From the Credit Union Times on 10/31/2014:
The NCUA issued prohibition orders to several individuals in October for embezzlement.
Reginald Clark, a former accountant at the $20.7 million Hoya Federal Credit Union in Washington, stole nearly $200,000 from the credit union, according to the NCUA.
He was sentenced to 63 months in prison and ordered to pay restitution in the amount of $219,286.41, the NCUA said. ...
Jennelle Curtis, a former accounting assistant at the $109 million Pinal County Federal Credit Union in Casa Grande, Ariz., pleaded guilty to two charges of embezzlement.
Curtis was sentenced to a one year in prison, five years of supervised release and ordered to pay $555,571 in restitution.
To avoid the time and costs associated with administrative litigation, Kendra Jill Moore, a former employee of the $258.5 million Partners 1st Federal Credit Union in Fort Wayne, Ind., consented to the issuance of an order of prohibition. ...
Read the whole story here.
Friday, October 31, 2014
Couple Pleads Guilty To Embezzling $1 Million From Kentucky Monastery
From WDRB on 10/31/2014:
Couple accepts plea deal in connection with embezzlement from Abbey of Gethsemani
Police say the case of a million dollars stolen from a monastery might be one of the largest thefts ever in Nelson County, Kentucky. In Nelson Circuit Court on Friday, Carrie and John Hutchins took a plea deal and they will now have to pay big.
John Hutchins pleaded guilty to hundreds of charges for embezzling a million dollars from the Abbey of Gethsemani, dating back to 2008.
"It was all wire transfers. Money was transferred in the same bank from the account in the abbey to an account he had access to. From there it was spent by debit card, check cash," said Nelson County Detective Jason Allison.
He says the money was spent lavishly. "There was a lot of trips to the Bahamas, flew up to Chicago for a meal. A lot of that money I would say was just blown."
Hutchins will go to prison for 20 years, taking the maximum penalty. Prosecutors say his wife, Carrie was not as responsible as her husband, who was the accountant for the monastery. She will be on probation for two years. The couple is losing pretty much everything valuable that they own.
"The gun safe, six watches, exercise equipment, all appliances in the marital residence, two big screen televisions, the zero turn lawnmower," the judge kept listing numerous items.
They will also lose their house and two cars. Detective Allison says the cars were bought with the embezzled money.
The rest of the million dollars stolen--is supposed to be paid back through $600,000 of restitution.
When asked if the monastery will likely ever see that money, the prosecutor smirked. "Um, that's a good question," he replied.
Police already seized what was left in their bank account: $42,000.
"I feel like we come to a good resolution, obviously would've like to have more money that we could've got back from the abbey but we got what we could," said Allison.
The prosecutor says it is not clear how the embezzlement went on for so long without abbey officials noticing. He says the monastery was very trusting of Hutchins, and as a non-profit organization, is not audited like other places.
The couple will be formally sentenced in December.
Couple accepts plea deal in connection with embezzlement from Abbey of Gethsemani
Police say the case of a million dollars stolen from a monastery might be one of the largest thefts ever in Nelson County, Kentucky. In Nelson Circuit Court on Friday, Carrie and John Hutchins took a plea deal and they will now have to pay big.
John Hutchins pleaded guilty to hundreds of charges for embezzling a million dollars from the Abbey of Gethsemani, dating back to 2008.
"It was all wire transfers. Money was transferred in the same bank from the account in the abbey to an account he had access to. From there it was spent by debit card, check cash," said Nelson County Detective Jason Allison.
He says the money was spent lavishly. "There was a lot of trips to the Bahamas, flew up to Chicago for a meal. A lot of that money I would say was just blown."
Hutchins will go to prison for 20 years, taking the maximum penalty. Prosecutors say his wife, Carrie was not as responsible as her husband, who was the accountant for the monastery. She will be on probation for two years. The couple is losing pretty much everything valuable that they own.
"The gun safe, six watches, exercise equipment, all appliances in the marital residence, two big screen televisions, the zero turn lawnmower," the judge kept listing numerous items.
They will also lose their house and two cars. Detective Allison says the cars were bought with the embezzled money.
The rest of the million dollars stolen--is supposed to be paid back through $600,000 of restitution.
When asked if the monastery will likely ever see that money, the prosecutor smirked. "Um, that's a good question," he replied.
Police already seized what was left in their bank account: $42,000.
