Thursday, October 30, 2014

Father-Son Duo In North Carolina Indicted For Allegedly Embezzling $11 Million From Payroll Clients

From the FBI on 10/28/2014:

Father and Son Operators of a Third-Party Payroll Company Indicted for Defrauding Client Companies of More Than $11 Million
           
Son Embezzled at Least $3.7 Million to Pay for Strip Clubs, Alcohol, Jewelry, and Lavish Residence

The two operators of a third party payroll company have been indicted for stealing more than $11 million from at least 113 clients and using the money to support their personal lifestyles, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. The criminal indictment was returned by a federal grand jury on Thursday, October 23, 2014, and was unsealed today following the arrest of James William Staz, 43, of Iron Station, N.C. James Staz’s father, William James Staz, 72, of Huntersville, N.C., is the co-defendant named in the 10-count indictment.

U.S. Attorney Tompkins is joined in making today’s announcement by John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI).

According to the allegations contained in the indictment:

William and James Staz operated “Employee Services.Net, Inc.” (ESN), a third party payroll company the two men formed in 2004 in Cornelius, N.C. James Staz was the vice president and financial manager of ESN until August 2011, when he became the company’s president. His father, William Stanz, was a company shareholder and managed ESN’s day-today operations until 2008, when he was incarcerated for a federal bank fraud conviction. William Stanz returned to ESN following his release from prison and continued to be involved in company operations.

As a third party payroll company, ESN provided various personnel services to its client companies, including processing payroll, collecting and paying federal, state and local employment taxes, and preparing and filing the required employment tax forms. In order to provide these services and make payments on behalf of its clients, ESN had access to the clients companies’ bank accounts and directly drafted the funds needed to cover the expenses. At its height, ESN had approximately 500 client companies located throughout the United States.

From about 2008 to March 2014, the defendants defrauded at least 113 ESN clients of approximately $11 million dollars intended for payroll and employment tax payments and used it to support their personal lifestyles. The victim companies include, among others, a company dedicated to delivering services for children with developmental disabilities or chronic illness, families in poverty, and families caring for the elderly and a company involved in the production of racing engines for a number of NASCAR Sprint Cup teams.

During that time period, James Staz embezzled at least $3.7 million in client funds and directed the money to his personal bank account. In order to conceal his embezzlement, James Staz made false entries into ESN’s accounting system to make it appear as though the stolen funds were used for legitimate client expenses. In reality, James Staz used the money to pay for alcohol, strip club entertainment, jewelry, a Mercedes Benz and a luxury home with a lavish three-tiered pool, a cascading waterfall, wet bar and dining area. For example, on October 25, 2012, James Staz embezzled nearly $125,000 from ESN and in the next four days, he spent the stolen funds on nearly $40,000 in charges at strip clubs and night clubs and nearly $120,000 on a new Mercedes Benz. Over the course of the fraudulent scheme, William Staz drew a salary from ESN as high as $200,000, including for the 9-month period he was incarcerated in federal prison.

To conceal their theft and to cover the losses and tax penalties caused to ESN clients by the delinquent payments, the defendants comingled and used client funds ESN collected for a current payroll/tax period to cover the previous period’s payroll and taxes. To further cover their scheme, the defendants then sent regular e-mails to clients, falsely stating that all employment taxes had been paid, which was not true for some of ESN’s clients.

The indictment charges William and James Staz with one count of wire fraud. James Staz is also charged with nine counts of money laundering. James Staz had his initial appearance today before U.S. Magistrate Judge David Keesler and will remain in custody pending his arraignment and detention hearing, which have been scheduled for Friday, October 31, at 9:30 a.m. William Staz will be ordered to appear on a summons.

The maximum prison term for the wire fraud charge is 20 years and a $250,000 fine. The maximum prison term for each of the money laundering charges is 20 years in prison and a $500,000 fine or twice the amount of the criminally derived proceeds, whichever is greater.


Hat tip: Fraud Talk reader Craig

Wednesday, October 29, 2014

$200K Little League Embezzlement Case Investigated In Washington State

From the Kent Reporter on 10/28/2014:

King County prosecutors continue to review and investigate the alleged embezzlement of more than $200,000 from the Kent Little League by a former treasurer.

"There hasn’t yet been a charging decision," said Dan Donohoe, spokesman for the King County Prosecuting Attorney's Office, in a Monday email. "The case is still under review/investigation."

Kent Police investigated the case and turned its information over to prosecutors in September.
Detectives started to investigate the case in December when the Little League board president reported significant financial discrepancies in the league's bank accounts in 2012 and 2013.

Detectives have not made an arrest in the case, but forwarded their investigation to prosecutors to review and decide about filing charges against the man.

The 48-year-old man reportedly used some of the embezzled funds in an attempt to keep his newly acquired Benchwarmer Sports Bar and Grill afloat, according to a police media release. The bar along Russell Road has since closed.

The league's board of directors sent a letter Sept. 10 to Little League parents and volunteers that read, "significant financial discrepancies were found in the management of league funds throughout the 2012 and 2013 seasons."


