James Collins, the former CEO of Honor Finance LLC, a subprime auto lending company based in Evanston, Illinois, has been sentenced to four years in federal prison. This sentencing comes after his involvement in two fraud schemes that led to losses amounting to approximately $67 million.
Between 2015 and 2018, Collins engaged in fraudulent activities with others by submitting false information to a bank that had extended a $200 million warehouse line of credit to the company. The misinformation allowed Collins to avoid providing additional collateral while maintaining funding from the line of credit. It also enabled him to increase funding from a trust set up by Honor and the bank for securitizing loans and selling them as bonds. Collins knowingly included delinquent vehicle loans in this trust portfolio, which were not eligible due to prior improper accounting entries. These actions resulted in a loss of about $62 million for the bank.
In another scheme, Collins misappropriated around $5.3 million from Honor Finance through a shell company named LHS Solutions. This entity acted as an intermediary between Honor and a third-party GPS device supplier. Instead of direct purchases by Honor, LHS Solutions bought devices at lower prices and sold them at inflated rates to Honor Finance, with Collins pocketing the difference alongside co-schemers. Additionally, he diverted commissions from vehicle warranty sales intended for Honor.
Collins pleaded guilty in 2023 to federal mail fraud charges and agreed on stipulations regarding bank fraud. U.S. District Judge Franklin W. Valderrama imposed the sentence on Wednesday and ordered restitution payments totaling approximately $67 million.
The announcement was made by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, along with Douglas S. DePodesta, Special Agent-in-Charge of the FBI's Chicago Field Office. Assistance came from the U.S. Securities and Exchange Commission with representation provided by Assistant U.S. Attorneys Matthew Getter and Paige A. Nutini.
Robert DiMeo, former Chief Operating Officer of Honor Finance and co-defendant in these cases, previously pleaded guilty to mail fraud charges in 2022 and is awaiting sentencing.
