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.”

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.

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.  ...

Update (1/12/2015):  Yedor has been sentenced to 10 years in prison in what is now believed to be a $36 million embezzlement scheme:

A Los Angeles man has been sentenced to 10 years in prison for defrauding Northwest and Delta Air Lines of more than $36 million over more than a decade, prosecutors said Friday.

Michael Yedor, 62, was sentenced by U.S. District Judge Timothy Batten after pleading guilty Oct. 20 to conspiracy to commit mail fraud. He also forfeited property such as a Beverly Hills mansion and a 71.9-foot yacht that he got from the fraud, prosecutors said.

"The scope and magnitude of this fraudulent scheme is astounding," U.S. Attorney Sally Quillian Yates said.

Yedor had been an employee of Northwest since 1979 and then Delta after the airlines merged in 2009. From at least 1999 through 2013, according to investigators, Yedor submitted invoices from a company, Airborne Voice and Data, that sought payment for goods and services that the company hadn't provided.

J. Britt Johnson, FBI special agent in charge of the Atlanta office, said Yedor's sentencing represents "the end of not only a complex scheme to defraud Northwest Airlines and Delta Airlines but also the resulting extensive federal investigation into those involved."

Yedor's accomplice, Paul Anderson, 57, of Apple Valley, Minn., a manager who had the authority to approve the payments, pleaded guilty to mail fraud on Sept. 15 and is scheduled to be sentenced Jan. 23.