Note: Independent research suggests that the owner of the Benchwarmer Sports Bar is one Kevin Baker

Connecticut Man Arrested For Embezzling $112K From Finance Company's Client Accounts

From the Shelton Herald on 10/29/2014:

A 32-year-old Connecticut man has been arrested on federal charges for allegedly stealing more than $110,000 from customers at the bank where he was employed.

On Oct. 21, a grand jury in New Haven indicted Alexander Alvarez, 32, of East Lyme on two counts of bank fraud.

As alleged in the indictment, Alvarez identified accounts that had little banking activity at a bank in Newington. He worked there as a financial service representative from January 2012 to February 2013.

He would change the mailing address for the accounts he targeted from the owner’s address to a fraudulent address so that transactions in the accounts would not be immediately discovered by the account owner, according to prosecutors in the U.S. Attorney’s Office for Connecticut.

Alvarez then allegedly created fraudulent transfer slips have the funds transferred to another account that he believed was dormant, or to an account that he directly controlled, or to be issued in a bank check.

Once the funds were transferred from the owner’s account, Alvarez withdrew the funds from the bank in cash or via an ATM card, or transferred them to his personal banking account, prosecutors said.

The indictment alleges that Alvarez stole $100,807 from one bank customer and $11,137 from a second bank customer.

The charge of bank fraud carries a maximum term of imprisonment of 30 years and a fine of up to $1 million.

Maryland Woman Pleads Guilty To Embezzling $1.25 Million From Consulting Firm

From WBOC 16 on 10/29/2014:

A Caroline County woman pleaded guilty Wednesday to conspiring to commit wire fraud in connection with a scheme to steal over $1.2 million from a consulting company, according to the U.S. Attorney's office.

United States Attorney for the District of Maryland Rod J. Rosenstein announced the plea agreement Wednesday for 45-year-old Janice McCumbie, of Marydel, Md.

According to her plea agreement, McCumbie worked for a global consulting business that served clients in various industries and had offices in Maryland and elsewhere. Clients paid large retainers to secure consulting services.  The plea agreement states, the consulting company would issue refund checks to the clients in certain circumstances, including when a client's retainer exceeded the amount of work that the consulting company actually performed or when the client made duplicate payments to the consulting company. McCumbie's duties included coordinating client refunds.   

Between June and December 2008, the plea agreement states McCumbie caused the consulting company to issue six fraudulent refund checks totaling $121,081.22 to a co-conspirator in exchange for a share of the check proceeds.

From February 2009 to October 2013, the plea agreement states McCumbie caused the consulting company to issue 42 false refund checks totaling $910,490.74 to defendant Leonard Smedley in exchange for a share of the check proceeds.  Similarly, from October 2010 to November 2013, McCumbie caused the consulting company to issue 17 false refund checks totaling $217,695.57 to her niece, defendant Amber Gayleard, who cashed the checks and shared the proceeds with McCumbie. Smedley and Gayleard were not clients of the consulting company.

Rosenstein says McCumbie has agreed to forfeit and pay restitution of $1,249,267.53, the loss resulting from her conduct.

McCumbie faces a maximum sentence of 20 years in prison.  U.S. District Judge George J. Hazel scheduled her sentencing for January 27, 2015, at 9:30 a.m.


Note: My own research suggests that McCumbie's employer was FTI Consulting - the global finance and forensic accounting firm.

North Carolina Woman Accused Of Embezzling $300K From County

From WRAL.com:

Dozens of new charges were filed this week against a former Vance County employee who was arrested earlier this month on charges that she embezzled more than $300,000 in county funds.
Christa Harris Reavis, 41, was initially arrested Aug. 8 on 29 counts of forgery and a count of embezzlement. She was rearrested on Tuesday on 49 counts of forgery and counterfeiting and 78 counts of uttering a forged instrument.

Authorities allege that, starting in 2007, Reavis printed checks payable to vendors and then altered payee's names.

Reavis, who worked in the county finance office, also is charged with felony larceny stemming from the disappearance of a bag containing more than $60,000 worth of checks from the county tax office back in 2009.


From the Henderson Daily Dispatch on 10/28/2014:

The former county finance employee accused of stealing more than $300,000 from her employer is seeking to move her case out of Vance County.

Christa Reavis, 41, of 94 Oak Forest Drive, appeared in Vance County Superior Court on Tuesday with her attorney Nick Bagshawe.

...

Former Manager of Rhode Island Insurance Company Charged With Embezzling $2.7 Million

From the Dispatch-Argus on 10/28/2014:

A former Rock Island insurance company manager has been federally indicted on fraud and money laundering charges totaling $2.7 million.

Dominic Giovanni Scodeller, 47, of Davenport, was arrested and made an initial appearance in U.S. District Court, Rock Island, on Tuesday, the same day federal records in the case were unsealed. Currently in the custody of federal marshals, he has a detention hearing scheduled this morning before Judge Sara Darrow.

On Oct. 21, a grand jury indicted Mr. Scodeller on 15 counts of fraud by radio, wire or television; money laundering; concealment; and mail fraud.

