Monday, July 21, 2014

Join Me Today For Fraud Talk - Live On the Voice America Radio Network

I will be live on the Voice America online radio network at 10 a.m. EST for Fraud Talk, my weekly program about fraud in America.  My guest this week is Jim Ratley, the President and CEO of the Association of Certified Fraud Examiners and we will be discussing the ACFE's Report to the Nations.

Case of the Week: Finance Professor & Bookkeeper in Washington State Sentenced For Embezzling $800K

From the Union Bulletin:

A former Walla Walla University finance professor and self-employed bookkeeper will spend time in federal prison on a charge of wire fraud in connection with the theft of more than $800,000 from a local dentist.

Dana G. Thompson of College Place was sentenced in U.S. District Court in the Tri-Cities this week to serve 18 months in prison.
 
Thompson taught finance at the Seventh-day Adventist university in College Place for 15 years and kept books for about 13 years for Walla Walla Dental Care owner Dr. Dan Laizure.
 
Thompson pleaded guilty in April and in May told the Union-Bulletin there were extenuating circumstances in the case, but did not give additional details.
 
The theft from Laizure was carried out by writing unauthorized checks from the dentist to himself, banks and other people in guise of insurance company refunds, according to court documents. Upon deposit, those checks electronically debited Walla Walla Dental care’s account.
 
In addition to his prison sentence, Thompson was ordered to pay $823,832 in restitution. Laizure is to be repaid $773,832, while $50,000 will go to Traveler’s Insurance for costs associated with Laizure’s investigation of the loss of money.
 
Thompson has handed over $34,000 from the sale of his home and a gold coin collection, according to court documents.
 
Court documents from his sentencing hearing Tuesday state Thompson will be on probation for three years following his release from prison. He will have to make all financial information available to his probation officer, including authorization to conduct credit checks and see federal income tax returns. Thompson also must disclose all financial assets and liabilities to the supervising officer, and he cannot sell or give away an asset without court approval.
 
As well, Thompson cannot incur any new debt, open lines of credit or enter into any financial contracts without permission from his probation officer, sentencing documents said.
 
Authorities may search him, his home, office or vehicle at any time during his probation, and he must complete a mental health evaluation and follow certain treatment recommendations.
 
Thompson has waived his right to appeal. The court recommended he serve his sentence at the federal prison in Sheridan, Ore.
 
Laizure said Thursday he refuses to be “bogged down” with the incident, and is looking forward.
 
“This is out of my hands,” the dentist said. “I have way too many things to think about for the future.”

Monday, July 14, 2014

Fraud of the Week: Missouri Woman Indicted For Embezzling Nearly $3 Million Causing Company To Go Bankrupt

From the  FBI on 7/1/14:

Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Kansas City, Mo., woman has been indicted by a federal grand jury for a nearly $3 million fraud scheme that forced her employer into bankruptcy. 
Irene Marie Brooner, 52, of Kansas City, was charged in an 11-count indictment returned under seal by a federal grand jury in Kansas City on Friday, June 27, 2014. That indictment was unsealed and made public today upon Brooner’s arrest and initial court appearance. 
Brooner, a certified public accountant, worked at Galvmet, Inc., a sheet metal fabrication facility and steel service center located in Kansas City, from 2001 until her termination in February 2014. At its peak in 2008, the company had 26 employees and $14 million in annual sales. Galvmet filed for bankruptcy and ceased operations in 2014. At the time of closing, the company had 18 to 20 employees and $10 million in annual sales. 
Brooner’s duties as controller included managing payroll, accounts receivable and payable, and maintaining the ledger at Galvmet. 
According to the federal indictment, for approximately 10 years (January 2004 until February 2014) Brooner created unauthorized Automated Clearing House (ACH) transactions from Galvmet’s bank account. An ACH is a batch-oriented funds transfer system that includes direct deposits of payroll from companies. Brooner allegedly deposited these funds into her personal bank accounts. Brooner also manipulated ACH transactions to inflate her salary, the indictment says, by increasing her bi-weekly payments without the knowledge or authorization of her employer. She allegedly deposited these funds into her bank accounts. 
As a result of Brooner’s fraud scheme, the indictment says, Galvmet lost at least $1,863,914. As a result, Galvmet declared bankruptcy, and was forced to cease operations. To keep the scheme going, Brooner allegedly falsified documents to support Galvmet’s operating loan with Missouri Bank & Trust, causing a loss to the bank of $1.1 million. Brooner allegedly converted the embezzled funds for her personal enrichment. The total loss from Brooner’s alleged fraud scheme was at least $2,963,914. 
Brooner allegedly spent the embezzled funds on personal items. According to the indictment, Brooner spent some of the proceeds to remodel, stock, furnish and decorate the basement bar of her new home. The bar, which she called “the Dirty Duck,” includes seating for approximately 15, a granite bar top, four or five tap lines, a refrigeration system, three flat-screen televisions, a smoke machine at the entrance, two couches and stained wainscoting around the room approximately eight feet tall. Mannequins, positioned throughout the bar, are outfitted with authentic U.S. and German uniforms and weaponry from the World War II era, including a Thompson sub-machine gun and multiple M-1 Garands with attached bayonets. Brooner told FBI agents that her husband, a carpenter, remodeled the bar in 2003 and 2004. From 2004 to 2014, Brooner spent $18,383 on alcohol. 
According to the indictment, Brooner’s spending included paying off her mortgage for $289,290, buying $81,686 in jewelry, and spending at least $400,392 on clothing and other retail, $97,180 on restaurants, $78,439 on vehicles, $169,389 on furniture and home decor, $62,003 on travel, $38,317 on electronics, $21,346 in ATM withdrawals, $59,571 on spa visits and beauty items, $68,745 on tuition for her children, $18,383 on alcohol, $104,060 to her children, $216,377 in assorted checks under $500, $64,557 in donations, $254,168 in other credit cards, and by purchasing other items. 
Brooner purchased a 2004 Lexus R33 sport utility vehicle, the indictment says, on which she made 64 payments totaling $51,813. Brooner also bought 69 pieces of jewelry and accessories from Meierotto’s Midwest Jewelers totaling approximately $29,701 and 82 pieces of jewelry and accessories from Tivol Jewelers totaling approximately $51,984.
The federal indictment charges Brooner with three counts of bank fraud, five counts of wire fraud and three counts of money laundering. 
Wire Fraud Scheme
Brooner allegedly sent approximately 148 unauthorized ACH transactions from Galvmet’s bank account to her personal checking account, resulting in $1,144,113 in loss to Galvmet. In addition, Brooner allegedly set up a second payroll payment that was sent via ACH to her personal savings account. Brooner allegedly sent about 133 unauthorized ACH payments to her savings account, resulting in $560,230 in loss to Galvmet. She allegedly transferred the funds to her checking account and spent the money on personal items. Brooner also manipulated the payroll account to increase her net pay on approximately 108 payroll checks, the indictment says, resulting in loss to Galvmet of $159,570. 
Bank Fraud Scheme
Brooner prepared borrowing base certificates on behalf of Galvmet for the purpose of obtaining and maintaining a corporate line of credit for business operations from Missouri Bank & Trust. A corporate line of credit, issued to a business entity by a financial institution, allows the business to draw on the credit when needed, rather than receiving the entire amount at one time. 
Brooner allegedly falsified borrowing base certificates. According to the indictment, the statements contained false entries concerning the accounts receivable and inventory numbers. The statements allegedly included customers shown as outstanding who, in fact, had already sent payments to Galvmet. By failing to post the payments received, the indictment says, Brooner made the accounts receivable appear to be greater in value than they really were. Brooner also allegedly misrepresented Galvmet’s inventory on the borrowing base certificate. Brooner reported inventory even if it had not been sent in-transit to Galvmet, the indictment says, which inflated the amounts on the balances to ensure Galvmet would continue receiving loan proceeds on the line of credit. This allowed the company to continue operations, the indictment says, which enabled Brooner to both conceal her embezzlement and continue to embezzle more money. 
Forfeiture Allegation
The indictment also contains a forfeiture allegation, which would require Brooner to forfeit to the government any property derived from proceeds of the alleged offenses, including her personal residence, a 2004 Lexus, numerous assorted jewelry and a money judgment of at least $2,963,914.

