A woman who was the CEO of a high-end jean company that outfitted Hollywood celebrities was sentenced Monday to 6 1/2 years in federal prison for running what prosecutors characterized as “two fraud schemes of epic proportions.”
Carolyn Marie Jones, 52, of Corona, was also ordered by U.S. District Judge Michael W. Fitzgerald to pay over $15 million in restitution to individual investors and Union Bank of California, according to federal prosecutors.
Fitzgerald said the defendant, who pleaded guilty in February to one count each of bank fraud and concealing assets in a bankruptcy proceeding, was “truly a greedy, awful person.”
The defendant “executed not one, but two, fraud schemes of epic proportions resulting in a loss to Union Bank and numerous investors of $15.1 million,” prosecutors wrote in a pre-sentencing memorandum that outlined one scheme involving bank loans and bankruptcy fraud and a second one targeting individual investors that Jones perpetrated while free on bond after being indicted in the bank fraud case.
According to court documents, Jones defrauded Union Bank in a scheme related to DDI — sometimes known as Diamond Decisions — which sold jeans under the labels Privacywear and PRVCY Premium.
Union Bank issued an $8.5 million line of credit — which was later increased to $15 million — to Jones in late 2008, based on a fraudulent loan application that used another person’s Social Security number, bogus tax returns that had never been filed with the Internal Revenue Service and false financial statements that grossly overstated the company’s profits, prosecutors said.
Jones “knowingly submitted false and fabricated tax returns, income statements, accounts receivable reports, and other financial documents to Union Bank,” according to the pre-sentencing memo.
“She lied to numerous bank employees about her company’s success and sales, among other things,” federal prosecutors wrote. “She fabricated fake customers and retail stores purportedly buying her products.”
Jones also admitted in court that the accounting firm she claimed had audited her financial statements was a sham company, federal prosecutors said, adding that she also confessed to lying to Union Bank employees, including the loan officer.
The defendant soon defaulted on the $15 million loan, and Union Bank filed a civil lawsuit against DDI in state court, officials said.
When the court issued an order authorizing Union Bank to seize the company’s assets, Jones filed a Chapter 11 bankruptcy petition in February 2010 that listed the bank as the sole creditor.
In the following months, Jones lied to the bankruptcy trustee, concealed DDI assets, specifically about $120,000 that she had received from DDI customers, and spent some of the money on herself, according to the U.S. Attorney’s Office.
“Jones operated a sophisticated and devious scheme that spanned many years and caused significant financial and personal harm,” said Eileen M. Decker, the U.S. attorney in Los Angeles. “Jones’ actions were driven by greed, caused losses to both a financial institution and individuals, and has now resulted in a significant prison sentence.”
As part of a plea agreement in this case, Jones apologized to the identity theft victim in the bank fraud case, and she agreed to pay $15 million in restitution to Union Bank and $124,100 in restitution to victims whom she admitted defrauding in the second scheme.
— City News Service