Mr. Scodeller was manager of purchasing and facilities for Bituminous Insurance Companies headquartered in Rock Island. He authorized BITCO payments to lessors for branch offices throughout the U.S., as well as for upgrades and construction work to its facilities, the indictment states.

Prosecutors allege that, from 2001 through May 2013, Mr. Scodeller developed a plan to defraud BITCO that started before he even was hired with lies about his academic record and lack of a criminal history during his job interview.

The indictment states that, once hired, Mr. Scodeller created "bogus entities" for fake corporations and bribed vendors and suppliers to pay him unauthorized kickbacks in exchange for BITCO business.

Mr. Scodeller allegedly set up mailing addresses and bank accounts for fake corporations -- such as "North Shores Group Properties," "Agility Business Resumption," "Secure Business Systems" and "AmyLyn Properties" -- that purportedly provided facilities and services to  BITCO. He is accused of using the nonexistent entities as false fronts to bill BITCO for facilities and services while disguising his control and interest in the entities.

To convince BITCO the entities were real, Mr. Scodeller allegedly submitted bills for services he claimed the entities provided, then would sign off on the bills and pocket the funds.
With legitimate firms that provided services, Mr. Scodeller allegedly would bill BITCO for an inflated amount under the name of a bogus entity and keep the difference.

The indictment also says Mr. Scodeller engaged in monetary transactions of more than $10,000 "involving property derived from the scheme to defraud BITCO."

After an internal investigation, BITCO turned the matter over to FBI and IRS criminal investigations.
Each count of mail or wire fraud has a maximum penalty of up to 20 years in prison and a $250,000 fine. The money laundering counts are punishable by up to 20 years in prison and a maximum fine of $500,000 or twice the value of property involved in the transactions, whichever amount is greater.

Tuesday, October 28, 2014

California Woman Arrested On Charges She Embezzled More Than $150K From Dental Office

Prosecutors allege Sandra Salazar Malloy, 53, of Lodi, California, has been arrested and charged with embezzling some $153,720 from the dental offices of Gary Silva, DDS in Lodi where she was employed as an office assistance in charge of accounts receivable.  Malloy allegedly pocketed cash payments meant for the dental practice as well as credit card refunds.  The thefts spanned a 5 year period from 2009 to September 2014. 

Maine Woman Sentenced To 20 Months For Embezzling $365,000 From Non-Profit

From the Portland Press-Herald on 10/27/2014:

A Brunswick woman who embezzled more than $365,000 from a Wiscasset nonprofit has been sentenced to 20 months in prison, according to a statement issued Tuesday by U.S. Attorney Thomas E. Delahanty.

Stacey Backman, 41, who had been a fund accountant at Coastal Enterprises Inc., pleaded guilty in June to embezzling the money over nearly four years, starting in 2010, and failing to report the income on her federal income tax returns.
CEI learned of the embezzlement in January 2014 and fired Backman.

In addition to the prison sentence, U.S. District Court by Judge D. Brock Hornby ordered Backman to repay the embezzled money to CEI, a private, nonprofit, charitable Community Development Corporation and Community Development Financial Institution that received more than $10,000 in federal funds each year.

Backman faced a maximum sentence of 10 years in prison on the charge.

Missouri Man Pleads Guilty To Embezzling Nearly $300K From Local Construction Concern

From the Kansas City Star on 10/27/2014:

A former Clarkson Construction Co., technology director pleaded guilty in Kansas City federal court to embezzling almost $300,000 from the company.

Rodney J. Tatum, 42, admitted that he used the company’s money to purchase solid-state hard drives, other computer equipment and 23 iPhones. He then resold the equipment and deposited $269,706 into his personal bank account.

Prosecutors also alleged that he defrauded an Alabama motor sports shop out of $6,567 worth of work.

Read more here: http://www.kansascity.com/news/local/crime/article3406168.html#storylink=cpy

Louisiana Man Pleads Gilty To Embezzling $1 Million+

From the Times-Picayune on 10/27/2014:

A Mandeville media consultant accused of running a scheme that defrauded clients of more than $1 million over a three-year period pleaded guilty Monday (Oct. 27) to five counts of mail fraud, according to U.S. Attorney Walt Green's office.

Raymond Christopher Reggie, 52, was charged in a superseding indictment with five counts of mail fraud. A federal grand jury in the Middle District of Louisiana in Baton Rouge indicted Reggie in August 2013 with five counts of wire fraud and six counts of money laundering.

Reggie is the former brother in law of the late U.S. Sen. Ted Kennedy and son of former Crowley City Judge Edmund Reggie.

The original counts were dismissed when the superseding indictment was filed, court records show. The U.S. Attorney's Office said Reggie's case was set to go to trial in Baton Rouge Monday. He pleaded guilty without the benefit of a plea agreement.

Reggie owned Nexlevel Group, an advertising firm that purchased and managed advertising for car dealerships.

Authorities said he submitted fake expenses for payment to the dealerships that showed the expenses actually were incurred. Once the dealerships submitted payments to Nexlevel, authorities said Reggie diverted the funds to a personal bank account.

