Report says former company executives engaged in elaborate fraud

LUNENBURG (AP) -- The top three officers of a plastics company here created fake customers as part of an elaborate $30 million fraud and also used corporate money to pay for personal expenses, including income taxes, according to an independent examiner's report.

The report by Examiner Charles Glerum details years of alleged misconduct by former Gitto/Global Corp. officers Gary Gitto, Charles Gitto Jr. and Frank Miller.

It also alleges for the first time that Gary Gitto took tens of thousands of dollars of kickbacks from customers.

The report was prepared by Glerum under orders the by U.S. Bankruptcy Court in Worcester. The company was acquired by Toner Plastics Inc. of Agawam in a U.S. Bankruptcy Court auction in 2004. Company officials fought efforts to make the report public, but it was released on Thursday after the Telegram & Gazette of Worcester won decisions in three courts.

Mark Cheffers, a forensic accountant hired by the Telegram & Gazette to examine the report and related records, said the fraud required "a sophisticated document trail, not just fake invoices but fake shipping records, cash accounts, receiving records and any number of documents."

An attorney for Miller declined comment to the Telegram & Gazette. Charles Gitto's lawyer did not return a phone call seeking comment.

Gary Gitto's lawyer, Max Stern, issued a written statement in which he blamed the financial schemes on Miller, who was president of the company before it entered bankruptcy.

The examiner cautioned that some allegations require additional investigation. The three company officials invoked their Fifth Amendment rights and did not cooperate with him.

A key allegation is made by the company's lender, LaSalle Bank of Chicago, which charges that Gitto/Global created false customers -- and supporting documentation -- to defraud it of more than $30 million.

Among the other allegations in the 154-page report:

-- Gary Gitto engaged in a kickback scheme with one customer that generated payments to him of $39,280 during 2004. His lawyer denied that Gitto had any involvement in any illegal activities.

-- At least nine other employees participated in the scheme. The scene at the company was chaotic in the days just before its bankruptcy filing, with officers removing boxes of documents while others shredded potential evidence.

-- The company paid the $70,000 annual salary of the captain of Gary Gitto's personal boat.

-- Company funds were used to pay for maintenance and other work on the executives' homes. In 2001, for instance, the company spent $93,000 on building maintenance and $78,000 for grounds maintenance on their private homes.

-- Between 2000 and 2002, company funds paid for hundreds of thousands in car, insurance, telephone, airfare, travel and entertainment expenses for the Gittos and Miller. The company spent $986,538 on such expenses for Charles Gitto, $801,468 for Gary Gitto and $432,559 for Miller. Glerum noted some of the expenses may be legitimate.

The U.S. attorney's office in Boston has said repeatedly that it cannot confirm or deny whether it has launched a criminal investigation into Gitto/Global.

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