Tuesday, July 1, 2014

Fraud of the Week: Former Airline Employee & Co-Conspirator Indicted In $22 Million Embezzlment Conspiracy

According to the FBI, 2 men have been charged with defrauding Delta and Northwest Airlines of $22 Million:

Michael Yedor and Paul Anderson have been indicted by a federal grand jury on charges that they participated in a long-running scheme to defraud Delta Airlines of millions of dollars. Yedor was arrested in San Diego, Calif. on Saturday, June 21, 2014.
“The longevity and scope of the scheme to defraud Delta is simply astonishing,” said United States Attorney Sally Quillian Yates. “The indictment is an important first step in finally bringing these defendants to justice after so many years of engaging in fraud.”
...
 According to United States Attorney Yates, the indictment, and other information presented in court: Anderson had been an employee of Northwest Airlines since 1979. In 2008, Delta Airlines purchased Northwest. The two airlines merged into a single company in December 2009, at which time Anderson became an employee of Delta working in its Minneapolis, Minn., office.
The indictment alleges that, from at least 2004 through 2013, Anderson was involved with Yedor in a scheme to defraud Northwest and, later, Delta, by submitting numerous false invoices on behalf of a company, Airborne Voice and Data, purportedly owned by Yedor. The invoices sought payment from the airlines for goods provided and services supposedly rendered by Airborne Voice and Data, when in fact, both Anderson and Yedor knew that Yedor’s company had not provided any such goods or services.
The indictment also alleges that Yedor sent the invoices to Anderson to be approved. Anderson approved the fraudulent invoices, which caused the airlines to issue payments to Airborne Voice and Data. In exchange for approving each of the invoices, Anderson received a portion of the proceeds of the fraud. The indictment alleges that Yedor and Anderson caused Northwest and Delta to issue approximately $22 million in payments to Airborne on the basis of the false invoices between 2004 and 2013.
Yedor, 62, of Los Angeles, Calif., and Anderson, 57, of Apple Valley, Minn., were indicted on June 10, 2014, and have each been charged with conspiracy to commit mail fraud and ninety-six counts of mail fraud. The indictment was unsealed after Yedor’s arrest on Saturday, June 21, 2014.  ...

Wednesday, June 18, 2014

Chris Marquet To Host Weekly FraudTalk Radio Show

Beginning 7/7/2014, Chris Marquet will host his own weekly radio show called FraudTalk on the VoiceAmerica network.  The show will discuss fraud cases and trends in today's business climate.  Please let us know if you might be interested in sponsorship or as a guest.  Look forward to more information as we launch the show.



Visit the FraudTalk page on the VoiceAmerica network here to listen to the show: http://www.voiceamerica.com/show/2349/fraudtalk



Sunday, March 30, 2014

Comprehensive Article About Embezzlement Epidemic In Vermont

Read this Valley News article from 3.30.14 which comprehensively discusses the apparent embezzlement epidemic in Vermont.  The report reads in part:
Based on cases that were in the judicial system in 2012, Vermont was ranked ninth in the country in risk for loss by embezzlement, according to a recently released report from Marquet International, a consulting firm based in New York City and Boston headed by Christopher T. Marquet, an attorney with more than 30 years of experience in business intelligence and security consulting. 
When all cases from 2008 through 2012 are considered, the report says, Vermont was number two, behind only Iowa. That state convicted Russell Wasendorf of siphoning off $215.5 million from 10,000 clients of the Peregrine Financial Group, a case which skewed the figures during the period.
By the way, one correction here: I am not an attorney.

Wednesday, March 5, 2014

Seminar In Boston: Bosses Behaving Badly - Detecting, Deterring & Mitigating the Risks of Executive Misconduct

On Thursday, March 27 and Friday, March 28, we are hosting a complimentary breakfast briefing seminar in the Boston area entitled: Bosses Behaving Badly: Detecting, Deterring, and Mitigating the Risks of Executive Misconduct.  I have collaborated with industry experts in computer forensics and employment law to host this special event.  The presentation will be held 3 times, morning, midday and afternoon.

For a description, go here and to register, go here.  There is no charge but space is limited for each session.  I hope to see you there.
- Chris

Tuesday, March 4, 2014

Former Program Director For Florida Non-Profit Sentenced To 6 Years For Embezzling $200K To Support Lifestyle

From the Tampa Bay Times on 3/4/14:

Before she sentenced Kimberly Sue Ross, Pinellas Circuit Judge Nancy Moate Ley gave her a history quiz.