Between January 2009 and July 2012, federal authorities said car dealerships issued Reggie's company 138 checks totaling approximately $1,217,657 for advertising services they did not receive.
Reggie is facing similar charges in St. Tammany Parish.

The St. Tammany Parish District Attorney's office charged Reggie with seven counts of theft over $1,500 in February 2013. The charges stem from an August 2012 arrest.

The St. Tammany Parish Sheriff's Office said at the time it had identified more than $600,000 in fake invoices for which Reggie was compensated. The sheriff's office said Supreme Automotive Group filed a complaint alleging it hired Reggie in 2010 to place ads for dealerships in various media outlets throughout southeastern Louisiana. The group said the ads never appeared in print or on the air.

Reggie is set to go to trial on the theft charges on March 16, court records show.

Reggie, who was one of President Bill Clinton's confidants in Louisiana, was sentenced in 2005 to serve one year and one day in federal prison after he pleaded guilty to bank fraud. Reggie admitted he used his company to move money between banks in Baton Rouge and New Orleans from 1999 to 2001 to make it seem like he had more cash than he actually did.

He took out a $6 million loan at Hibernia National Bank of New Orleans using a fabricated contract with the U.S. Census Bureau as collateral. Court records show Hibernia lost $3.5 million as a result.
In the federal mail fraud case, Reggie faces prison time, fines, restitution and could be forced to forfeit any property he obtained using money from the dealerships. A sentencing date has not been set.

"Being articulate, smart, charming and connected are often characteristics seen in successful con artists, like this defendant," Green said. "The audacity of his fraud schemes is only outdone by his desperate attempts to deflect blame on others. This defendant only accepted responsibility after realizing that his efforts to smear and blame others would not save him from the harsh reality of the law and facts."

Jerome R. McDuffie, acting special agent in charge of the Internal Revenue Service's criminal investigations division said his office and the U.S. Attorney's Office "remain fully committed to prosecution of those who engage in these practices for personal gain."

Monday, October 27, 2014

Missouri Woman Pleads Guilty To Embezzling $3 Million From Local Manufacturer - Company Forced To Go Bankrupt & Shutter

From the Associated Press on 10/22/2014:

A Kansas City woman has pleaded guilty to a $3 million fraud that forced her employer to declare bankruptcy and close the business.

Federal prosecutors say 52-year-old Irene Marie Brooner pleaded guilty Wednesday to bank fraud. She admitted that for more than a decade she took the money from Galvmet Inc., a sheet metal fabrication and steel service center in Kansas City. The company closed in 2014, when it had 18 to 20 employees.
 
Brooner was a controller who managed payroll and accounts at Galvmet. During the scheme, she created 389 unauthorized transactions from the company's bank account to her personal account and increased her net pay on about 108 checks.
 
Brooner was ordered to forfeit her home, a Lexus, jewelry and at least $2.9 million.


From the Kansas City Star on 10/22/2014:

A 52-year-old certified public accountant pleaded guilty Wednesday to a $3 million fraud scheme that forced her former employer, Galvmet Inc., out of business.

The Kansas City woman, Irene Marie Brooner, who appeared in U.S. District Court for the Western District of Missouri, will forfeit personal assets and a money judgment equivalent to more than $2.9 million obtained in the scheme.

She also faces a possible sentence of up to 30 years in federal prison and an additional fine of up to $1 million.

According to U.S. Attorney Tammy Dickinson, Brooner worked at the Kansas City sheet metal fabrication and steel service company from 2001 until she was fired in February 2014. She had been the company’s controller in charge of managing payroll and accounts receivable and payable.
Brooner admitted in court that she created hundreds of unauthorized bank transactions, directing Galvmet funds to her personal accounts. She also admitted to increasing her pay by manipulating the company’s payroll account.

Brooner’s embezzlements, causing more than $1.89 million in losses to Galvmet, were discovered by the company when it prepared a Chapter 13 bankruptcy filing in February this year. Company sales had fallen from a peak of $14 million in 2008 to $10 million when it ceased operations, causing the loss of about 20 jobs.

Dickinson said Brooner also was discovered to have falsified documents with Missouri Bank & Trust, causing a $1.1 million loss to the bank.

Court filings indicated that Brooner used the embezzled funds to pay for a Lexus sport utility vehicle, pay off her home mortgage, remodel and extravagantly outfit a basement bar, spend about half a million dollars on clothing and jewelry, eat in restaurants, travel, go to spas and beauty salons, pay for gifts and school tuition for her children, and spend a half million dollars on undetailed check and credit card purchases.

The plea agreement requires her to forfeit the Lexus and jewelry and pay a money judgment of at least $2.96 million, representing the total net proceeds of her scheme.
The case was investigated by the FBI and prosecuted by Daniel M. Nelson.

Read more here: http://www.kansascity.com/news/business/article3228523.html#storylink=cpy

Patent Attorney In Maine Accused Of Embezzling $5 Million From New York-Based Window Treatment Company

From the Pen Bay Pilot on 10/22/2014:

ROCKPORT and DENVER, Colo. — A lawsuit alleging a $5 million theft via mail and wire fraud, racketeering and a shell company, filed in June against a Rockport couple, is in the beginning stages of the legal process in Colorado U.S. District Court.