"I feel like we come to a good resolution, obviously would've like to have more money that we could've got back from the abbey but we got what we could," said Allison.
The prosecutor says it is not clear how the embezzlement went on for so long without abbey officials noticing. He says the monastery was very trusting of Hutchins, and as a non-profit organization, is not audited like other places.
The couple will be formally sentenced in December.
Indiana Woman Pleads Guilty In $130K Embezzlement Of Local PBS Station
From the Associated Press on 10/31/2014:
The former finance manager of a Public Broadcasting Service television station in Fort Wayne has admitted stealing money from the organization.
Fifty-eight-year-old Gail Waymire pleaded guilty Thursday to one count of wire fraud by using a false invoice to route nearly $9,000 from WFWA-TV to her personal bank account. The Journal Gazette and The News-Sentinel report federal prosecutors agreed to dismiss 19 other counts against Waymire and recommend she receive a sentence on the low end of the possible penalties.
A grand jury indicted Waymire last month on charges of embezzling of more than $130,000 from the station over a three-year period. Her sentencing hearing is scheduled for Feb. 4 ...
The former finance manager of a Public Broadcasting Service television station in Fort Wayne has admitted stealing money from the organization.
Fifty-eight-year-old Gail Waymire pleaded guilty Thursday to one count of wire fraud by using a false invoice to route nearly $9,000 from WFWA-TV to her personal bank account. The Journal Gazette and The News-Sentinel report federal prosecutors agreed to dismiss 19 other counts against Waymire and recommend she receive a sentence on the low end of the possible penalties.
A grand jury indicted Waymire last month on charges of embezzling of more than $130,000 from the station over a three-year period. Her sentencing hearing is scheduled for Feb. 4 ...
Thursday, October 30, 2014
North Carolina Woman Sentenced To 2 Years For Embezzling Nearly $840K From Bookkeeping Clients
From the News Herald on 10/30/2014:
STATESVILLE, N.C. – A Lenoir woman was sentenced to 24 months in federal prison Monday, according to a release from the office of U.S. Attorney Anne M. Tompkins.
Denise Swanson was convicted of tax evasion, the release said. She will serve three years under court supervision following her release from prison. She was ordered to pay $839,830 in restitution to client victims and $249,912 to the IRS, according to the release.
Swanson was the owner and operator of Bottom-line Accounting, a tax preparation and bookkeeping business, court records show. She performed tax preparation services for clients, which included making related tax payments on their behalf, the records show.
STATESVILLE, N.C. – A Lenoir woman was sentenced to 24 months in federal prison Monday, according to a release from the office of U.S. Attorney Anne M. Tompkins.
Denise Swanson was convicted of tax evasion, the release said. She will serve three years under court supervision following her release from prison. She was ordered to pay $839,830 in restitution to client victims and $249,912 to the IRS, according to the release.
Swanson was the owner and operator of Bottom-line Accounting, a tax preparation and bookkeeping business, court records show. She performed tax preparation services for clients, which included making related tax payments on their behalf, the records show.
Swanson received funds from clients intended to go toward tax obligations to the IRS and other state agencies, the release said. Instead of making payments, she embezzled the money and used it to pay for her daughter’s college tuition, renovations to her house, gambling, and to cover personal expenses, the release said.
Court records show she failed to report the embezzled income on her individual tax returns for tax years 2006 through 2011. Swanson pleaded guilty to tax evasion for 2010 in August 2013, the release said.
Swanson was allowed to remain free following the sentencing hearing. She will be ordered to report to the Federal Bureau of Prisons upon designation of a federal facility, according to the release.
Arkansas Woman Pleads Guilty To Embezzling $244K From County Coffers
From TXK Today on 10/30/2014:
Texarkana, Arkansas | Keesha Rose, age 37, pleaded guilty today to Theft Concerning Programs Receiving Federal Funds, announced Conner Eldridge, United States Attorney for the Western District of Arkansas. Rose serves as the County Treasurer and Tax Collector for Lafayette County. The Honorable Harry F. Barnes accepted the plea in the United States District Court in Texarkana.
U. S. Attorney Eldridge commented, “We remain committed to investigating and prosecuting public officials that abuse the trust placed in them by embezzling public funds. Such conduct offends taxpayers and citizens as well as the vast majority of public officials who are truly dedicated to their service.”
