Trade: Former SBA
Honoree Is Subject of
Federal Indictment
Three years ago, Laurel Engineering was riding a wave of adulation and touted as a shining example of what international trade can do for the region’s economy.
The Chula Vista-based company, which manufactured conveyor belts and provided engineering services to the mining industry, was doing business in eight countries, had revenues of $18 million in 1995 and more than 100 employees. It also was recognized by the San Diego district Small Business Administration as the Exporter of the Year in May 1996.
Subsequently, the SBA’s national office found Laurel’s success story so compelling it was named SBA Exporter of the Year for the entire country. Its president and CEO, Tammy Lynn Flor, accepted the award in a ceremony in Washington, D.C., in 1997.
Yet that same year, Laurel Engineering filed for Chapter 11 bankruptcy, stating in federal Bankruptcy Court filings it had liabilities of $5.5 million and total assets of $107,216.
At the time, the company was evading paying its debts by setting up a maquiladora in Tijuana, according to several of its creditors and their attorneys.
After 2 1/2 years of an FBI investigation, the U.S. Attorney’s Office last month charged Tammy Flor with 21 counts of bank fraud, wire fraud, mail fraud, bankruptcy fraud and making false statements to a bank.
Also charged in the indictment are Donald Robert Flor, Tammy Flor’s father and founder of Laurel; and Tammy’s husband, Verl Duane Mason.
Response
Donald Flor, 58, along with his daughter and son-in-law, pleaded not guilty to the charges last month in U.S. District Court in San Diego. Interviewed briefly by phone, Donald Flor declined to talk about the case except to say the government’s allegations were untrue.
“They’ve got a lot of misleading information from various sources and, yes, it looks suspicious,” Flor said. “The problem is that people make assumptions and allegations, but they don’t have the facts.”
Ezekiel Cortez, Donald Flor’s attorney, said, “The government is making a serious mistake,” in its charges. “The government doesn’t understand the industry or maquiladoras and how they function,” Cortez added.
He declined to talk about the details of indictment, saying he will try the case in the courtroom. A pre-trial status conference is scheduled for July 25.
According to the federal indictment, Laurel Engineering’s problems began in 1996 while bidding on several mining projects in Chile. Even though it was already heavily in debt to suppliers, the company applied for and received an SBA guaranteed loan from Grand National Bank of Alhambra for a line of credit up to a maximum of $833,000, according to the indictment.
The indictment also alleges the defendants knowingly submitted false requests to bank officials to obtain advances on the line of credit, then submitted false documents showing the purchase of equipment for the mining project.
Then the defendants provided fraudulent documentation to both bank officers and its clients involved in the project, including Signet Engineering, based in Perth, Australia, and Pegasus Gold Corp., a mining company based in Seattle.
“They needed cash flow to keep their business going,” said Assistant U.S. Attorney James Brannigan in summarizing the indictment’s allegations.
“What they were doing is by making false statements, they got people to give them money to keep the business running while they transferred the profit base to Mexico,” Brannigan said. “And then once they got the contracts, they shut their doors in the United States.”
Cortez declined to say whether the Flors continue to operate a maquiladora set up in Tijuana in 1994.
Creditors
The bankruptcy file for Laurel reveals a listing of 241 secured and unsecured creditors and includes both the federal and state governments seeking back taxes totaling $519,588.
John Jolliffe, executive vice president of Casas International Brokerage in San Diego, said his family trust leased space to Laurel in the De La Fuente Business Park in Otay Mesa just before it went bankrupt in 1997.
Jolliffe said Laurel vacated the premises without paying what was owed, leaving a debt of about $25,000 for the three months they leased the space. The lessor, the Jolliffe Family Trust, is one of the unsecured creditors in the bankruptcy filing.
He said Laurel was able to gain the trust of many people because of its connections with the SBA, particularly after it was named Exporter of the Year.
“If the government is bestowing that kind of honor on somebody, you think they’re on the up and up,” he said. “They used that to fool a lot of vendors.
“I really blame the SBA because they did not do a lick of homework on (the award). They believed everything Laurel presented to them,” Jolliffe said.
Sam Oh, a Los Angeles attorney who represented Goodyear Tire and Rubber, said his client was owed about $325,000 for rubber products. When Laurel ran into financial difficulties, they worked out an agreement with the Flors to repay the debt, “but ultimately, Goodyear was not paid.”
Oh attended the 1997 bankruptcy hearing in which Tammy Flor testified about the company and its operations.
“My impression was that (her testimony) was not believable,” Oh said. “She basically said she didn’t know what was going on.”
Mario Conte, the federal defense attorney assigned to Tammy Flor, did not return several phone calls for comment.
Richard Boesen, who represents Flor’s husband, Verl Duane Mason, declined any comment.
George Chandler, district director for the SBA’s San Diego region, said he didn’t remember Laurel Engineering or the Flors, even though the local firm captured the national exporting award in 1997.
He said the award is based on a number of criteria, including increased sales, profits, the growth of employment from exporting, and the encouragement a firm gives to other businesses to expand exporting.
Asked for some documentation about Laurel on how the company was selected as the best in its category that year, Chandler said the agency doesn’t keep records more than three years old.
Janie Dymond, spokeswoman in the SBA’s office in Washington, D.C., said she could not provide the number of nominations for the exporter award but said each of the SBA’s 10 national regions likely nominated a company for the award.