Jason Throne previously worked as an in-house patent attorney for Hunter Douglas Inc. and his wife, Mary Throne, formed with her husband a corporation called Patent Service Group, according to court documents.

According to the lawsuit, Jason Throne is accused of stealing nearly $5 million dollars from Hunter Douglas and covering up the theft by submitting fraudulent billing statements from the Throne's company, Patent Service Group, "for the purpose of defrauding HDI."

The thefts are alleged to have occurred during the course of Throne's more than 20-year career with Hunter Douglas, a Delaware corporation with its principal place of business located in New York. The company makes window blinds, covering and architectural products.

In late 1999, the Thrones established and incorporated Patent Service Group Inc. with a mailing address in Boulder, Colo., and a principal place of business at 236 Union St. in Rockport. The court document also said that Patent Service Group Inc. was administratively dissolved in 2002, but is believed to still be operated by the Thrones in Maine.

"Unbeknownst to HDI until recently, PSG is an entity Mr. and Mrs. Throne established and directed for the sole purpose of falsely billing HDI for patent search services that were on information and belief never performed. Between the years 2000 and 2014, the Thrones used PSG to submit false and fraudulent invoices to HDI on a monthly basis," Hunter Davis said in the court documents.

According to the lawsuit, filed June 30, Jason Throne was a Hunter Douglas employee from Aug. 16, 1993 to June 12, 2014. Since 2001, Throne's title was Intellectual Property General Counsel and as the sole in-house dedicated patent counsel, he was considered a high-ranking member of the company's legal department.

That title, the company said, reflected Throne's "supervisory authority over HDI's intellectual property portfolio, most significant of which was the Company's patent-related matters." And as such, he was responsible for managing and overseeing patents for Hunter Douglas and its subsidiary and affiliate companies.

As part of the job, Throne was charged with preparing and filing various patent applications, or directing and managing others doing the work. His duties also involved working with the company's research and development and engineering personnel "to memorialize and assess new inventions for their patentability."

The company also said in the lawsuit that as part of the job of preparing patent applications, research and searches of the U.S. Patent and Trademark Office databases must be conducted to assess whether a similar patent has already been field or granted, among other things. Throne was involved with and/or oversaw routine patent searches on behalf of Hunter Douglas, as well as "state of the art" patent searches, patent infringement searches and patent validity searches.
In addition to supervising a company attorney or paralegal, Throne was also authorized to retain outside counsel to perform the tasks, the latter most often requiring a written contract, according to the court document.
Hunter Douglas also said that it "explicitly prohibits" its salaried employees from engaging in any outside employment or entering into any contracts that would create a conflict of interest without disclosure to and the written permission from appropriate company personnel.

According to the court document, the Thrones are alleged to have prepared invoices to Hunter Douglas on an "approximately" monthly basis from 2000 through April 2014, for "purported patent searches" conducted during the previous month. They submitted the invoices under the name of PSG. The invoices averaged between $30,000 and $40,000 per month, according to the law suit.

The PSG invoices would be sent to Hunter Douglas via fax machine to Jason Throne at a number connected to a Post Office box in Rockport.

"The Thrones faxed the invoices to Jason Throne at HDI with the specific, fraudulent intent of giving the invoices an air of legitimacy, making it appear as if PSG was a third party vendor, instead of the alter ego of Jason and Mary Throne," said Hunter Davis in the court document.

The Thrones also allegedly established and used a P.O. box in Boulder, Colo., for remittance of PSG bills. The PSG invoices directed Hunter Douglas to remit payment to that address.

"The Post Office box was established by the Thrones with the specific intent of fraudulently obtaining HDI funds through the mail," said the court document.

The company alleges that when Throne received the PSG invoices, he would approve them and add his initials. Each PSG invoice would be sent to the company's accounting department for payment, allegedly bypassing the company's established procedure for processing and approving "key outside legal vendor charges."
"... he never inputted the PSG expenses into the system or gave direction to anyone else to input PSG expenses," said the court document. "Mr. Throne intentionally failed to input PSG charges into the legal workflow system to further conceal the Defendants' fraud."

Between 2000 and 2014, Hunter Douglas paid Patent Service Group/the Thrones a total of $4,841,146.09.

2000 - $285,272.87
2001 - $374,068.64
2002 - $346,373.38
2003 - $276,167.41
2004 - $250,357.52
2005 - $237,355.84
2006 - $272,180.09
2007 - $306,216.81
2008 - $253,893.55
2009 - $341,821.78
2010 - $402,663.67
2011 - $419,761.30
2012 - $444,723.94
2013 - $476,716.63
2014 - $153,572.66

Hunter Douglas alleges then that Jason or Mary Throne would travel from Maine to Colorado, and physically obtain the company's checks mailed to Patent Service Group at the P.O. box in Boulder. From there, they would allegedly travel to Steamboat Springs to personally deposit the checks into a bank branch located in that city that was opened and controlled by the Thrones.

