One of six indicted officials with defunct compounder Gitto Global Corp. pleaded guilty to fraud and related charges Oct. 1 in U.S. District Court in Worcester, Mass.
Gary Gitto, former co-owner of Lunenburg, Mass.-based Gitto Global, pleaded guilty to wire fraud, conspiracy and money laundering. As part of a plea agreement, several other charges, including bank fraud, were dropped.
Gitto's sentencing is scheduled for Jan. 5. He faces a maximum sentence of 35 years and a maximum fine of $750,000. If convicted of the original charges, Gitto would have faced a maximum sentence of 65 years and a maximum fine of $2 millon.
In a Sept. 29 letter to Gitto's lawyer Max Stern of Boston U.S. Attorney Carmen Ortiz said her office would recommend that Gitto's offense level be reduced based on [Gitto's] acceptance of personal responsibility for the offenses. Ortiz also recommends a three-year supervised release period after Gitto completes his sentence.
Gitto and five other Gitto Global executives including his father, Charles Gitto Jr. were indicted in September 2008 after a lengthy investigation of financial crimes that took place at the firm between 1998 and 2004.
One of the other executives John Moritz Jr. passed away in 2009, according to a local news report. The four surviving defendants are scheduled to go to trial Nov. 29. Executive Frank Miller faces a maximum sentence of 55 years and a maximum fine of $1.5 million. Charles Gitto and the others each face a maximum sentence of 25 years and a maximum fine of $500,000.
The original 25-page indictment alleges that the six executives took specific actions between 1998 and 2004 to allow Gitto Global to access funds from local banks that were far in excess of what Gitto Global's actual inventory and accounts receivable would support.
When Gitto Global filed for bankruptcy in September 2004, its actual sales of PVC and polyolefin compounds were found to be around $40 million. The company had claimed sales of more than $100 million. At the time, Gitto Global reported debt of more than $50 million, including almost $30 million to LaSalle Business Credit LLC of Chicago.
The original indictment singled out Gitto, his father and Miller, saying that they treated Gitto Global as a limitless source of personal funds, regardless of the state of the company's actual revenues, and removed substantial monies from the company for their personal use.
Gary Gitto initially had pleaded not guilty to the charges. In a September 2008 interview with Plastics News, attorney Stern had said that there was no credible evidence that Gary Gitto knew anything about or had anything to do with this scheme. Stern could not be reached for comment on Gitto's guilty plea.
A 2005 bankruptcy report alleged that Gitto Global spent more than $2 million on cars, insurance, phones, air fare, travel and entertainment for Miller and the Gittos between 2000 and 2002. The company also paid the $70,000 annual salary of the captain of Gary Gitto's personal boat, according to the report.
A related 2006 motion detailed a case where Gitto Global relabeled PVC resin inventory at the time valued at 40 cents per pound as Teflon-brand fluoropolymer, valued at between $6 and $21 per pound.
Gitto Global was sold in late 2004 for $9 million to local businessman Steven Graham, who reopened the firm as S&E Specialty Polymers.
Charles Gitto had launched Gitto Corp. in 1990, shortly after selling his original business, Gary Chemical, which he had named after his son.