Roy William "Will" Harris was the Chief Executive Officer and majority shareholder of Arochem Corporation, a now defunct refinery and petrochemical plant located in Ponce, Puerto Rico which ceased operation in 1992.
[1] Harris was convicted of conspiracy to commit wire and bank fraud, money laundering, engaging in a continuing financial crimes enterprise (CFCE).
[6] Harris was also the sole shareholder and managing director of Arochem International, Ltd. ("Limited"), based in the Cayman Islands, which engaged in trading and financing of crude oil and petroleum products.
[6] The companies, under Harris's leadership, managed a revolving credit facility with the banks that allowed them to borrow up to $245 million for their operations, secured by their oil inventories and other assets.
In response to growing losses, Harris and his executive team, including the CFO Vincent Dispenza, comptroller Dean Seniff,[7] and other senior officers, allegedly engaged in widespread fraudulent activities to conceal the companies' true financial condition and to continue securing loans from the banks.
According to Harris's indictment (summarized):From January 1990 to December 9, 1991, Arochem Companies submitted borrowing base reports to their lending banks, showing that the collateral securing their loans exceeded $200 million.
[6]The fraudulent practices involved falsifying financial statements, manipulating oil inventory valuations, and creating fictitious contracts and documentation to inflate Arochem's profits and asset values.
According to the Los Angeles Times, Phony documents allegedly were created to show that Arochem had $60 million in crude oil stored in Malaysia.
[8]According to the federal indictment (summarized):In late 1989, Arochem Companies began experiencing severe financial struggles, with a reported deficit by early 1990 between $60 to $65 million.
During a meeting among key officers, Seniff disclosed the deficit and, alongside Dispenza, discussed plans to inflate Arochem's financial statements by overstating its crude oil inventory.
After Harris rejected a plea bargain that would have earned him a maximum three-year sentence, a New York jury convicted him in December 1992 of engineering a scheme to defraud the bank consortium.
Prosecutors identified false financial documents and sham contracts, as well as accounting ledgers doctored to overvalue the companies' oil inventory and hide its large losses.
Under the statute, the government must prove that the defendant organized or managed a group of individuals who committed at least three separate financial crimes and received at least $5 million in gross receipts during a two-year period.
The appellate court rejected this argument, affirming the principle that in cases involving continuing offenses, conduct occurring both before and after the enactment of the statute can be considered in determining guilt.
The United States v. Harris case is notable for its contributions to the legal understanding of financial fraud, money laundering, and the application of the CFCE statute.
However, the appellate Federal Judge Charles Haight Jr. responded in his decision:Viewing the case in this light, I conclude that the continuing financial crimes enterprise statute gave defendant adequate warning that the charged conduct would fall within its terms.
[6]Harris's legal team also tried to use that the CFCE law was focused on drug king pins as a means to appeal, arguing that other financial crimes were different in nature.