Two men have been found guilty of committing a multi-million dollar fraud using false documents to obtain letters of credit (L/Cs) from US and foreign banks.

Transactions involving foreign banks were backed by the US Department of Agriculture's (USDA's) export financing programme.

When some of the foreign banks failed to meet their L/C obligations, the fraudsters claimed on USDA's payment guarantee for US agricultural exports.

Guilty verdicts

Pablo Calderon and Brett Lillemoe have been found guilty in a federal court for frauds amounting to US$25 million.

The fraudsters used multiple forged documents to obtain L/Cs from banks operating in the US, including Deutsche Bank and Colorado-based CoBank ACB, by presenting false and altered shipping documents, including altered bills of lading.

USDA guarantee

They similarly obtained L/Cs from foreign banks using forged documents that also enabled them to secure credit guaranteed by USDA's GSM-102 programme.

Under this programme, a foreign importer that has contracted to buy US agricultural products can apply for an L/C from an approved foreign bank. It then issues an L/C in favour of the US exporter.

Foreign defaults

If the foreign bank defaults on its payment obligations, a claim can be submitted under the USDA guarantee for up to 98 per cent of the payment amount owed at the time of the default.

The foreign banks involved in this scheme defaulted on over US$25 million of loans for which USDA's GSM-102 programme had to pay out the guarantees.

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