A Lathrop, man was sentenced in federal court for a $1.7 million fraud scheme related to the sale of his business.
Todd Edwin Rood, 53, of Lathrop, was sentenced by U.S. District Judge Gary A. Fenner to four years in federal prison without parole. The court also ordered Rood to pay $1,347,608 in restitution and a money judgment to the government of $1,207,979, which covers his gain.
Rood, the former owner of Rood Machine & Engineering (RME) in Kearney, Mo., pleaded guilty to application fraud on Dec. 6, 2017. Rood admitted that he made false statements to the purchaser’s bank about his assets and liabilities during the sale of his business in a scheme to defraud RME’s buyers and their financial institution. The loss to the bank and the buyers was $1,347,608.
The victims of Rood’s fraud scheme agreed to purchase RME for $2,050,0001 based on his financial documents, which overstated RME’s financial vitality. The purchasers sought a $1,744,000 loan; to obtain the loan, they were required to infuse RME with $200,000 cash. In addition, the purchasers paid $62,000 in closing costs to obtain the loan. The loan was guaranteed by the Small Business Administration.
According to court documents, the purchasers also undertook a “quick sale” of their home in Georgia to buy RME on the timetable set forth by Rood, who falsely claimed to have terminal colon cancer. They incurred a loss of $40,000 on their home as a result.
Rood falsified documents in 2015 and 2016 outlining the assets and liabilities of his business. According to court documents, Rood had his bookkeeper classify tow loans for $121,327 as income, and to re-classify $120,000 in loans from his parents in 2013 and 2014 as income in 2014. Rood also directed his bookkeeper to record as income seven fictitious sales in 2015 totaling $342,500. By altering his bookkeeping, Rood inflated his income by approximately $583,827. All of this was in advance of the sale in order to inflate his income, lower his liabilities, and enhance the appearance of Rood’s business to a prospective buyer.
Under the terms of his plea agreement, Rood must pay the purchasers $262,000 in restitution for their closing costs and cash infusion into RME, which they made in reliance on the information underlying Rood’s false certification to which he is pleading guilty.