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Monmouth County Man Admits Orchestrating Multimillion-Dollar Accounts Receivable Factoring Scheme


Today, a Monmouth County man admitted defrauding lenders of approximately 50 million dollars in connection with an invoice factoring scheme perpetrated over nearly a decade, U.S. Attorney Philip R. Sellinger announced.

According to U.S. Attorney Sellinger, Vincent Galano, 59, of Oceanport, pleaded guilty to an information charging him with one count of wire fraud.

According to documents filed in this case and statements made in court:

Accounts receivable factoring (factoring), also known as invoice financing, is a financial transaction through which a company obtains cash by selling its unpaid invoices, ordinarily at a discount, to a factor. 

Factoring clients send their debtors notices of assignment naming the factor as the assignee of the debt owed on the invoices. 

The factor, in turn, collects invoiced amounts owed by the clients’ debtors and, upon collection of the entire invoiced amount, pays its clients the balance of the invoice, deducting the factor’s fees.

Galano formed Prime Financial Funding LLC (PF Funding) in 1996 for the purpose of factoring accounts receivables for various corporate clients. 

In 2007, PF Funding entered into a secured lending relationship with a single-purpose entity created to finance PF Funding’s factoring business. 

Shortly thereafter, the factoring lender established a line of credit as a means to provide PF Funding capital to grow its receivables portfolio. 

Over the next several years, PF Funding grew its factoring business by drawing from the line of credit while maintaining as current its loan obligations to the factoring lender. 

However, beginning in 2011, through PF Funding, Galano purchased increasingly greater numbers of invoices for which he was unable to collect the debt owed on the receivables. 

To justify PF Funding’s continued draws from the line of credit, Galano concealed this bad debt from the factoring lender by misrepresenting the bad invoices as collectible on reports he routinely provided to the factoring lender. 

In other instances, Galano mischaracterized invoices that had already been paid and collected as outstanding and capable of being factored, in essence, double-counting to drive up the outstanding receivables. 

In the reports provided to the factoring lender, Galano manipulated the overall value of PF Funding’s portfolio of outstanding invoices in an amount proportional to the funds he needed to draw from the unsecured line of credit to maintain as current the principal and interest payments on his outstanding loans.

Engaging in this pattern of misrepresentation over nearly a decade, by 2020, PF Funding had ultimately defaulted under its loan obligations, owing approximately $50 million to its lenders by virtue of the scheme. 

During a May 2020 telephone call with his lenders, Galano admitted that he had concealed significant losses suffered by PF Funding over many years. 

He further admitted that he had routinely distributed to lenders over that prolonged period fabricated reports that overstated the number and value of outstanding invoices, which the reports represented as payable.