WORCESTER, MASS. (July 21, 3:25 p.m. ET) — The case involving a multiyear fraud at defunct compounder Gitto Global Corp. has wrapped up with the sentencing of the final two executives involved in the matter.
Former Gitto Global Corp. executive Louis Pellegrine Jr. was sentenced May 27 to three years and two months in jail. Fellow executive William Deakin was sentenced to four years in jail for his role in the fraud. Both were sentenced by U.S. District Judge Dennis Saylor in Worcester, Mass.
Deakin, 63, who had served as the firm's controller, also will be on supervised release for three years after his initial sentence. Deakin and Pellegrine, 61, each also was ordered to pay restitution of more than $23 million. Pellegrine, who worked as the firm's outside accountant for several years, will be on probation for two years after his release.
Under sentencing guidelines, Saylor could have sentenced Deakin, a resident of Acushnet, Mass., to as much as 10 years and one month in prison. Prosecutors had asked for a sentence of four years and 11 months, while Deakin's lawyer — John Lachance of Worcester — had asked for 18 months of house arrest and three years of probation.
Pellegrine's lawyer, Ian Gold of Boston, had asked for “an alternate sentence … of either home detention or intermittent incarceration” for his client.
Deakin's and Pellegrine's sentences were less than those received by former Gitto officials Frank Miller and Gary Gitto earlier this year. Miller, the firm's co-owner and president, was sentenced to more than seven years, while co-owner Gitto received a sentence of almost five years.
Six executives in total were indicted for their roles in 2008. Charges against Charles Gitto Jr., Gary Gitto's father, were dropped late last year for medical reasons. Another defendant, John Moritz Jr., died in 2009 before facing trial.
The alleged fraud occurred at Lunenburg, Mass.-based Gitto Global — a compounder of PVC and related materials — between 1998 and 2004. FBI officials have said that Gitto executives overstated the company's sales and inventory, which led its secured lenders to advance millions of dollars.
In a pre-sentencing court filing, lawyer Lachance said that “although Deakin held the title of controller, he did not supervise others in the fraud” and that “other than a regular salary and car lease, [Deakin] received nothing of value from the fraud.”
Deakin joined Gitto Global as a bookkeeper in 1994 and six months later was promoted to controller, according to the filing, even though he had no previous financial experience with a company of Gitto Global's size. Lachance added in the filing that Deakin “was not permitted to release financial information without specific approval, and acted as a conduit between [Miller] and outsiders.”
In a separate court filing, lawyer Gold said that Pellegrine, who ran his own small accounting firm, “was ill-prepared” for auditing a company of Gitto Global's size and was unaware of the ongoing fraud.
Pellegrine, who in recent years had moved from Massachusetts to Kissimee, Fla., “had almost an aversion to number-crunching and paper sorting, leaving much of the fine detail to his employees,” Gold wrote in the filing.
“Mr. Pellegrine was in over his head,” Gold said. “But he, like the various bank examiners who also failed to find fraud, was deceived by Miller and the operation he and Deakin had created.”
Gitto Global filed for bankruptcy in 2004, claiming debts of more than $50 million. To date, Miller, Gitto and Deakin have been ordered to repay a total of more than $70 million.
Gitto Global's assets were sold in late 2004 to local businessman Steven Graham, who continues to operate the business as S&E Specialty Polymers LLC.