A Marlborough business owner was sentenced yesterday in federal court in Worcester in connection with a scheme to commit bank fraud.

James R. Faro, 61, of Dover, was sentenced to two years in prison and three years of supervised release, and was ordered to pay $1.12 million in restitution. Faro pleaded guilty to conspiring to commit bank fraud in March 2018. Faro and his co-conspirator John J. Crowley, 62, of Boca Raton, Florida, were charged in January 2018. Crowley has also pleaded guilty and is scheduled to be sentenced on Sept. 24.

Faro is the former owner and president of Sea Star Seafood Corp., a company previously headquartered in Marlborough that distributed frozen seafood products. Crowley is the former CFO for Sea Star.

Sea Star maintained an asset-backed loan agreement from October 2010 to August 2012 whereby a bank agreed to loan Sea Star up to $6 million pursuant to a revolving line of credit. Sea Star pledged its assets – most notably its inventory and accounts receivable – as collateral for the loan.

Faro and Crowley between November 2010 and August 2012 conspired to intentionally overstate the value of Sea Star’s outstanding accounts receivable that it reported to the bank. By doing so, Faro and Crowley fraudulently increased the level of assets against which Sea Star could borrow from the bank. Sea Star informed the bank in August 2012 that it had discovered a “discrepancy” of well over $2.5 million in its reported versus actual accounts receivable. Sea Star declared bankruptcy and discontinued its business operations approximately one week later.