“Criminal acts by our public officials, such as those committed by Ms. Rose, undermine the trust necessary in our democracy,” stated David T. Resch, Special Agent in Charge for the Federal Bureau of Investigation in Little Rock, “We will continue working closely with the Arkansas State Police and the U.S. Attorney’s office to investigate and prosecute such violations.”
Facts in the case according to court records are that Keesha Rose was elected as Treasurer and Tax Collector for Lafayette County, Arkansas in November, 2010 and was responsible for collection and administration of all funds collected and disbursed on behalf of Lafayette County. Lafayette County received benefits in excess of $10,000 under a Federal program for the both 2011 and 2012. On May 31, 2013, The Arkansas Division of Legislative Audit reported that a comparison of cash receipts to cash bank deposits revealed that $162,275.00 was not deposited in the county’s bank accounts by Rose for a period of January 1, 2011 through September 20, 2012. The auditors noted numerous issues with accounting processes and recordkeeping that were consistent with the embezzlement of funds. In addition to the $162,275.00, auditors determined that for the time period between September 20, 2012 and November 7, 2013, an additional $81,618 in public funds was embezzled by Rose, bringing the total to $243,893.00.
On March 19, 2014, a Federal Grand Jury issued an indictment against Rose charging her with two counts of theft of a program receiving federal funds in excess of at least $5,000.
Update (3/21/2015): Rose was sentenced to 24 months in prison. Read the story here.
Texarkana, Arkansas | Keesha Rose, age 37, pleaded guilty today to Theft Concerning Programs Receiving Federal Funds, announced Conner Eldridge, United States Attorney for the Western District of Arkansas. Rose serves as the County Treasurer and Tax Collector for Lafayette County. The Honorable Harry F. Barnes accepted the plea in the United States District Court in Texarkana.
U. S. Attorney Eldridge commented, “We remain committed to investigating and prosecuting public officials that abuse the trust placed in them by embezzling public funds. Such conduct offends taxpayers and citizens as well as the vast majority of public officials who are truly dedicated to their service.”
“Criminal acts by our public officials, such as those committed by Ms. Rose, undermine the trust necessary in our democracy,” stated David T. Resch, Special Agent in Charge for the Federal Bureau of Investigation in Little Rock, “We will continue working closely with the Arkansas State Police and the U.S. Attorney’s office to investigate and prosecute such violations.”
Facts in the case according to court records are that Keesha Rose was elected as Treasurer and Tax Collector for Lafayette County, Arkansas in November, 2010 and was responsible for collection and administration of all funds collected and disbursed on behalf of Lafayette County. Lafayette County received benefits in excess of $10,000 under a Federal program for the both 2011 and 2012. On May 31, 2013, The Arkansas Division of Legislative Audit reported that a comparison of cash receipts to cash bank deposits revealed that $162,275.00 was not deposited in the county’s bank accounts by Rose for a period of January 1, 2011 through September 20, 2012. The auditors noted numerous issues with accounting processes and recordkeeping that were consistent with the embezzlement of funds. In addition to the $162,275.00, auditors determined that for the time period between September 20, 2012 and November 7, 2013, an additional $81,618 in public funds was embezzled by Rose, bringing the total to $243,893.00.
On March 19, 2014, a Federal Grand Jury issued an indictment against Rose charging her with two counts of theft of a program receiving federal funds in excess of at least $5,000.
Update (3/21/2015): Rose was sentenced to 24 months in prison. Read the story here.
Corporate Controller For Connecticut Hedge Fund Charged With Embezzling $2.4 Million
From WTNH 8 on 10/30/2014:
GREENWICH, Conn. (WTNH) — A man accused of embezzling millions has been charged for his actions. 45-year-old Lawrence Herzing has been arrested on a federal complaint alleging he embezzled millions of dollars from the hedge fund where he was employed.
Herzing recently worked as the controller of Contrarian Capital Management, L.L.C. On 32 separate occasions in the last nine years he allegedly used his position to wire himself funds.
It’s alleged that two specific wire transfers totaled more than $2.4 million dollars. The complaint charges Herzing with wire fraud, an offense that carries a maximum term of 20 years in prison.
GREENWICH, Conn. (WTNH) — A man accused of embezzling millions has been charged for his actions. 45-year-old Lawrence Herzing has been arrested on a federal complaint alleging he embezzled millions of dollars from the hedge fund where he was employed.
