Federal Judge: Former Mamtek Head Improperly Diverted Bond Funds

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CHICAGO — A federal judge upheld a bankruptcy court-imposed judgment against the former head of Mamtek US Inc., finding he fraudulently obtained bond funds from a $39 million issue for a sucralose production plant in Missouri.

U.S. District Court Judge Nanette Laughrey agreed with the bankruptcy court that ordered Bruce Cole to return $904,000 transferred to his personal accounts and another $360,000 Cole used to pay off personal creditors.

Laughrey said evidence showed that Cole had submitted a $4 million invoice for a company that had not preformed any services for Mamtek and was in fact not even yet established. The money instead was doled out to other creditors, Mamtek officers, and Cole's wife's personal account.

"On this record, a reasonable fact finder could only conclude that Mamtek intended to defraud when it submitted the Ramwell invoice to Moberly and then transferred $904,167 to the defendants," the Aug. 15 ruling said.

Separately, Cole is to stand trial on criminal charges of securities fraud and stealing later this year. The Securities and Exchange Commission previously filed a civil complaint accusing Cole of scheming to defraud potential investors. Bankruptcy trustee Bruce Strauss has filed a series of lawsuits against Mamtek officials seeking to recoup funds for creditors.

Several investor-led lawsuits are also pending against the financial firms involved in the bond issue. Morgan Keegan underwrote the bonds issued in 2010 by the Moberly Industrial Development Authority.

A city appropriation pledge backed the bonds that helped finance construction of the sucralose production plant. In 2011, Mamtek, which was developing the plant, defaulted on a payment to Moberly needed for debt service, and the city refused to make good on its appropriation pledge. The company then abandoned the half-built plant.

The Missouri Secretary of State last year filed a civil enforcement action against Morgan Keegan accusing the firm of securities fraud. It accuses the firm of defrauding clients by misrepresenting material facts about the offering.

The bonds carried an A rating from Standard & Poor's based upon the city's pledge. Moberly lost its investment-grade rating after it declined to make good on its pledge. The sucralose plant bonds are rated D.

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