CHEESE MELTDOWN N.J. Company's Fraud Boils Over

Recipes for cooking company books vary according to taste but generally include the following ingredients: greed, theft, power, and accounting trickery. In the case of a New Jersey company, those elements congealed around a tasty ingredient found in many a kitchen cookbook: cheese.

In a scheme that mirrored the executive suite shenanigans of the granddaddy of white-collar crimes—Enron—top executives of cheese manufacturer Suprema Specialties Inc. booked fraudulent profits and inflated earnings, which in turn kept Wall Street investors happy and banks willing to loan money. Most of the Paterson-based company's sales and profits were in fact fictitious. And in some cases, low-end imitation cheese was re-labeled as all-natural, then sold at a considerable premium to boost the company's bottom line.

Meltdown. Suprema's bubble burst in 2001, when a company insider troubled by the massive fraud alerted the U.S. Attorney's Office, which in turn enlisted our Newark field office's white-collar crime squad. The insider, a former controller for the company, revealed to our special agents the extent of the scheme that cost banks about $80 million in losses and led Wall Street to halt trading on the company's stock. Unable to raise any more money, the company declared bankruptcy in 2002, leaving investors, including a Louisiana teacher's pension fund, holding millions of worthless shares.

full story http://www.fbi.gov/page2/may07/cheese053007.htm