Published February 18, 2012 in the Rutland Herald
Former Middlebury company executive pleads guilty to fraud
A former executive with Specialty Filaments Inc. in Middlebury pleaded guilty this week to a federal charge of conspiring to commit more than $1 million worth of bank fraud.
Jeff Audette, former vice president of the company that declared bankruptcy and closed its doors in 2007, pleaded guilty on Monday during a closed-door hearing in Burlington, according to U.S. District Court records only made public Thursday.
Audette faces up to five years in jail and a fine of up to $250,000 or twice the gross gain or loss, whichever is greater, according to a plea agreement Audette accepted.
The former vice president was charged in late December but the information, plea agreement and other docket information were sealed by order of federal Judge William Sessions who wrote in the order to seal that secrecy was needed to “protect the integrity of the investigation.”
While certain elements of a case are occasionally sealed, it’s rare for information about a case to be kept secret to the point that even its existence is off-limits.
But Assistant U.S. Attorney Gregory Waples said Friday that the extreme measure was necessary to secure Audette’s cooperation in a potential future criminal case.
“He was cooperating at that time with another potential target and that would not be possible if the case was public knowledge,” Waples said, adding that the target he referred to was a “person who could bear criminal responsibility.”
Audette is the second former employee of Specialty Filaments to plead guilty to conspiracy to commit bank fraud.
In September, former director of finance Paul Mammorella, 56, pleaded guilty in exchange for a plea deal that required he cooperate with federal investigators. A sentencing hearing for Mammorella has been set for March 12.
According to information that Waples filed in Mammorella’s and Audette’s cases, Specialty Filaments had a line of credit with Wells Fargo allowing them to borrow 85 percent of the value of its last 90 days worth of accounts receivable and 50 percent to 66 percent of the value of its inventory.
The company had to give Wells Fargo periodic reports on its collateral so the bank could adjust its credit line.
Waples said the company falsified those reports from June to December of 2006, inflating the company’s accounts receivable and inventory, getting the bank to loan substantial sums of money.
Those actions cost Wells Fargo and the Vermont Economic Development Authority, which guaranteed a portion of the loan, more than $1 million when Specialty Filaments went bankrupt, Waples wrote.
Documents in the case were unsealed Thursday, a day before a hearing was set to take place on a request by the Burlington Free Press seeking to make the records public.