evidence" of their own violations of federal criminal law, making false claims and receiving "significant overpayments," or otherwise face suspension or debarment from federal contracting. There is continued concern from contractors regarding the ambiguity of the new FAR language, including how far into the past the disclosures are applicable, and the implications of the fact that small businesses were not exempt in the final rule.

"This is a new and complex regulation for federal contractors, particularly with respect to those violations that took place prior to December 12th that remain unreported," said Claude Goddard, Jr., chair, Akerman Senterfitt Government Contracts practice. The unease contractors feel about the regulations is evident by the fact that Akerman Senterfitt held a seminar on February 5th, discussing in detail "Mandatory Disclosures of Crimes and Fraud—What Every Federal Contractor Needs to Know."

The mandatory disclosures of FAR are defined in FAR 52.203-13, added to the existing Contractor Code of Business Ethics and Conducts clause. In federal contracts that exceed $5 million and will last 120 days or more, contractors are obligated to contact the Office of the Inspector General when it is believed that a principal, employee, agent or subcontractor has committed fraud, either by accepting a bribe or is guilty of any of the gratuity violations found in Title 18 of the United States Code, or has submitted a false claim. The regulation states that subcontractor disclosures must be made directly to the government and not the prime contractor, and that the mandatory disclosure provisions remain in place until three years after final payment on a contract. Though the new rules establish ground for disclosures effective for contracts beginning on or after December 12, 2008, the precedents regarding theft and embezzlement were set long ago.

The results of failing to disclose violations are outlined in changes to FAR sections 9.406-2 and 9.407-2, which deal with suspension and debarment. The knowing failure of a principal, until three years after final payment, to disclose to the government within a timely period any violations can result in suspension or termination of federal contracting.

The new regulations also state that contractors must establish a business ethics awareness and compliance program, which must be conducted periodically, informing principals and employees, and even agents and subcontractors, of their responsibilities under the law. There is also the establishment of a new internal control system which entails periodic reviews of the compliance program to ensure it is working, as well as to ensure no improprieties are taking place and that there is an avenue for reporting misconduct and appropriate disciplinary action for violations.

Matthew Carr, NACM staff writer

9

Man Gets 18 Months in Attempt to Defraud Ex-Im Bank
A California District Court Judge recently sentenced Carlos Serrano of Glendale, CA to 18 months in a community correctional facility in connection with a $1.3 million scheme to defraud the First International Bank of Connecticut (FIB) and the Export-Import Bank of the U.S. (Ex-Im Bank). In addition to the jail time, Serrano was also ordered to pay $924,569 in restitution to Ex-Im and placed on five years' probation.

Nearly a decade ago, Serrano agreed with his co-conspirators to act as an exporter in a loan transaction between a company in the Philippines and the FIB, with Ex-Im acting as the transaction's guarantor. Specifically, Serrano's goal was to obtain a $200,000 down payment from the Philippine company, purchase $1.3 million in goods on behalf of that same company, ship the goods and then promptly certify to the FIB and Ex-Im that he had purchased and shipped those goods. Using fake names, Serrano contacted several U.S. suppliers and obtained price quotes without ever actually purchasing any goods. Still, he then certified documents sent to and relied upon by the FIB and Ex-Im indicating that he had purchased and shipped $1.3 million in American goods.

Relying on these falsified documents and statements, the FIB sent Serrano $1.1 million in loan proceeds, of which he gave himself $28,000, his co-conspirators $949,000 and a company in Singapore $160,000. Due to the fraud, Ex-Im lost a total of $924,569.

The case itself was part of a larger investigation into an alleged $80 million scheme to defraud the Ex-Im Bank between November 1999 and December 2005. To date, eight individuals, including Serrano, have been convicted and sentenced to jail time for their involvement in the scheme, some for as long as three years.

Jacob Barron, NACM staff writer

 

 

 

 

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