Herzing recently worked as the controller of Contrarian Capital Management, L.L.C. On 32 separate occasions in the last nine years he allegedly used his position to wire himself funds.
It’s alleged that two specific wire transfers totaled more than $2.4 million dollars. The complaint charges Herzing with wire fraud, an offense that carries a maximum term of 20 years in prison.
Investigation intoPotential $140K Embezzlement at Local Non-Profit in California
From the Manteca Bulletin on 10/30/14:
An alleged embezzlement at the Manteca-Ripon Pentecost Society (MRPS) Hall in Manteca involving $140,000 is under investigation by the Manteca Police Department.
The suspect has reportedly confessed to taking the money; however, there are lingering questions as to whether the individual will be prosecuted. The identity of the suspect is not being revealed at this time because no charges have been filed. Bulletin sources familiar with the case as well as Manteca Police Sgt. Jodie Estarziau said that MRPS officials are not sure they want to prosecute.
“But obviously we’re going with it (prosecution) because it’s a criminal act,” Estarziau said.
She did not indicate when charges will be filed, and added she did not have any further specifics about the case on Tuesday.
But these are the facts gathered so far from various sources.
MRPS officers, as well as some members of the non-profit organization, know the identity of the suspect as the individual has confessed, but they are not revealing it to the press.
The money was discovered missing when the renovation of the hall started and they needed the money to pay the contractor.
The money was taken over a number of years.
Money that is missing does not involve rents paid for the use of the hall for events such as weddings, anniversaries, and community events. The money that was allegedly compromised involved membership fees and proceeds from MRPS dinner-dances.
One source indicated that the charge is “only a misdemeanor” because there is only a “slight amount” involved but that “we kind of have an idea of the amount.” The same source also hinted that since there was a confession from the alleged embezzler, and that they understand that “things happen,” and they would like to respond with understanding and kindness because of the group’s devotion to the Holy Ghost.
An alleged embezzlement at the Manteca-Ripon Pentecost Society (MRPS) Hall in Manteca involving $140,000 is under investigation by the Manteca Police Department.
The suspect has reportedly confessed to taking the money; however, there are lingering questions as to whether the individual will be prosecuted. The identity of the suspect is not being revealed at this time because no charges have been filed. Bulletin sources familiar with the case as well as Manteca Police Sgt. Jodie Estarziau said that MRPS officials are not sure they want to prosecute.
“But obviously we’re going with it (prosecution) because it’s a criminal act,” Estarziau said.
She did not indicate when charges will be filed, and added she did not have any further specifics about the case on Tuesday.
But these are the facts gathered so far from various sources.
MRPS officers, as well as some members of the non-profit organization, know the identity of the suspect as the individual has confessed, but they are not revealing it to the press.
The money was discovered missing when the renovation of the hall started and they needed the money to pay the contractor.
The money was taken over a number of years.
Money that is missing does not involve rents paid for the use of the hall for events such as weddings, anniversaries, and community events. The money that was allegedly compromised involved membership fees and proceeds from MRPS dinner-dances.
One source indicated that the charge is “only a misdemeanor” because there is only a “slight amount” involved but that “we kind of have an idea of the amount.” The same source also hinted that since there was a confession from the alleged embezzler, and that they understand that “things happen,” and they would like to respond with understanding and kindness because of the group’s devotion to the Holy Ghost.
Maine Woman Sentenced For Embezzling $365K From Local Charitable Concern
From the Associated Press on 10/29/2014:
A Brunswick woman who embezzled more than $365,000 from a Wiscasset nonprofit where she worked has been sentenced to 20 months in prison.
Federal prosecutors say 41-year-old Stacey Backman was also ordered Tuesday to pay restitution to Coastal Enterprises Inc., where she worked as an accountant.
Backman 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. Part of the scheme involving using the organization's credit cards for personal expenses.
She was fired in January.
Coastal Enterprises Inc. is a charitable community development corporation and community development financial institution that received federal funds.
A Brunswick woman who embezzled more than $365,000 from a Wiscasset nonprofit where she worked has been sentenced to 20 months in prison.
Federal prosecutors say 41-year-old Stacey Backman was also ordered Tuesday to pay restitution to Coastal Enterprises Inc., where she worked as an accountant.
Backman 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. Part of the scheme involving using the organization's credit cards for personal expenses.