Who was James B. Sanderlin? the judge asked.

Ross blotted the tears on her cheeks. She knew that Sanderlin was the first African-American judge in circuit court. She also knew that he was the namesake of the nonprofit organization that provides a wealth of free services to low-income families. It's the same organization from which she admitted embezzling $200,000.

Ross, 47, was sentenced Monday to six years in prison for grand theft from the James B. Sanderlin Neighborhood Family Center. Her sentence includes a third-degree felony charge from January 2012 for failing to redeliver leased property.

In a case Ley called aggravating, Ross said she was unaware that she wrote 232 fraudulent checks totaling $200,337 in four years. Financial crimes investigator John Pickart said Ross monitored the account balances, wrote checks sequentially with the same dollar amount and even wrote checks directly payable to Progress Energy for her electric bill.

Ross, who worked at the center as a program manager responsible for handling the budget, paying the bills and supervising administration, lived an $80,000 income lifestyle while earning an average annual salary of $40,000.

She spent the money on furniture, fast food, jewelry, an Xbox, bowling, Netflix, a hair salon, cable TV, flowers, Adventure Island, a pet store, and the flea market, Pickart said.
...

Read the whole story here.

Hat tip: FraudTalk reader Joe.

Former Head Of Wisconsin Little League Organization Accused Of Embezzling $200K

From Madison.com on 3/4/14:

The former president of a Little League organization in Madison is facing charges for allegedly embezzling $200,000 of the league's funds.

Stephen Verhage, 59, of Madison, is facing multiple felony counts of theft and fraudulent writings, Madison police said in a news release.

Verhage was president of the Kennedy Little League, 5801 Commercial Ave., which has 60 baseball teams and about 650 players.

"In November of 2012, police got a complaint regarding the embezzlement of funds," said police spokesman Joel DeSpain. "Information provided to the case detective indicated the fraudulent activity dated back to at least 2005."

The investigation into the complaint just wrapped up, with police determining about $200,000 had been taken from the organization, allegedly by Verhage.
...

Former Municipal Treasurer In California Charged With Embezzling $212K From Non-profit - Returns Money Before Arrest

From the San Diego Union-Tribune on 3/3/14:

Former Carlsbad city treasurer James Comstock allegedly stole more than $212,000 from a nonprofit arts group where he volunteered, but returned the money before his arrest in December, a county prosecutor said Monday.

The new details in the case emerged this week after state officials announced Comstock has been barred from practicing accounting until the criminal charges against him are resolved. A preliminary hearing has been set for April 30, Deputy District Attorney Bill Mitchell said.
 
Comstock has been charged with two felony counts of grand theft of personal property and two felony counts of embezzlement. He was released on $120,000 bail shortly after his Dec. 18 arrest, Mitchell said.
 
The charges against Comstock are unrelated to his work as city treasurer, a job he held from late 2010 until he resigned in early 2013. The charges are related to accounting he did for Carlsbad’s ArtSplash education nonprofit, which holds an annual two-day fundraiser for local schools each fall.
...
 
Read the whole story here.

Tulsa World Article Profiles Crime Of Embezzlement; Highlights Major Cases In Oklahoma In Recent Years

From Tulsa World on 3/3/14:

Embezzlement is the ultimate crime of opportunity.

People who probably wouldn't even dream of robbing a bank will succumb to temptation and help themselves to stacks of their employer's money. Sometimes the perpetrators are motivated by financial need, perhaps caused by addiction. On other occasions, it's pure greed. Other times, the motivation to steal is not so easy to explain.
...
 
