Monmouth County Man Sentenced In $50M Lending Scheme

  OCEANPORT – A man has been sentenced to 63 months in prison for defrauding lenders of $50 million dollars with a decade-long invoice factoring scheme, officials said.

  Vincent Galano, 60, previously pleaded guilty to one count of wire fraud.

  According to officials, “accounts receivable factoring, also known as invoice financing (factoring), is a financial transaction through which a company obtains cash by selling its unpaid invoices, ordinarily at a discount, to a factor. Factoring clients send their debtors notices of assignment naming the factor as the assignee of the debt owed on the invoices. The factor collects invoiced amounts owed by the clients’ debtors and, upon collection of the entire invoiced amount, pays its clients the balance of the invoice, deducting the factor’s fees.”

  In 1996, Galano created PF Funding LLC (PF Funding) to factor accounts from various clients. In 2007, PF Funding entered into a secured lending relationship with a single purpose entity created to finance PF Funding’s factoring business. Afterwards, the factoring lender established a line of credit in order to provide capital growth.

  Officials said PF Funding grew its factoring business over the next several years by drawing from the line of credit while maintaining as current its loan obligations to the factoring lender.

  In 2011, Galano purchased a large number of invoices which he was unable to collect the debt owed on the receivables. Subsequently, Galano concealed the debt from the factoring lender. He mischaracterized invoices that had already been paid and collected as outstanding and capable of being factored, essentially double-counting them, officials said. Galano also manipulated the overall value of PF Funding’s portfolio of outstanding invoices.

  Repeating this for over a decade, PF Funding had ultimately defaulted under its loan obligations, owing approximately $50 million to its lenders by 2020.

  In 2020, Galano admitted over a phone call that he had concealed significant losses suffered by PF Funding over many years. He also admitted to fabricating reports that overstated the number and value of outstanding invoices.

  Along with his prison term of 63 months, Galano was sentenced to two years of supervised release and ordered to pay restitution of $50 million.