Macquarie Group sues family of alleged US fraudsters

Macquarie Group is chasing $US40.7 million ($52 million) from an American family that ran a billion-dollar-plus cocoa trading business, after emails between staff allegedly revealed one of the biggest fraud cases in recent US history.
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Macquarie has joined forces with several other banks including Dutch financial giant ABN AMRO to sue the father-son duo that ran one of the world’s largest suppliers of cocoa products, Transmar.

The banks allege they were hoodwinked into believing Transmar was financially sound ahead of lending the company a total of $US360 million in 2016.

The civil lawsuit was filed on Monday in the New Jersey courts.

Transmar, which counted chocolate makers Hersheys and Nestle as clients, collapsed in 2016.

A cache of allegedly incriminating emails were unearthed during the company’s insolvency proceedings during 2016 and 2017, which allegedly showed the great accounting lengths the company’s staff went to to cover up a $US140 million deficiency in its accounts.

The emails allegedly show Transmar’s executives openly referring to the company having two sets of books – one set that was shown the its banks and tax authorities which painted the company as financially strong, and another set of books –allegedly hidden from the banks– that revealed the company’s actual parlous financial position.

Former Transmar chief executive Peter G Johnson and his son Peter B Johnson, who ran Transmar’s Euromar Commodities business were charged in the US over their alleged fraud in August. The charges include bank fraud, wire fraud affecting a financial institution and conspiracy to commit fraud.

Both men have denied any wrongdoing and have pled not guilty to the charges. Other family members working at Transmar and as well as other senior staff are named in the civil suit filed by the banks.

Lawyers for the Johnsons have been contacted for comment. Macquarie declined to comment on the matter as it was before the courts.

The banks allege Transmar’s representatives including the Johnsons reverse engineered the company’s profits and earnings to ensure they were strong enough to not raise any red flags with the banks.

This was allegedly done by adding faked contracts for new business to the company’s books over several years.

The court documents in the banks’ case against the Johnsons include emails allegedly sent by members of the Johnson family, which the banks claim highlight the fraud the family was conducting.

One email included in the court document allegedly from Peter Johnson Snr to his son Peter Johnson Jnr reads: “NOT SURE HOW TO UNWIND ALL THIS SHIT——BUT NOT SURE THESE CONTRACTS CAN BE TREATED AS FUNCTIONALLY “REAL” —WE PUT THEM IN TO ARTIFICIALLY PUMP PROFITS/EXPAND VALUATION FOR IT/OFFSET INTERCOMPANY [BALANCE] BB (‘borrowing base’ reports) HOLES ETC. HOW WE SPREAD THESE/ELIMINATE THESE IS THE TRICK—“

Another email from Mr Johnson Jr to his colleagues allegedly states: “[e]ventually, the whole circus tent is gonna fall in on us. The banks seem to be circling us in ever closer circumference as well.”

The banks allege they were fraudulently induced to lend Transmar up to $400 million after being presented with the company’s accounts that showed it had strong earnings and low borrowings.

“The defendants communicated openly about the fraud, including discussing the mechanics of inflating collateral value, the necessity of maintaining two sets of books, and even the “existential threat” posed to the company by their conduct,” the complaint alleges.

“Defendants sought to protect themselves against discovery of their blatant fraud by the dubious technique of putting subject matter lines on their emails such as, ‘DO NOT FORWARD -DELETE’ and ‘VERY CAREFUL – DO NOT FAT FINGER FORWARD.'”

According to the banks’ claim, the alleged fraud appears to have started as a result of an actual financial loss on a large trading position in 2012, referred to by the family as “the infamous Dick Krysty [former Transmar CFO] nonexistent butter position”. (Mr Krysty has not been accused of any wrongdoing in the civil action or the criminal action.)

After that, it is alleged, the Transmar’s books were cooked to cover up the loss and other losses it was incurring.

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