LITTLE ROCK, Ark. — John Mills, the former president and chief executive officer of Affiliated Foods Southwest, on Tuesday was sentenced to 41 months in federal prison and fined $3.2 million for his part in a scheme to defraud the company’s lenders.
Mills in February pleaded guilty to orchestrating a “check kiting” scheme designed to help improve the financial condition at Affiliated, which filed for bankruptcy last year and was subsequently acquired by Associated Wholesale Grocers .
The scheme involved passing checks from subsidiary companies to cover cash needs for AFS’ accounts, then drawing on its loan from U.S. Bank to cover the shortfalls, prosecutors said. The bank uncovered the scheme during an audit last year and froze AFS’ account, leading to the company’s bankruptcy.
Prosecutors also charged Mills, along with Alexander Martinez, AFS’ former chief financial officer, with presenting false financial documents to the board and banks. Mills, who served as CEO from 2004 to 2009, also faces three years of supervised release.
Martinez was also charged with fraud related to the scheme but has pleaded not guilty. His trial is scheduled to begin next May.