April 7, 2008

ERNEST FRED PIERCE PLEADS GUILTY TO BANK FRAUD CONSPIRACY

The Office of the United States Attorney for the District of Vermont announced that Ernest Fred Pierce, 52, of Grand Isle, pleaded guilty today in United States District Court in Burlington to a charge that he conspired to commit bank fraud. Chief U.S. District Judge William K. Sessions III released Pierce on conditions pending sentencing, which has been scheduled for August 4, 2008.

According to court records, Pierce founded Vermont Technology Group, LLC in about 2002. Vermont Technology was a company which provided information technology support services to client companies. In 2005, Vermont Technology obtained a $300,000 business line of credit from Chittenden Bank that was secured by Vermont Technology's accounts receivables. Under the lending agreement, Vermont Technology could borrow up to 80% of its accounts receivables that were outstanding 90 days or less. Vermont Technology was required each month to provide Chittenden with accounts receivables aging reports which showed each receivable owed to Vermont Technology. These reports determined how much money Vermont Technology could borrow from the bank.

In the summer and fall of 2005, Vermont Technology lost some big clients and developed financial problems. Beginning in October 2005 and continuing through June 2006, Pierce and another Vermont Technology employee created and caused to be sent to Chittenden Bank accounts receivable aging reports that falsely reflected a substantial receivable owed by the Veterans' Administration. In fact, Vermont Technology never did business with the VA and was owed no money by that agency. At first, the non-existent VA receivable was reported to be for $86,000, but that grew over the months to $155,000. This enabled Vermont Technology to fraudulently obtain under its line of credit about $120,000 from Chittenden Bank.

In August 2006, Chittenden discovered the fraud and terminated the line of credit. Vermont Technology went out of business and Pierce filed for bankruptcy. The bank instructed Pierce to turn over all accounts receivable payments Vermont Technology received for past services, but instead Pierce misappropriated most of these moneys and used them for improper purposes.