She was fired in January.
Coastal Enterprises Inc. is a charitable community development corporation and community development financial institution that received federal funds.
Former Tribal Official inMaine Sentenced to18 Months for Embezzlement; Previously Embezzled $2.7 Million From S. Dakota Tribal College
From the Associated Press on 10/29/2014:
The former finance director for Maine's Passamaquoddy (pass-uh-muh-KWAH'-dee) Tribe has been sentenced to 18 months in prison for embezzling about $20,000 from the tribe.
Charles Fourcloud was also sentenced Tuesday in U.S. District Court in Bangor to three years of probation and ordered to pay full restitution.
The 59-year-old Fourcloud had pleaded guilty in June.
Authorities say he submitted false expense claims to steal the money.
Fourcloud was fired as finance director of the Passamaquoddy's Pleasant Point reservation government in September 2013 for lying about his identity.
Authorities say Fourcloud's real name is Arlynn Knudsen, and he was sentenced to 10 years in federal prison in 1998 after pleading guilty to his role in the embezzlement of nearly $2.7 million from Oglala Lakota College in South Dakota.
The former finance director for Maine's Passamaquoddy (pass-uh-muh-KWAH'-dee) Tribe has been sentenced to 18 months in prison for embezzling about $20,000 from the tribe.
Charles Fourcloud was also sentenced Tuesday in U.S. District Court in Bangor to three years of probation and ordered to pay full restitution.
The 59-year-old Fourcloud had pleaded guilty in June.
Authorities say he submitted false expense claims to steal the money.
Fourcloud was fired as finance director of the Passamaquoddy's Pleasant Point reservation government in September 2013 for lying about his identity.
Authorities say Fourcloud's real name is Arlynn Knudsen, and he was sentenced to 10 years in federal prison in 1998 after pleading guilty to his role in the embezzlement of nearly $2.7 million from Oglala Lakota College in South Dakota.
Former CFO of Kansas City Company Sentenced to 2 Years for Embezzling $338K
From the Kansas City Business Journal on 10/29/2014:
James Kilkenny of Kansas City, the former CEO and CFO of Waechtersbach USA Inc., was sentenced to two years in prison and ordered to pay $338,221 in restitution after being convicted for a wire fraud scheme.
Kansas City-based Waechtersbach USA is a distributor and vendor that buys German and Asian products and distributes them to U.S. retailers.
Kilkenny, who pleaded guilty to wire fraud in April 2014, admitted to overpaying his salary and using company money for personal expenses over a nine-year period. He disguised the overpayment as warehouse and office expenses.
Kilkenny also used company funds to pay back personal loans and to pay for his dependents' health insurance without authorization. He also used the company's travel credit card for personal, local expenses.
The embezzlement came to light when the owner of the company was notified by the U.S. customs department that the company received an $80,000 import tax refund. The owner became suspicious and an internal investigation revealed Kilkenny received the $80,000 refund, but reported that the refund was for only $8,000. Kilkenny instructed the employees in the Kansas City office to lie about the amount if asked.
The company then began investigating all of Kilkenny's spending and discovered the extent of the embezzlement.
James Kilkenny of Kansas City, the former CEO and CFO of Waechtersbach USA Inc., was sentenced to two years in prison and ordered to pay $338,221 in restitution after being convicted for a wire fraud scheme.
Kansas City-based Waechtersbach USA is a distributor and vendor that buys German and Asian products and distributes them to U.S. retailers.
Kilkenny, who pleaded guilty to wire fraud in April 2014, admitted to overpaying his salary and using company money for personal expenses over a nine-year period. He disguised the overpayment as warehouse and office expenses.
Kilkenny also used company funds to pay back personal loans and to pay for his dependents' health insurance without authorization. He also used the company's travel credit card for personal, local expenses.
The embezzlement came to light when the owner of the company was notified by the U.S. customs department that the company received an $80,000 import tax refund. The owner became suspicious and an internal investigation revealed Kilkenny received the $80,000 refund, but reported that the refund was for only $8,000. Kilkenny instructed the employees in the Kansas City office to lie about the amount if asked.
The company then began investigating all of Kilkenny's spending and discovered the extent of the embezzlement.
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
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.
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.
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.
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.
...
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.
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.
