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Ex-Oak Rock Financial CEO Pleads Guilty to Fraud Scheme

The former chief executive officer of business lender Oak Rock Financial LLC pleaded guilty to bank fraud for causing $100 million in losses by deceiving investors and a bank about his company’s finances.

John Murphy, 63, entered the plea today in federal court in Central Islip, New York, prosecutors said. Murphy misrepresented the Bohemia, New York-based company’s finances in an agreement to borrow money from Manhattan-based Israel Discount Bank of New York and other lenders, according to prosecutors. Oak Rock was put into bankruptcy protection in April 2013 while owing about $90 million in principal to the lenders.

“Murphy abused his position as CEO and defrauded banks out of millions of dollars by lying about his company’s financial health,” Brooklyn U.S. Attorney Loretta Lynch said today in a statement.

Murphy had been creating fake records to increase his firm’s borrowing capabilities, prosecutors alleged. Israel Discount Bank learned of the fraud in April 2013 and requested that Oak Rock be placed in bankruptcy, according to a memorandum filed that month with the bankruptcy court in Central Islip.

Israel Discount Bank said at the time that Murphy had left his position and was “nowhere to be found.”

Business Salvage

Stephen Scaring, Murphy’s lawyer, said in a phone interview today that his client “didn’t put any money in his pocket” and was trying to salvage the company’s business amid the recession. So far, about $30 million of the banks’ losses have been recovered through the bankruptcy proceeding, he said. Scaring said Israel Discount Bank’s allegation that his client had gone missing wasn’t true.

“He certainly doesn’t want to avoid responsibility,” Scaring said. “He’s always led an exemplary life. He just tried to do more than he could do.”

Murphy faces a maximum prison term of 30 years when he is sentenced, according to prosecutors.

The case is U.S. v. Murphy, 2:13-cr-00702, U.S. District Court, Eastern District of New York (Brooklyn).

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