Former company’s owners face fraud charges

The owners of G3K Display Inc., the parent company of a former North Springfield company that was known as Kiosko, have been indicted in U.S. District Court in New York City on numerous corporate accounting fraud charges.
http://www.rutlandherald.com/article/20150110/NEWS02/701109957

Published January 10, 2015 in the Rutland Herald Former company’s owners face fraud charges By SUSAN SMALLHEER Staff Writer NORTH SPRINGFIELD — The owners of G3K Display Inc., the parent company of a former North Springfield company that was known as Kiosko, have been indicted in U.S. District Court in New York City on numerous corporate accounting fraud charges. According to a press release from the Manhattan U.S. attorney’s office and the Federal Bureau of Investigation, the four executives of G3K and a customer for one of the firm’s major clients engaged in a massive fraud designed to use loan money for personal use, including expensive homes, cars, private school tuition and credit card bills. The FBI press release said $18 million in loans were at the heart of the fraud and that $2.8 million had been diverted for personal use. The company’s offices were closed in early May under court order after the company was placed into receivership due to the federal investigation. The people indicted and arraigned this week in Manhattan included Steven Kaitz, Latchmee Mahato, Jonathan Wheeler and Zachary Kaitz, all executives with G3K, and Kathleen Smith, an executive with G3K’s major client Foot Locker. G3K made display cabinets and materials for retailers. At the time it closed, the company said G3K had offices and manufacturing facilities in New York, New Jersey, Vermont and Oregon. It closed its North Springfield facility in May, when about 30 people lost their jobs. At that time, the federal government announced there was a criminal investigation underway into the company’s business practices. According to the release, Steven Kaitz and the other co-defendants were involved in an “elaborate scheme to defraud lenders and customers out of millions of dollars.” The G3K executives created “inflated sales and accounts receivable” to support their borrowing requests. No one from the Springfield office or the original owners were indicted, according to the press release. “As alleged, the defendants went to elaborate lengths to falsify company accounting data to defraud lenders and customers. To bolster the falsehoods, the defendants allegedly created fake e-mail accounts for fictitious employees of the defrauded customers. Now they will be made to answer for the charged collusion and self-dealing that supplanted honest business practices,” said Manhattan U.S. attorney Preet Bharara. No one at either the U.S. attorney’s office nor the FBI’s New York office returned calls for comment. Bob Flint, executive director of the Springfield Regional Development Corp., had worked closely with Kiosko and its local owners, the Pennell family of Chester. Kiosko was sold to G3K in 2012. “It’s such a shame that something like this happened that hurt so many people in our area. It was seen as a partnership to grow the company and, unbeknownst to anyone locally, it turned out to be something else entirely. What a waste to lose a talented, longtime local company over something like this.” According to the release, all five defendants were arrested Tuesday and arraigned Wednesday.