Update (11/5/14) from News 10, KXTV:
A woman accused of stealing more than $150,000 from a Lodi dentist pleaded guilty in court on Wednesday.
Sandra Salazar Malloy, 53, of Galt, pleaded guilty to felony grand theft and embezzlement charges; and as part of her plea deal, other charges against her were dismissed, San Joaquin County Deputy District Attorney Stephen Taylor said.
The investigation into Malloy started in September. She was the bookkeeper for dentist Dr. Gary Silva when he fired her. Silva then hired a forensic accountant in October, who found that Malloy was embezzling money from the dentist's practice.
Taylor said Malloy admitted to stealing cash from patient payments. Further investigation found Malloy stole more than $150,000 by running "refunds" on Silva's credit card terminal to her personal bank debit cards.
Records show this isn't Malloy's first time embezzling money from a dentist. In 1994, she was prosecuted and convicted of stealing from a Stockton dentist. Taylor said it is unclear how much she stole and if the money was recovered.
Malloy faces a possible four-year state prison term. If she makes pre-sentencing restitution, Malloy could receive probation for this crime with a possible jail term, Taylor said.
Update (11/5/14) from News 10, KXTV:
A woman accused of stealing more than $150,000 from a Lodi dentist pleaded guilty in court on Wednesday.
Sandra Salazar Malloy, 53, of Galt, pleaded guilty to felony grand theft and embezzlement charges; and as part of her plea deal, other charges against her were dismissed, San Joaquin County Deputy District Attorney Stephen Taylor said.
The investigation into Malloy started in September. She was the bookkeeper for dentist Dr. Gary Silva when he fired her. Silva then hired a forensic accountant in October, who found that Malloy was embezzling money from the dentist's practice.
Taylor said Malloy admitted to stealing cash from patient payments. Further investigation found Malloy stole more than $150,000 by running "refunds" on Silva's credit card terminal to her personal bank debit cards.
Records show this isn't Malloy's first time embezzling money from a dentist. In 1994, she was prosecuted and convicted of stealing from a Stockton dentist. Taylor said it is unclear how much she stole and if the money was recovered.
Malloy faces a possible four-year state prison term. If she makes pre-sentencing restitution, Malloy could receive probation for this crime with a possible jail term, Taylor said.
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.
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.
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.
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."
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.
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.
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’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.
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.
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.
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
FBI, Huntersville PD investigating SouthLake Christian embezzlement allegations
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.
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.
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.
Former General Manager of California Labor Union Accused of Embezzling $700K
From the Daily Press on 10/24/2014:
Labor union accuses former GM of embezzlement
The former general manager of San Bernardino County’s largest labor union misappropriated, converted or embezzled more than $700,000 in funds from executives and members, according to a recently-filed lawsuit.
Representing over 11,000 San Bernardino County workers, the San Bernardino Public Employees Association is suing its former head, Robert Blough, alleging that he stole $595,444.82 in cash and misspent another $108,345.12 between July 1, 2011 and June 30, 2013.
The union last week filed a civil suit against Blough in county Superior Court, seeking to recoup the allegedly stolen money along with additional unspecified compensation.Blough could not be reached for comment.
After the union hired a new auditing firm last year, the auditors “discovered that there was a large disparity in the amount of SBPEA’s recorded cash receipts and the amount of deposits made to SBPEA’s bank account at Security Bank of California,” the lawsuit states.
Blough had access to the union’s safe and was responsible for holding cash and depositing cash at the bank, according to the lawsuit.
The audit also found that union credit cards, including those held in Blough’s name, had numerous charges that “appeared to be personal in nature,” the lawsuit said.
The suit’s filing last Friday came two days after the union announced it had requested the District Attorney’s office investigate the missing funds.
Blough, who became the union’s general manager on Dec. 26, 2005, was placed on administrative leave without pay on June 21, 2013. He was fired Aug. 13, 2013, along with his assistant, Jeannie Marquez.
Marquez is not named as a defendant in the suit.
The union is also alleging that “Blough falsified and altered records to conceal his misappropriation, conversion, and embezzlement of funds from SBPEA’s Executive Committee and members,” the lawsuit states.
Update 11/27/2014: Bough denies allegations:
The former general manager of the San Bernardino County Public Employees Association, responding to a lawsuit filed against him by the union, denies allegations he misappropriated or embezzled hundreds of thousands of dollars.
