Guilty Plea in Million-Dollar-Plus Check Kiting Case

February 2, 2010 - BROWNSVILLE, TX—Jeff Woodard, Jr., 48, of Harlingen, Texas, has pleaded guilty to defrauding three local banks by means of a check kiting scheme, United States Attorney Tim Johnson announced today.

At a hearing before United States District Judge Andrew S. Hanen, Woodard pleaded guilty to one count of bank fraud, admitting he operated a check kite scheme involving four bank accounts held in the names of several of his former businesses. The scheme resulted in combined total of more than a million-dollar loss affecting three local banks.

A check kite exists when a person passes checks back and forth between banks before the checks have time to clear to create the appearance that the bank customer has more money in the accounts than he actually does. A check is written on one bank and deposited in a second bank. Checks not backed by sufficient collectable funds are written from the second bank (or a third bank) and deposited with the first bank to mask the fact that there are insufficient funds to pay the initial check. The process continues until the kite is discovered.

Woodard operated Harlingen Imports, also known as Competition Car and Truck Center, in Harlingen, Texas; Competition Chrysler Dodge Jeep and Competition RGV in Raymondville, Texas; and Competition Motor Sports, with locations in Harlingen, Texas, and McAllen, Texas. The check kite scheme covered the period from Nov. 1, 2004 through Jan. 30, 2006.

In this case, Woodard or persons acting under his direction wrote multiple checks on one account and deposited them with another of the three banking institutions daily. There was no legitimate business reason for the vast majority of the checks to be written. The checks were all written in whole dollar amounts, typically in even hundreds, and were typically sequential. Woodard signed about half of the checks. Others were signed by employees or business partners, acting under his direction. The number and size of the checks dwarfed the reported revenues of the three businesses combined.

Over the time period covered by the FBI’s detailed computer analysis, October 2005 through December 2005, Woodard was responsible for kiting resulting in an actual loss of approximately $1.6 million.

The maximum statutory penalty is 30 years' imprisonment, a $1 million fine, and five years of supervised release. Sentencing is set for May 10, 2010 at 8:30 a.m. before Judge Hanen.

This case was investigated by the FBI and is being prosecuted by Assistant U.S. Attorneys Michael Wynne and Israel Cano.