The ex-president of Ohio-based Premier Healthcare Management was sentenced to serve 42 months in prison, followed by three years of supervised release, for defrauding S&T Bank out of over $59 million.
The DOJ announced the sentence for 68-year old Harold Sosna on October 7. An order for financial restitution in an as yet undetermined amount is expected to follow, according to the Pittsburgh Post Gazette
“Harold Sosna received a long prison sentence, which is consistent with the magnitude of his fraud scheme ... He cheated community banks in western Pennsylvania and Ohio of an astounding sum — $59 million. Sosna is responsible for the largest bank fraud scheme ever prosecuted in our District,” stated acting U.S. attorney Stephen Kaufman.
The term “check kiting” originated in the 1920’s and derives from the expression “flying a kite” which was used to refer to the practice of issuing loans that were unsupported by collateral apart from the thin or hot air keeping them aloft. In practice, check kiting is a scheme in which the perpetrator writes bad checks between multiple accounts
perpetuating a state in which deposits (for non-existent funds) are registered as processing thereby tricking the bank into allowing withdrawal or transfer for funds that were in fact never available. In essence, the perpetrator of this type of scheme is surreptitiously obtaining a loan without collateral or the bank’s consent to enter into such a transaction.
Under the executive leadership of Sosna since 1998, Premier Healthcare Management owned nine Ohio nursing care facilities, each under distinct corporate subsidiaries with separate bank accounts. As reported by the Pittsburgh Post-Gazette, court documents show that by 2017, Premier’s financial situation became increasingly desperate, and then finally ruinous after the onset of the COVID-19 pandemic.
In a bid for leniency, defense attorney Herbert Haas explained to the court that his client was unwilling to consider resorting to bankruptcy out of his "love of the staff, the patients, his family, and frankly, his own pride and ego.”
According to the defense, unwilling to admit defeat, and no longer able to support Premier’s operations with short-term payday loans, Sosna’s health deteriorated
, and he began to abuse alcohol.
Purportedly in a final act of desperation, during a three day period in May, Sosna negotiated 203 checks through various subsidiary accounts, processing more than $118 million in unfunded transactions between S&T Bank and First Financial Bank, resulting in defrauding S&T Bank of over $59 million. After the banks discovered some irregularities, Sosna turned himself in and cooperated with investigators, which his attorneys argued warrants consideration and leniency.
“Mr. Sosna is deeply, deeply remorseful for his conduct, and as his actions have demonstrated, he has devoted himself to doing whatever it takes to make amends for his crimes,” stated attorney Haas
Under Federal law, bank fraud is punishable by up to 30 years