The lawsuit claims that the Thrones took steps to hide their involvement with Patent Service Group when it was initially discovered by Hunter Douglas staff.

According to the court document, a patent engineer at the company in November 2013 discovered substantial billing entries for PSG, a company the engineer allegedly had never heard of or witnessed any work product from.

When the employee questioned Throne, he allegedly represented that the company was a patent search vendor that he used and that "the expenses are approved."

"He then emailed to her a response reiterating that PSG was 'a patent search service I use that tracks a number of different developments throughout the organization," according to the court document.
In addition to those allegations, Hunter Douglas claims that Patent Service Group "did not provide any material work product to HDI."

The company claims there is no written agreement that documents the business relationship between the companies, and that Hunter Douglas has no itemized billing, work files or reports from Patent Service Group and no email related to PSG.

"To the extent HDI can detect any services provided by PSG, the services are indistinguishable from the employment services for which HDI employed and paid Jason Throne," said Hunter Douglas in the court document.

The lawsuit claims that Mary Throne is not and has never been an attorney, and that there is no evidence she has obtained any degrees or certification related to intellectual property.
"On information and belief, Ms. Throne was previously employed as an aquatic aerobics instructor," said the court document.
The lawsuit said that Patent Service Group's billing rate for Hunter Douglas searches was $125 per hour, and that Jason Throne allegedly approved PSG's rate eventually increasing to $300 per hour.
In the year 2000, PSG billed $285,272.87 at a purported rate of $125 per hour. That would mean, the company surmised, that PSG worked nearly 2,300 hours during the year performing patent search services "solely for HDI." That equates to nearly 9.5 hours per day for each non-holiday work day during that year, the lawsuit said.

In 2001, PSG billed $374,068.64, also at the purported rate of $125 per hour. That would equate to 3,000 hours of work during the year, or 12 hours a day for each non-holiday work day during that year.

"Despite demands by HDI to do so, Mr. Throne has not produced any evidence of independent PSG work product or searches," said Hunter Douglas in the lawsuit.

Throne is also alleged to have failed to make his employer aware that PSG was providing services to Hunter Douglas until questioned about it by the patent engineer in November 2013. He also failed to make them aware that his wife or anyone else was acting on behalf of Patent Services Group or the nature of his relationship with PSG, as it pertained to Hunter Douglas, "including the conflict of interest that existed based on his interest in PSG."

Records filed with the lawsuit purport to show that Throne had signed the company's ethics policy against conflicts of interest and also certified he had no outside employment.

In addition to not being authorized by Hunter Douglas to conduct work for Patent Service Group, if he did, and based on his representations in writing that he was not working in any capacity other than as an employee of Hunter Douglas, the lawsuit alleged that: " To the extent PSG provided any actual services, HDI never approved the use of PSG nor waived the conflict that existed based on Jason Throne's interest in PSG. Mr. Throne was not authorized to approve a conflict involving himself, contract with PSG or approve payments to PSG on HDI's behalf. Mr. Throne was also not authorized to approve any rate increases to PSG on HDI's behalf."

Hunter Douglas alleges that homes the Thrones purchased in Rockport and in Steamboat Springs, Colo., as well as automobiles, a boat and other "significant" person property, were purchased with Hunter Douglas funds.

The company alleges that the Thrones engaged in a pattern of continuous racketeering activities by engaging in mail and wire fraud.

"The Thrones conducted the business of PSG entirely through the predicate acts of mail fraud and wire fraud. PSG was established and operated by the Thrones for the purposes of fraudulently obtaining funds from HDI using Mr. Throne's approval authority. The Thrones conducted the business of PSG through mail and wire communications, and they used mail and wire communications to shield their involvement with PSG by setting up the Boulder Post Office Box and using PSG as a front to obtain funds from HDI.

"The Thrones were engaged in interstate commerce. Jason Throne worked for HDI in its Broomfield office and out of his home residence in Maine. Jason Throne created PSG's invoices and sent them by facsimile from Maine to HDI's office in Colorado. The Thrones induced HDI to mail payments to PSG in Colorado. The Thrones deposited payment checks from HDI to PSG in a Colorado bank account and, upon information and belief, accessed those funds from Maine."

Hunter Douglas has accused the Thrones of violations of the Racketeer Influenced and Corrupt Organization Act and of the Colorado Organized Crime Control Act. They are accusing the Thrones and Patent Service Group of conspiracy, civil theft and rights in stolen property, unjust enrichment, imposition of constructive trust and conversion. HDI is claiming fraudulent concealment, fraudulent inducement, breach of fiduciary duty and breach of contract against Jason Throne, and breach of contracts against both Thrones. Mary Throne is accused of aiding and abetting breach of fiduciary duty

Hunter Douglas, according to the court document, is seeking a jury trial and damages, including three times the actual damages incurred, as well as court costs and attorney fees.

According to the Rockport town website, the Throne's waterfront home on Pandion Lane, across the street from the Farmstead, is valued for tax purposes at $1.9 million, of which $646,900 is for the land. They also own a nearby parcel of 1.01 acres valued at $114,200. Both parcels were purchased in 2006 for $975,000, according to the property record cards on file with the town.

