Former CEO John Mills among witnesses testifying at trial
Alexander “Lex” Martinez, former CFO for Little Rock-based Affiliated Foods Southwest, was convicted June 2 of conspiring to commit bank fraud, aiding and abetting bank fraud by participating in a check-kiting scheme and aiding and abetting a false statement to a financial institution.
He is the second former employee of the wholesale company, which in 2009 went bankrupt and then ceased operations, convicted for fraud.
John Mills, former president, CEO and chairman of the board of Affiliated Foods Southwest, pleaded guilty in February 2010 to defrauding U.S. Bank of about $7 million in the scheme.
Mills was sentenced to 41 months’ imprisonment and three years’ supervised release, and he has to pay $3.17 million in restitution to U.S. bank. He began serving the sentence Jan. 3 this year.
The Martinez indictment alleged that he conspired with Mills to commit bank fraud.
Affiliated was the parent company over various entities, including Consolidated Warehousing, Convenience Store Supply Inc. (CSSI), and Supermarket Investors Inc (SII). The indictment showed that on an almost daily basis from Sept. 29, 2008, until Feb. 27, 2009, checks were kited from CSSI and SII and deposited into Affiliated Foods Southwest’s account. The systemic deposit of non-sufficient checks formed the basis of the bank fraud charge.
The total amount of checks kited during the scheme exceeded $11.5 million, according to the Federal Bureau of Investigation.
As part of the conspiracy, Martinez and Mills would create inaccurate comparative sales and income reports and quarterly consolidated financial statements, according to the FBI. In addition, they provided false information to the Affiliated board and to the U.S. Bank concerning a 2008 transaction purportedly involving the sale of some stores owned by Affiliated.
Mills was among 20 witnesses offering testimony during the Martinez trial, along with other Affiliated employees and board members and U.S. Bank employees. Affiliated had a $70 million participatory loan with U.S. Bank as the lead lender during the time period when the crimes occurred.
Martinez took the stand as the only witness in his defense, according to the FBI’s Little Rock field office.
The jury deliberated for an hour and half before coming back with the guilty verdict.
Sentencing will take place at a later date. The statutory penalty for each offense is not more than 30 years’ imprisonment and a fine of up to $1 million.
Affiliated Foods Southwest serviced hundreds of independent grocery stores in Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee and Texas.
When the company ceased operations, more than 1,800 people lost their jobs, and more than 600 employees and members of the cooperative lost $34 million in savings accounts with Affiliated, the Arkansas Democrat-Gazette reports.