Every fraud, no matter how cleverly constructed, has a weak link.
For Jeffrey M. Fitzgerald, 34, an ambitious Prince George's County entrepreneur who owned a lucrative auto-leasing business, the weak link turned out to be his customers -- many of whom made their living as drug dealers.
This was disclosed Thursday when Fitzgerald pleaded guilty to two conspiracy charges in federal court.
He was charged with fraudulently obtaining an estimated $1.3 million from 22 different banks to purchase luxury automobiles that he then leased out to people who otherwise might not have qualified as leaseholders.
For two years the business prospered, but trouble started in 1989 when "a number of Fitzgerald's customers who derived income from narcotics trafficking stopped paying Fitzgerald for various reasons," according to a statement of facts presented by prosecutors.
Among the "various reasons," investigators said, was that some of Fitzgerald's customers began turning up dead in Washington's drug wars.
And in addition to those who died in gun battles, there were other drug dealers who just stopped making their payments and correctly figured Fitzgerald would be too frightened to bother them.
"These were not the kind of customers you repossess easily," said one federal official familiar with the case.
According to a statement of facts presented by Assistant U.S. Attorney Jefferson S. Gray that accompanied Fitzgerald's guilty plea, Fitzgerald operated a car-leasing business in Camp Springs, known as J. M. Fitzgerald & Co., that purchased 44 luxury cars, a speedboat and two dump trucks.
Fitzgerald would buy cars -- among them Mercedes-Benzes, BMWs, Porsches, Volvos and Jeep Cherokees -- from Washington-area car dealers and ask for dealer financing.
The dealers would apply for bank loans using financial documents that Fitzgerald gave them.
He got the financing he needed by submitting false tax returns, financial statements and W-2 forms to establish his credit, according to the statement of facts.
In some cases, Fitzgerald recruited people to buy the cars, and he would manufacture phony employment records and credit histories so they could qualify for the loans.
Fitzgerald then turned around and leased these cars to people who, because of bad credit or employment records, would not otherwise be able to buy or lease the cars.
Fitzgerald made his money by charging a monthly leasing fee that was substantially greater than the monthly payment owed to the bank.
In addition, he charged an initial "handling" fee that was larger than the down payment on the cars.
A number of his leasing customers were Washington area drug dealers, who enjoyed driving the kinds of luxury cars that Fitzgerald had.
As long as Fitzgerald's customers made their monthly payments, the scheme went undiscovered.
But when those customers stopped making their payments, Fitzgerald could not make his to the banks.
The banks then began to foreclose on their loans. When his business began disintegrating, Fitzgerald fled to North Carolina.
By pleading guilty, Fitzgerald faces a maximum possible sentence of five years imprisonment and a fine of $250,000 on each of the two conspiracy charges.
He is scheduled to be sentenced on September 11.
He also faces tax evasion charges for failing to report about $214,000 in income from his scheme. The Internal Revenue Service estimates that he owes about $70,000 in unpaid federal and self-employment taxes.
In a separate action, the U.S. attorney's office announced that a Baltimore federal grand jury indicted five other people for conspiracy and bank fraud in an unrelated but similar case.
The two frauds were uncovered by the FBI and the criminal division of the IRS, which were investigating car-leasing companies in Prince George's County.
The grand jury indicted Theodore Washington, Bob Cummings Witt, Kirk Thompson, Deirdre Lynn Wood and Denise Wood, who were accused of operating a similar scheme through a company known as Advance Leasing Inc.