The Thrones sold their Steamboat Springs home, which they built in 1999, for $1.125 million in 2007 for $1.125 million, according to SteamboatToday.com. It was also reported that the Thrones former home sold again in 2013, but for $693,500. According to the Routt County Assessor's website, the Thrones still own 35 acres of land within a 10-mile radius outside the Steamboat Springs city limit.

New Jersey Man Jailed On Charges He Embezzled $259K From Engineering Firm

From the South Jersey Local News on 10/23/2014:

A Medford resident, who is a professional engineer, was recently sentenced to five years in prison for embezzling approximately $259,000 from a Red Bank engineering firm, according to the Monmouth County Prosecutor’s Office.

Eugene E. Brandt, 49, of Normandy Court in the Sherwood Forest development, was arrested on Nov. 14, 2013, and pleaded guilty in July 2014 to second-degree felony charges for stealing from Engineered Design Works Inc., according to Charles Webster, spokesman for the Monmouth County Prosecutor’s Office.

Neil Friese, one of the owners of Engineered Design Works, said that Brandt, a co-owner, left the company in 2009 after incidents of theft were uncovered.

Friese said that Brandt committed more than 30 acts of theft over a five-year period.

Friese said Brandt issued himself checks and cashed them and then concealed the thefts by manipulating accounting records.

The prosecutor’s office said that Brandt was sentenced and incarcerated on Oct. 3, 2014.

Friese said that Brandt paid back approximately $51,000 to the company and, as part of a plea agreement, executed a “civil consent judgment,” agreeing to repay the balance of approximately $208,000.

Embezzlement Investigation Ongoing At North Carolina Church - Former Finance Director Suspected Of Stealing At Least $250K

From WSOCTV on 10/22/2014:

FBI, Huntersville PD investigating SouthLake Christian embezzlement allegations

Allegations of embezzlement and fraud at a prestigious Christian school in Lake Norman are now under scrutiny by FBI agents.

Wednesday, FBI officials confirmed they are now in a joint investigation with Huntersville Police regarding the allegations at SouthLake Christian which surfaced last week after the school's headmaster and the church's pastor resigned.

FBI agents have already searched a Mooresville home owned by former headmaster Wayne Parker, according to neighbors.

"I expect to see search warrants, I expect to see forensic analysis of the financial records, subpoenas," said former FBI agent Chris Swecker.

Swecker said the FBI becomes involved in embezzlement cases when the dollar figures reach an investigative threshold, which typically starts at $250,000.

"You can probably surmise there's at least a good deal of loss alleged," Swecker said.

Swecker said embezzlement cases can be common at religious institutions if they fail to provide sufficient oversight of their finances, especially in cases where the money is controlled by one or two people.

"They trust him, they allow him unfettered access to the books, they allow him total complete autonomy when it comes to handling the finances, which is absolutely the wrong thing to do," Swecker said.

Channel 9 went to Malloy's home for comment but was unable to speak with him.

An attorney for Parker told Eyewitness News they have no comment about the widening investigation.

An attorney for Southlake also declined to comment.

Watch the Video here.

Former New Mexico Credit Union Employee Pleads Guilty To Embezzling $118K

From the FBI on 10/21/2014:

ALBUQUERQUE—Louisa Gabaldon, 43, of Belen, N.M., pleaded guilty this morning to a federal bank fraud charge under a plea agreement with the U.S. Attorney’s Office.

Gabaldon was indicted on Aug. 7, 2013, and charged with 12 counts of bank fraud. The indictment alleged that from Jan. 2004 through July 2010, Gabaldon engaged in an illegal scheme to defraud her employer, the Belen Railroad Employees Credit Union (Credit Union) by making fraudulent withdrawal of funds from accounts belonging to the Credit Union’s customers.

Today, Gabaldon pled guilty to Count 5 of the indictment charging her with fraudulently withdrawing $31,000 from a customer’s account on July 31, 2006. The plea agreement, however, requires Gabaldon to pay $118,376.56 in restitution to cover losses associated with all 12 counts in the indictment as well as related losses suffered by the Credit Union.

In entering her guilty plea, Gabaldon admitted that, while employed by the Credit Union, she had loan approval which permitted her—when authorized by customers—to make withdrawals from customers’ accounts, transfer funds among their accounts, increase the amount of their loan accounts and open new loans in their names. Gabaldon admitted that, without the knowledge or permission of Credit Union customers, she added amounts to customers’ existing loan accounts and opened new loans in their names and used the funds to pay for her own debts and to make a partial payment for the purchase of a home. In order to conceal her fraudulent activity, Gabaldon moved funds among customers’ accounts to make it appear as if loans had been repaid or funds were replaced.

At sentencing, Gabaldon faces a maximum penalty of 30 years in prison. She remains on conditions of release pending her sentencing hearing, which has yet to be scheduled.

Former Athletic Director At Northern Kentucky University Accused Of Embezzling "Hundreds of Thousands" - Supported His Many Mistresses

From WCPO, Ch. 9, Cincinnati on 10/27/14:

HIGHLAND HEIGHTS, Ky. – While the athletic director was having affairs with his many girlfriends at Northern Kentucky University, he was embezzling hundreds of thousands of dollars from the school and using the money to give them cash and buy them gifts.

