CEO Of Private Equity Fund Charged In Manhattan Federal Court With Lying To Bank

Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ELLIOTT SMERLING was indicted this morning on charges of wire fraud, bank fraud, and aggravated identity theft for seeking and obtaining an approximately $95 million subscription-backed line of credit for his $500 million private equity fund on the basis of a forged audit letter, falsified subscription agreements, and falsified bank account statements.

Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Elliot Smerling went to elaborate measures to create a blatantly false picture of the financial underpinnings of a private equity fund in order to obtain a $95 million line of credit.  Through a forged audit letter and falsified subscription agreements and bank statements, Smerling allegedly induced a California bank to make a loan commitment it never would have made had it known the truth.  Now, the truth has landed Elliot Smerling in federal court.”

FBI Assistant Director William F. Sweeney Jr. said:  “Falsifying information in order to secure a loan, regardless of the amount, is a crime.  When the loan secured is nearly $100 million, the stakes are even higher.  As alleged, Smerling engaged in illegal practices in order to benefit his interests.  Today he’s learned the consequences of his alleged actions.”

According to the Indictment filed today in Manhattan federal court, and the Complaint[1] unsealed February 26, 2021, in the Southern District of Florida:

From at least in or about December 2020 through at least in or about February 2021, ELLIOT SMERLING, the defendant, solicited and obtained on behalf of the general partner (“General Partnership-1”) of a private equity fund (“Private Equity Fund-1”), a loan of approximately $95 million from a commercial bank headquartered in California (“Victim Bank-1”), which was secured by purported capital commitments made by the limited partnership of investors in Private Equity Fund-1 (“Limited Partnership-1”).  SMERLING obtained the approximately $95 million loan on the basis of falsified documents and material misrepresentations, including:  (1) a forged audit letter, purportedly prepared by an international network of accounting, audit, tax, and professional services firms (“Audit Firm-1”), attesting to the audited financial statements of Limited Partnership-1; (2) forged subscription agreements that falsely represented that the investment fund of a private university based in New York, New York (“University Endowment Fund-1”), and the chief investment officer of that fund (“Chief Investment Officer-1”) had committed $45 million to fund Limited Partnership-1, and that the investment management division of a banking and financial services firm headquartered in New York, New York (“Investment Manager-1”), and the chief executive officer of Investment Manager-1 had committed $40 million to fund Limited Partnership-1; and (3) falsified bank records purporting to attest to a $4.5 million wire transfer from University Endowment Fund-1 to Limited Partnership-1. 

On or around December 1, 2020, SMERLING contacted an employee of Victim Bank-1 concerning SMERLING’s interest in acquiring an approximately $95 million loan for SMERLING’s $500 million private equity fund, Limited Partnership-1.  The loan sought by SMERLING would substitute for an existing line of credit SMERLING had secured from a multinational financial services company (“Commercial Bank-1”), where Limited Partnership-1 purported to have an existing line of credit with an outstanding loan balance equal to the amount sought by SMERLING from Victim Bank-1.  The employee of Victim Bank-1 referred SMERLING to a director in the Global Fund Banking Group at Victim Bank-1 (“Witness-1”).

Thereafter, in or…