Some of the most notable cases filed in recent years in Tulsa federal court that involved stealing an employer's money:
  • James R. Cooley, 45, pleaded guilty in November to a wire fraud charge connected to his embezzlement of nearly $700,000 from Newfield Exploration Co. Cooley was employed as the regional human resources manager in Newfield's Tulsa office from September 2007 until January 2011. Cooley admitted in his plea agreement that beginning in the autumn of 2008, he began to create false invoices and would then submit them on behalf of a consulting company he created. Cooley is scheduled to be sentenced on April 23. 
  • James Lamar "Marty" Gresham, 52, pleaded guilty in September to a bank fraud charge, admitting that he stole more than $1.5 million over nearly four years by forging more than 500 checks drawn on an account of his then-employer, Frontier International Trucks in Tulsa. Gresham's job as controller at the company at the time allowed him access to the company's financial records and bank accounts, prosecutors said. He is scheduled to be sentenced on April 24.
  • Wesley Scott McGinness, 67, a former executive director of the HOW Foundation, was sentenced in November 2012 to one year and three months in prison for defrauding the agency of more than $1.5 million over nearly eight years. He admitted in his plea agreement that he "gambled heavily at casinos in the Tulsa area," using credit cards, and then wrote checks on HOW's account to pay for his gambling habit. He admitted writing $1,359,714.89 in unauthorized checks and embezzling about $224,000 from the cash receipts from the organization's thrift store. 
  • Janice Mora Adams, 56, was sentenced in July 2012 to four years and nine months in prison and was ordered to pay more than $3 million in restitution after pleading guilty to misapplying funds while she worked as a senior vice president for private banking and internal control officer at Peoples Bank. She stated in court documents that she initiated fraudulent loans and accounts as part of a scheme in which she embezzled funds from May 2004 until February 2010.
  •  Floyd Lee Cleghorn, 47, was sentenced in October 2011 to 18 months in prison and was ordered to pay $346,000 in restitution to AAON, Inc., where he had worked unloading trucks and verifying inventory. The charge to which he pleaded guilty alleged that he caused the company to purchase items that it didn't need and then would sell them on the online auction website eBay.com. His petition to plead guilty said he had received mental health treatment for kleptomania.
  • Elizabeth A. Stanley, 54, was sentenced in October 2011 to one year and three months in prison and was ordered to pay $118,956.87 in restitution after pleading guilty to willfully misapplying funds while she worked at First National Bank & Trust Co. of Miami, Okla. Though not charged as an embezzlement case, Stanley admitted in her plea agreement that she stole money by converting checks to her own use and taking money that she was supposed to be putting in automated teller machines.
  • Thomas Clark Rondot, 67, was sentenced in July 2011 to two years in prison on a tax-evasion conviction connected to his embezzlement from the Crosby Group, Inc. for whom he used to work as chief financial officer. He conceded in his plea agreement that he owed more than $1.3 million in restitution to the Crosby Group and an insurance company for conduct "that is not the offense of conviction." U.S. District Judge Claire Eagan indicated during Rondot's sentencing hearing that Rondot had embezzled for more than three years and did not pay taxes on the stolen money.

Civil Suit Suggests $130 Million Embezzlement From Massachusetts Municipal Police Union Benefits Fund

From the Boston Globe on 3/4/14:

A recently retired Hull police officer has sued the town’s police chief and several other high-ranking officers, saying they embezzled union funds and charitable contributions for meals in expensive restaurants and drink tabs at bars and adult entertainment clubs.

In the complaint, Richard McKenna, who retired in December after 28 years on the force, said he filed the suit after he did not receive supplemental retirement benefits owed to him by the union. The union president, Scott Saunders, later told him that $130,000 was missing from the fund, which was virtually empty, and there were no financial records, according to the suit.

The civil suit, filed on behalf of all union members to recover the allegedly lost funds, includes testimony from Saunders saying he contacted the state attorney general’s office in December about the missing money. The attorney general’s office would not confirm or deny that it is investigating the matter.

Police Chief Richard Billings said Monday that he had not been a union member since 2004, when he became chief, and has had nothing to do with the union’s finances since then. He was aware that Saunders had reported the missing money to authorities and said he was eager to learn the outcome of any investigation.
...

Read the whole story here.

Former Municipal Finance Director Sentenced For Embezzling $400+K From North Carolina Town

From the Lincoln Times-News:

The City of Cherryville’s former finance director will spend two years in federal prison after pleading guilty to embezzling more than $400,000 in city funds over a six-year period, according to the United States Attorney’s Office in the Western district of North Carolina.
 
A federal judge sentenced 59-year-old Bonny Verley Alexander on Friday, ordering her to 24 months behind bars followed by an equal time period of supervised release.
 
