Former Chattanooga area auto dealer Joseph Prebul will be arraigned Friday in federal court in New York on criminal fraud charges.
He faces forfeiture of his money and property after his indictment Thursday in New York on charges of wire and mail fraud.
Mr. Prebul, former president of Prebul AutoGroup, is scheduled to be arraigned in a Southern District of New York court. He faces 11 counts of wire fraud and one count of mail fraud, according to a news release from the U.S. attorney's office in Manhattan.
He must forfeit all property that came from proceeds of the wire and mail fraud offenses, according to the indictment. That includes, but is not limited to, at least $6.8 million and property at 401 Brady Point Road on Signal Mountain owned by Mr. Prebul, according to the city directory.
If neither the money nor that property is available, the government seeks forfeiture of any other property belonging to Mr. Prebul up to the value of the original property sought, according to the indictment filed by Lev L. Dassin, the acting U.S. attorney in the Southern District of New York.
Each fraud count carries a maximum sentence of 20 years in prison and a maximum fine of either $250,000 or twice the gross gain or loss from the offense, whichever is greater.
Mr. Prebul's attorney in the New York criminal case, Roland Riopelle, did not return calls Friday seeking comment.
Mr. Prebul was arrested in February in Chattanooga in a criminal complaint for allegedly defrauding his brother-in-law out of $7 million. He then was forced to file for bankruptcy protection and liquidate all his dealerships.
A criminal complaint is a sworn affidavit investigators can present to a judge as a document for charging someone without going through a grand jury.
Mr. Prebul said in recent civil court filings that his brother-in-law, Danny Bensusan, conspired to have him arrested because he couldn't immediately make a loan payment.
Mr. Bensusan filed a $32 million lawsuit against Mr. Prebul in Circuit Court in Hamilton County on Feb. 12. He withdrew that and filed another civil lawsuit in federal court in New York through New York attorney Gerald McMahon, but a judge has allowed Mr. Prebul to keep the Circuit Court case going.
From 2004 through December 2008, Mr. Prebul allegedly solicited Mr. Bensusan and others to invest money in a cash management program that he said would earn an above-average interest rate of return, according to the indictment. But instead of earning interest, the money was deposited in a Chrysler cash management account, where Mr. Prebul could transfer dealership profits.
"As (Mr.) Prebul well knew, the funds in the Chrysler CMP Account offset the amount of interest that Chrysler charged on the outstanding balance of a car dealership's loan," according to the indictment.
In July 2004, Mr. Prebul wrote to Mr. Bensusan's son that "(there) is no better setup at any bank in America. It's only for car dealers who borrow large amounts of money. If we are holding a large sum of deposit, let's put the money to work and give us a great rate of return with no risk associated with the deposit. If you need it for operations, just call (an employee) and he can wire the money on the same day of the request," according to the indictment.
The scheme allowed Mr. Prebul to obtain millions of dollars from Mr. Bensusan and his family through interstate wire transfers from a financial institution in New York, according to the indictment.
The money was not immediately available to investors because Mr. Prebul used it to finance business operations and to "fund a lavish lifestyle," according to the indictment. But Mr. Prebul created false client account statements to maintain his scheme, according to the indictment.
The mail charge comes from a $500,000 check Mr. Bensusan mailed via Federal Express after false representations from Mr. Prebul caused Mr. Bensusan to mail it, the indictment states.
In July 2008, Mr. Bensusan requested about $6.5 million, of which Mr. Prebul returned $4.5 million. When Mr. Bensusan requested more and did not receive it, he demanded an accounting and a return of all invested funds.