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Motorcycle dealer, accountant sentenced to prison for scheme to defraud banks

A local motorcycle and RV dealer and his accountant have been sentenced to federal prison for running a financing scheme that resulted in 18 lenders losing more than $58 million.

Russell S. Ott, 51, of Oswego, was sentenced to 13 1/2 years in prison and his accountant, Brian McMahon, 55, of Naperville, was sentenced to 2 1/2 years, according to a statement from the U.S. Attorney’s office. U.S. Distict Judge Edmond E. Cheng handed down the sentences.

Ott, 50, was the owner of Emily Inc., which did business as Pro Source, selling motorcycles, luxury motor homes, RVs, ATVs, boats and jet skis from 1995-2008. In 2007 and 2008, he also was partial owner of Liberty Cycle and Huntley Chevrolet, both in Libertyville.

McMahon, 54, was Ott and Emily’s CPA, and also owned Triumph Suzuki in Naperville from 2001-04 before selling it to Ott.

Pro Source fraudulently obtained more than $31 million in direct financing through five lines of credit from Fifth Third Bank, which lost more than $27.1 million, according to the statement.

Ott used the money to operate Pro Source, which operated at a loss; to buy a home in Elburn for over $679,000 and make more than $1.1 million in improvements; buy a $258,000 vacation home in Wisconsin; buy a $350,000 rental home in South Elgin, prosecutors allege. He also bought a Sky Hawk 172 Cessna airplane and hanger for $200,000; pickups and other vehicles for family members and employees.

In the second part of the scheme, individual straw borrowers took out about 200 fraudulent loans totaling $42.4 million, costing another 18 banks more than $29.5 million. The straw buyers named in the indictment allegedly took out some 62 fradulent loans.

They used the money to finance lavish lifestyles, operate businesses, and make other investments, creating what prosecutors called “the false appearance of personal wealth,” which induced lenders to advance even more funds. It also charges eight of the defendants with tax evasion, failing to file income taxes, or filing false federal tax returns.

The borrowers would get loans but never purchase the very expensive RVs for which they were made, prosecutors allege, claiming many of the vehicles never existed. The funds were deposited into Emily Inc.’s bank account, and Ott would transfer it to straw borrowers while making monthly payments on some loans.

Ott pleaded guilty to bank fraud and tax evasion and was sentenced on Dec. 3, according to the statement. He will begin serving his sentence on Jan. 20, 2015, and was also ordered to pay about $61.16 million in restitution to his victims and the United States Treasury.

McMahon pleaded guilty to two counts of aiding and assisting the filing of Ott’s false tax returns, according to the statement. He will begin his sentence Jan. 21, 2015, and was ordered to pay $396,829 in restitution to the U.S. Treasury.

Eight other co-defendants who acted as straw buyers in sham vehicle sales have all pleaded guilty and have either been sentenced, or are awaiting sentencing.