Alexander, who pleaded guilty in 2013 to five counts of program embezzlement for misappropriating city funds, federal authorities said, served as finance director for the City of Cherryville from 2005 through 2011, when she retired.
 
Over the six-year period, she stole city funds to “pay for personal expenses” including shopping and travel expenditures, a U.S. Attorney’s Office press release said.
 
Not only did she take an amount each week worth more than 300 percent of her actual salary but she also used American Express credit cards to pay for her private spending ventures.
 
The amount totaled just under $310,000, according to federal authorities.
...
 
Read the whole story here.

Missouri Man Pleads Guilty To Embezzling Nearly $5 Million From Leasing Concern; Was Company Controller; Gambling Blamed

From Kansas City infoZine on 3/1/14:

A Neosho, Missouri man pleaded guilty in federal court to stealing more than $4.9 million from his employer.
 
Springfield, MO - infoZine - David VanWinkle, 60, of Neosho, waived his right to a grand jury and pleaded guilty before U.S. Magistrate Judge David P. Rush to wire fraud, money laundering, and failure to pay taxes.

VanWinkle was the comptroller for Frontier Leasing Incorporated (FLI) in Joplin, Missouri. By pleading guilty today, VanWinkle admitted that he stole $4,911,621 from FLI between June 2008 and December 2013, which he spent on personal expenses and gambling.

Based on a report from a financial institution, federal agents began investigating unusual deposits VanWinkle made into his business accounts for two businesses, VanWinkle Accounting and VanWinkle Farms.

VanWinkle, acting as the comptroller for FLI, received payments from FLI’s customers in the form of checks. VanWinkle deposited some of those checks into FLI’s legitimate business accounts but deposited other checks into another checking account under the name of FLI that VanWinkle had opened at another bank. VanWinkle was the sole person on this secret account; no one else was aware that FLI had the account and VanWinkle was not authorized to open an account or deposit any of FLI’s customer payment checks into the account.
...

Read the story here.

Four Women Separately Banned From Involvement In Federally Insured Financial Institutions For Fraud & Embezzlement

From the Credit Union Times on 2/28/14:

The NCUA issued four orders on Friday prohibiting individuals from participating in the affairs of any federally insured financial institution. Violators were all banned for theft, with court-ordered restitution amounts ranging from less than $20,000 to more than $1 million.

Carol Ann Ferraro, former executive vice president of $107 million Chaffey Federal Credit Union in Upland, Calif., was sentenced to 30 months in prison, five years of supervised release and ordered to pay $1,052,790.56 in restitution for embezzlement.
...

Jeannette Abbott, a former employee of the $86.8 million Malheur Federal Credit Union in Ontario, Ore., pleaded guilty to theft, embezzlement or misapplication by a credit union officer, which carried a four-month prison sentence, three years of supervised release and restitution in the amount of $93,749.40.

Justine Martin, a former employee of the $633.6 million Leominster Credit Union in Leominster, Mass., “admitted to facts sufficient for a finding of guilt to the charge of larceny over $250,” said the NCUA. She must serve five years of supervised probation and pay $17,990 in restitution.

Nancy Ann Secoda, a former employee of $407 million Vons Employees Federal Credit Union in El Monte, Calif., was convicted for grand theft and willfully acquiring personal information. Secoda pleaded no contest and was ultimately sentenced to five years in prison and required to pay $712,253.58 in restitution.
...

Read the whole story here.

Sunday, March 2, 2014

City Clerk In Oklahoma Charged With Embezzling Over 7 Year Period; Manipulated Payroll

From Oklahoma 9 Mobile on 2/28/14:

The Rush Springs City Clerk has been charged with embezzlement.

John David Morrow was responsible for all of the city's finances for nearly a decade.

During that time, investigators claim he manipulated the payroll in an effort to increase his salary.
The allegations first surfaced following an audit of the City of Rush Spring in 2011.

According to court papers, Morrow did not withhold payroll taxes from his paychecks, did not withhold insurance premiums and issued himself extra paychecks.
 
Morrow allegedly embezzled from the city for seven years until he was caught.

The Grady County District Attorney's Task Force began investigating Morrow's activities, and records show Morrow admitted to investigators he took the money to pay for living expenses such as paying for his home and raising his children.
...

Read the story here.