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A long-awaited independent examiner’s report has concluded that officials at the now-defunct Gitto/Global Corp. of Lunenburg, Mass., created fake customers and sales as part of an extensive fraud scheme that involved millions of dollars and included paying for personal expenses with corporate money. “The evidence that the Gitto principals engaged in substantial misconduct for the purpose of defrauding Gitto/Global’s lenders and other creditors is overwhelming,” said the 154-page report by Charles L. Glerum of Boston law firm Choate, Hall & Stewart, released last week and filed on the Web site of the U.S. Bankruptcy Court for the District of Massachusetts in Worcester. “There is further substantial evidence that the Gitto principals misappropriated substantial sums from Gitto/Global for their personal use or benefit.” The report’s release has been subject to extensive litigation since February. The U.S. Court of Appeals ordered releasing the report after various media outlets, including the Telegram & Gazette of Worcester, Mass., and the Sentinel and Enterprise newspaper of Fitchburg, Mass., appealed a sealing that Judge Joel B. Rosenthal ordered and that was upheld by a district court. Glerum’s report, which deleted all bank numbers before its release, chronicles years of alleged misdeeds by former company officers — CEO Gary Gitto, Chairman Charles Gitto Jr. and President Frank Miller. He recommends further investigation of some allegations, and he added that “the level of misconduct described in this report certainly may give rise to criminal as well as civil liability.” The report said, “Although it is difficult to determine an exact figure, it is believed that Gitto/Global’s actual sales never exceeded $56 million. Astoundingly, however, internal records reflect sales of more than $95 million in 2002, more than $360 million in 2003, and nearly $689 million in the first three quarters of 2004. Gitto/Global used its false ‘sales’ to overstate the value of its accounts receivable and in turn, borrow additional funds from its secured lender. “To create such incredible sales figures, Gitto/Global recorded fictitious sales to actual customers, vendors and to entities created by the Gitto principals.” The U.S. Attorney’s Office in Boston has been mum about whether it will pursue criminal action. A grand jury convened there last winter. Gitto/Global’s biggest lender, LaSalle Business Credit LLC, alleges the company defrauded it of $30 million. Among the allegations in Glerum’s report: � Gary Gitto netted about $40,000 during 2004 in a kickback arrangement with one customer. � About 10 employees participated in the scheme, with employees shredding and otherwise removing documents right before filing for bankruptcy. � The company paid the captain of Gary Gitto’s personal boat an annual salary of roughly $70,000. Gary Gitto’s attorney, Max D. Stern of Stern Shapiro Weissberg & Garin in Boston, blamed Miller, the company’s president, in a statement printed in the Sentinel and Enterprise. “If one looks beyond the examiner’s suspicions and focuses on the evidence he reports, the only conclusion that one can reach is that the wrongdoing was accomplished not by anyone named Gitto at all, but by Frank Miller, the president of the company and its major stockholder, with the assistance of his wife, Maria — without the knowledge of Gary Gitto or his father, Charles,” the statement read. Stern had opposed releasing the report, saying it would impede the Gittos’ right to a fair trial. Gitto/Global filed for Chapter 11 on Sept. 24, 2004, in Worcester. Toner Plastics Inc. of Agawam, Mass., acquired its remaining assets for about $9 million last December. Toner renamed the company S&E Specialty Polymers LLC. Copyright �2005 TDD, LLC. All rights reserved.

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