in Elaborate Shipping Scam
TRENTON - Attorney General Gurbir S. Grewal announced that a man was sentenced to prison today for orchestrating an elaborate shipping scam by which he defrauded five freight brokers out of $2.6 million. The defendant fled the country and was a fugitive for eight years after being indicted in 2011, but he returned in July 2019 and surrendered to the Division of Criminal Justice.
Rajendra Patel, 62, who previously resided in Jersey City, N.J., was sentenced seven years in state prison by Superior Court Judge Mitzy Galis-Menendez in Hudson County. Patel pleaded guilty on Aug. 9, 2019 to second-degree theft by deception. He must pay full restitution to the victims.
Deputy Attorney General Thomas Huynh prosecuted the case and handled the sentencing for the Division of Criminal Justice Financial & Cyber Crimes Bureau.
“Thanks to the work of our prosecutors and detectives, this longtime fugitive is going to prison for perpetrating a multimillion-dollar fraud scheme targeting the freight industry,” said Attorney General Grewal. “Con artists like this defendant harm honest business operators and impose huge costs which ultimately impact consumers as well.”
“I commend the attorneys and detectives in our Financial & Cyber Crimes Bureau who exposed this elaborate scheme and secured this sentence,” said Director Veronica Allende of the Division of Criminal Justice. “We will continue to use our expertise to aggressively prosecute financial fraud and seek restitution for victims.”
Freight brokerage companies are paid a fee for serving as “middle men” between companies that need freight moved and carriers that agree to move the freight. They arrange for shipment of goods, collect payment from the company shipping the goods, and pay the carrier that moves the goods. Such brokers will extend credit to companies that regularly ship goods through them. Patel ran a scam, similar to what is known as a “bust out,” in which he built up a line of credit with the brokers and then used that credit to defraud the brokers. It is alleged that two co-conspirators who remain fugitives assisted Patel.
What was unusual about this scheme was that the defendants engaged in transactions in which one of their companies – Prime Time Freight or Diamond Freight Solutions – contracted with the freight broker to ship goods from California to New Jersey, and another one of their companies – PRP Enterprises – responded to the internet job notice posted by the broker and was hired as the freight carrier that moved the goods. The brokers were unaware of the connection between the companies. Because of the line of credit, the broker would pay PRP before the broker was paid by Prime Time or Diamond Freight.
Patel and his alleged co-conspirators initially gained the confidence of the brokers and built up a line of credit by moving some actual freight using independent drivers and major freight carriers. But PRP eventually stopped moving actual freight, while continuing to submit and be paid for fictitious invoices with falsified supporting documentation. Prime Time and Diamond Freight contracted with the brokers for a total of 1,217 shipments. The defendants allegedly laundered the illicit proceeds through a complex scheme involving moving money between the companies and making payments to relatives and other individuals to whom they had ties.
Part of the money paid to PRP by the five freight brokers was transferred through a series of transactions to Prime Time and Diamond Freight and ultimately used by those companies to, in essence, pay the brokers with their own money. However, ultimately, Prime Time and Diamond Freight failed to pay $2,630,613 that they owed to the five freight brokers. The brokers paid approximately $3.9 million to PRP. They received only about $2.1 million in payments from Prime Time and Diamond Freight out of the total of about $4.7 million which the two companies owed under their contracts.
The case was presented to the state grand jury by former Deputy Attorney General Francine S. Ehrenberg. The investigation was conducted for the Division of Criminal Justice Financial & Cyber Crimes Bureau by former Lt. James MacInnes, former Detective Sgt. Robert Walker, former Analyst Amy Patterson and former Deputy Attorney General Ehrenberg. They were assisted by Auditor Charlene R. Singleton of the New Jersey Division of Taxation.
Robert G. Stahl, Esq., and Andrew Olesnycky, Esq., Stahl Criminal Defense Lawyers, Westfield, N.J.