Bob Blough, in his 10-page response filed Nov. 20 in San Bernardino Superior Court, alleges that the union had “unclean hands” and was essentially complicit in the alleged wrongdoing, rendering the lawsuit meritless. He said the union was equally responsible and failed to take any action to “mitigate and lessen damages.”
The union’s actions, Blough alleges, constitute a full release and waiver by the union of “any and all its claims” against him. He is seeking $520,000 in general damages, compensation for the cost of litigation, and punitive damages.
Blough, of Calimesa, couldn’t be reached for comment Wednesday.
...
Read the whole story here.
Labor union accuses former GM of embezzlement
The former general manager of San Bernardino County’s largest labor union misappropriated, converted or embezzled more than $700,000 in funds from executives and members, according to a recently-filed lawsuit.
Representing over 11,000 San Bernardino County workers, the San Bernardino Public Employees Association is suing its former head, Robert Blough, alleging that he stole $595,444.82 in cash and misspent another $108,345.12 between July 1, 2011 and June 30, 2013.
The union last week filed a civil suit against Blough in county Superior Court, seeking to recoup the allegedly stolen money along with additional unspecified compensation.Blough could not be reached for comment.
After the union hired a new auditing firm last year, the auditors “discovered that there was a large disparity in the amount of SBPEA’s recorded cash receipts and the amount of deposits made to SBPEA’s bank account at Security Bank of California,” the lawsuit states.
Blough had access to the union’s safe and was responsible for holding cash and depositing cash at the bank, according to the lawsuit.
The audit also found that union credit cards, including those held in Blough’s name, had numerous charges that “appeared to be personal in nature,” the lawsuit said.
The suit’s filing last Friday came two days after the union announced it had requested the District Attorney’s office investigate the missing funds.
Blough, who became the union’s general manager on Dec. 26, 2005, was placed on administrative leave without pay on June 21, 2013. He was fired Aug. 13, 2013, along with his assistant, Jeannie Marquez.
Marquez is not named as a defendant in the suit.
The union is also alleging that “Blough falsified and altered records to conceal his misappropriation, conversion, and embezzlement of funds from SBPEA’s Executive Committee and members,” the lawsuit states.
Update 11/27/2014: Bough denies allegations:
The former general manager of the San Bernardino County Public Employees Association, responding to a lawsuit filed against him by the union, denies allegations he misappropriated or embezzled hundreds of thousands of dollars.
Bob Blough, in his 10-page response filed Nov. 20 in San Bernardino Superior Court, alleges that the union had “unclean hands” and was essentially complicit in the alleged wrongdoing, rendering the lawsuit meritless. He said the union was equally responsible and failed to take any action to “mitigate and lessen damages.”
The union’s actions, Blough alleges, constitute a full release and waiver by the union of “any and all its claims” against him. He is seeking $520,000 in general damages, compensation for the cost of litigation, and punitive damages.
Blough, of Calimesa, couldn’t be reached for comment Wednesday.
...
Read the whole story here.
Wednesday, October 22, 2014
Former Principal Of NH Parochial School Pleads Guilty To Embezzling $152K
From the New Hampshire Union Leader on 10/20/2014:
The former principal of a private school in Litchfield intends to plead guilty to embezzling more than $150,000 from the Catholic school, and may spend up to 13 years in prison.
Shannon L. Dannible, 37, of Amesbury, Mass., is expected to plead guilty to a felony count of unauthorized taking or transfer for stealing $152,468 from St. Francis of Assisi School over four years.
According to court documents, Dannible obtained funds from the school’s bank accounts by issuing herself checks, withdrawing cash for herself and directing school funds to pay off personal debts.
In May 2011 — about two years prior to Dannible’s arrest for embezzling — the Catholic Diocese of Manchester was holding frequent meetings with parishioners and parents of St. Francis to try to resolve budget concerns.
While there was no talk of the school closing, Dannible told the New Hampshire Union Leader at the time that ideas on how to generate more income and revenue for the school were addressed at meetings, as well as how to reduce the school’s debt.
A few months later — before the embezzling was discovered — tuition rates were increased at the school.
Dannible, who was indicted for the thefts last year, will be back in court on Nov. 12 for a plea and sentencing hearing.
She has reached a plea deal with prosecutors that will, if approved by Judge Jacalyn Colburn next month, order her to spend five to 15 years in prison for the offense, with 2½ years of the minimum sentence suspended.