Scott Eaton said he gave one of his five NKU girlfriends $2,500 a month in university funds for two years, according to evidence the state used to send him to jail. Eaton, 51, said he stopped when the woman's husband contacted him.

Eaton, a husband and a father, paid one lover's tuition during their 13-year "on and off" affair, mailed Christmas gifts to her last year and sent her e-mails early this year telling her he still loved her, the woman told a criminal investigator working the case.

Eaton told investigators he started that affair in 2000 and two more in 2008. He also said he had affairs in 1998  - the year he was hired at NKU - and 2002.

The I-Team examined dozens of documents - including investigators' reports, girlfriends' testimony and a university audit - and discovered what Eaton bought with the money and how he got away with his theft for years.

Eaton himself wrote a letter to the I-Team from jail. It's the first time he has communicated publicly outside of court since he pleaded guilty last April. He was fired in March 2013.

Eaton's long trail of theft, deceit and betrayal landed him a 10-year prison sentence. For now he is in the Campbell County Detention Center - prisoner number 353556 – awaiting transfer to a state prison.

Once a week his ex-wife Katherine brings their children to the jail to visit him.

In his letter to the I-Team, Eaton says he spends his time tutoring inmates and preparing them for their GED exams. Although it's only a few miles from NKU, it’s a far cry from where he was just a few years ago, leading the flourishing athletic program into Division I.

To NKU's fault, no one was paying attention to how he spent the university's and taxpayers' money.
"It went on for a while because he was able to access the money, he was able to direct the money and he did not have sufficient oversight," said Kentucky Attorney General Jack Conway, whose office put Eaton behind bars.

Eaton said he began experiencing "financial difficulties" in 2006. He told investigators he realized the university was not keeping track of his spending.

At the start of 2007, Eaton began buying Kroger gift cards with his university credit card and using them to buy other store gift cards to make purchases. Sometimes he bought items and returned them for cash.

Over the next six-plus years, Eaton used his NKU credit card 183 times to buy Kroger gift cards for his personal use. He started buying them in amounts of $2,125, then raised that to $3,135.

By mid-2008, maybe because he started to worry about getting caught, he started spending less on cards - $1,440 was a favorite amount – but bought them more often.

By mid-2009, he was back up to $1,800. By 2011, it was $2,700, then $3,600.

He was still buying them in amounts of $3,600 when he got caught in early 2013.

By that time, Eaton had bought $262,106 in Kroger gift cards for his personal use, according to an NKU audit. The audit tracked his illegal spending to a dozen retailers.

In all, the university said Eaton embezzled $311,215 for his personal use. (See the chart below). But that wasn't all.

NKU's audit found that Eaton spent another $145,760 for university uses against university policy or without proper authorization. (See the chart below). That had not been disclosed publicly until now.

According to NKU, Eaton's "abuse" buying included  textbooks and clothing for student athletes and grad assistants in violation of university policy. Some of his spending went for sports equipment, printing and office supplies, summer camps, and other athletic department purposes, including picture frames and flowers. But the university said Eaton did not use contracted vendors or provide receipts in some cases.

All told, Eaton spent more than $26,000 at Barnes and Noble and more than $8,000 at Kohl's and Best Buy, according to NKU's audit.

Eaton's mistresses included at least four university employees and one student. Two investigators interviewed one of the women at a McDonald's near campus last January.

She said she had been having a sexual relationship with Eaton since 2000. She said she was aware he was married but not that he was having relationships with other women.

She said Eaton called her the day that NKU officials confronted him.

"They know about us," she said he told her.

She said she went to Eaton's office, cleaned out some things and put them in her car.

She said she told Eaton not to contact her anymore, but he repeatedly sent her emails and a Christmas present.

She said she called him and refused to meet him, but she took his items and put them in his unlocked car parked at Amazon, where he was working after NKU fired him.

Conway said the story should be about Eaton's crimes, not his trysts.

"There's some salacious details to this story. I recognize that," Conway said. "But he is not in jail for being a bad husband. He's in jail for stealing over $311,000 from Northern Kentucky University."

Eaton turned down WCPO's request for an interview. In his letter he admits much of what happened "is indefensible" but he also wrote:

"I dedicated 15 years of my life to NKU and making it a better place and I am sure that there are many who would like to learn 'the rest of the story', but I do not think it is a good idea at this point in time, especially for my family."

WCPO showed Eaton's letter to Conway. He wasn't sympathetic.

"He appears to say he dedicated more than 15 years of his life to making NKU a better place. I would say that he really shook the confidence that a lot of people have in NKU," Conway said.

NKU President Geoffrey Mearns said the school has tightened its accounting and reduced the number of workers who carry a university credit card.

"We have done and continue to do all that we can to minimize the risk that anything like this will happen again," Mearns said.

The earliest Eaton can be released is May 2016.

When he does get out of prison, he is required to begin paying back the $311,215 he stole.