A court in the US state of New Jersey has sentenced two men to prison for their parts in a US$1 million up-front fee fraud that centred on a purported standby letter of credit (L/C) that the fraudsters said would help their victims import gold.

Roy Gillar was sentenced to six years in prison while Harold Mignott faces three years in jail. A co-defendant, Jerrid Douglas is scheduled to be sentenced later this month.

Shell company

According to court records, the defendants fraudulently persuaded two victim company owners to enter a joint venture agreement with the defendants' New Jersey-based shell company.

The defendants falsely represented that their company could acquire and provide a standby L/C backed by either EUR 1 billion (US$1.1 billion) in cash or highly lucrative Mexican gold bonds.

Gold for refineries

The victim company wanted access to the standby L/C so it could purchase raw gold overseas and sell it to gold refineries.

As part of the joint venture agreement, the company agreed to pay the defendants US$1 million for the bank fee associated with the standby L/C.

Cover up

To cover up the scheme and convince the victims to approve the transfer of the funds, the defendants made numerous verbal and written misrepresentations, including providing the victims with a phony letter from a major international bank saying that it was ready, willing, and able to provide a EUR 1 billion standby L/C to the defendants' shell company.

But after the victim company owners transmitted US$800,000 of the US$1 million to the defendants, the defendants failed to provide a standby L/C or anything of value. Instead, the defendants misappropriated the money for their personal use.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.