The former president and chief executive of a Bohemia finance company pleaded guilty Friday to bank fraud in a scheme that cost investors and lenders more than $100 million, according to federal prosecutors.
John P. Murphy, 63, of Nesconset, the former head of Oak Rock Financial LLC, admitted in court that he fooled banks into loaning him money by lying about his company's crumbling finances, prosecutors said.
"Mr. Murphy, instead of being a steward of Oak Rock Financial, spent his time cooking the books," George Venizelos, the New York FBI office's assistant director in charge, said in a statement. "Let this serve as a reminder to executives everywhere that honesty and integrity are more important than the bottom line."
Oak Rock Financial, a commercial lending company that provided capital to start-ups and other businesses, itself borrowed from several institutions, but primarily from Manhattan-based Israel Discount Bank of New York, prosecutors said.
Murphy's attorney, Stephen P. Scaring of Garden City, said the economy tanked and some of his client's customers fell behind on their loan payments.
"These were real loans. They were just loans that were behind," Scaring said.
From January 2009 to April 2013, Murphy admitted that he created fake "accounts receivable" to keep his own lenders at bay.
Reading a detailed statement, Murphy also said in court that he "re-aged" some of his customers' delinquent accounts by copying data from accounts in good standing. He also changed the delinquency dates on some accounts in order to keep collateral and loans current.
Murphy, showing no emotion and making no personal comments, pleaded guilty in federal court in Central Islip.
He faces up to 30 years in prison. No sentencing date has been scheduled.
Murphy was released on $1 million bond, with two homes put up as collateral: the Nesconset house Murphy and his wife own; and a house belonging to friends of the couple, authorities said.
U.S. Magistrate Judge Gary R. Brown questioned Murphy's wife in the courtroom Friday, asking how she was doing.
"As best as I could be," she replied.
Brown urged to her to keep watch over her husband and make sure he returns to court for sentencing.
She told the judge that she has been with her husband for nearly 45 years and that won't be a problem. Murphy surrendered his passport and isn't allowed to travel beyond New York and New Jersey.
Scaring disputed the government's estimated losses of more than $100 million.
He said the government has already recovered more than $30 million of the initial $90 million in loans.
Assistant U.S. Attorney Michael P. Canty, who is prosecuting the case, had no comment on how much money the government may have recovered so far.
Scaring said Murphy invested about $40 million of his own money in Oak Rock Financial.
"He's been an honest man for all his life," Scaring said. "He certainly regrets what he did."