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.