In addition to the prison time, Dannible will have to pay full restitution to the school, with an initial payment of $10,000 to be handed over at the time of the sentencing, according to the terms of the plea on file at Hillsborough County Superior Court in Nashua.
If restitution payments are made in an appropriate time frame, the maximum 15-year prison sentence will be reduced to as low as 11 years, court documents say.
Without the plea deal, Dannible would have faced trial and may have been ordered to spend 7½ to 15 years in prison.
She will also be required to participate in counseling or rehabilitation, and provide a yearly copy of all tax filings with a probation officer.
The former principal of a private school in Litchfield intends to plead guilty to embezzling more than $150,000 from the Catholic school, and may spend up to 13 years in prison.
Shannon L. Dannible, 37, of Amesbury, Mass., is expected to plead guilty to a felony count of unauthorized taking or transfer for stealing $152,468 from St. Francis of Assisi School over four years.
In May 2011 — about two years prior to Dannible’s arrest for embezzling — the Catholic Diocese of Manchester was holding frequent meetings with parishioners and parents of St. Francis to try to resolve budget concerns.
Dannible, who was indicted for the thefts last year, will be back in court on Nov. 12 for a plea and sentencing hearing.
Without the plea deal, Dannible would have faced trial and may have been ordered to spend 7½ to 15 years in prison.
Former Funeral Director In Mass Charged With Embezzling $150K From Clients (not to mention improperly storing bodies...)
From the Associated Press on 10/20/2014:
A former Boston funeral director charged with improperly storing bodies and stealing thousands of dollars in funeral pre-payments has been ordered held on $50,000 bail.
Joseph O'Donnell pleaded not guilty in Suffolk Superior Court on Monday.
A former Boston funeral director charged with improperly storing bodies and stealing thousands of dollars in funeral pre-payments has been ordered held on $50,000 bail.
Joseph O'Donnell pleaded not guilty in Suffolk Superior Court on Monday.
He's charged with stealing nearly $150,000 from clients and keeping the remains of 12 people at a storage facility where they were found in July. He faces a 278-count indictment including multiple counts of larceny, forgery, embezzlement and improperly disposing of human remains.
O'Donnell's attorney says he doesn't acknowledge wrongdoing and would like to be out of jail so he could begin repaying former clients. He's been in custody since he pleaded not guilty in April to stealing $12,000 in funeral prepayments.
Prosecutors say O'Donnell's license expired in 2009 but he continued doing business until 2013
Tuesday, October 21, 2014
Great Media Series On Embezzlement
Kathy Jessup, a local journalist in Michigan, has begun an excellent six part series of articles on embezzlement. They are terrific exposes on this topic and I encourage all of my readers to check it out. The first two articles have been published and can be viewed here and here.
Thanks, Kathy! for your first rate work.
Thanks, Kathy! for your first rate work.
Monday, October 20, 2014
Michigan Woman Accused Of Embezzling $460K From Nursing Home Residents
From www.mlive.com on 10/17/2014:
LAPEER, MI – The Lapeer County woman accused of embezzling more than $460,000 from residents at a Rochester Hills nursing home has been arraigned and is free on bond.
Tina Marie Binkley, 44, of Almont, was arraigned Thursday, Oct. 16, according to the Attorney General's Office. The charges include two counts of embezzlement from a vulnerable adult of $100,000 or more, with each charge punishable by up to 20 years in prison and a $50,000 fine or three times value of the money or property involved, whichever is greater.
Oakland County District Court Judge Julie Nicholson set Binkley's bond at $25,000 cash or surety, which she posted on Friday, Oct. 17, according to the Attorney General's Office.
Investigators allege money was taken from 136 residents from the Boulevard Health Center.
Authorities said Binkley was fired in April 2013 from her job as the facility's business manager after allegedly failing to follow standard financial reporting procedures.
The case was referred to the Attorney General's Office after an accountant hired by the facility noticed bookkeeping discrepancies. Binkley allegedly had access to a general account for facility income and day-to-day expense, as well as a trust fund.
Binkley was arrested Thursday, Oct. 16, by special agents from the Department of Attorney General after an investigation by the state Attorney General's Health Care Fraud Division.
Binkley is scheduled to be in court for a pre-exam conference on Tuesday, Oct. 21, at 10 a.m. and will be assigned a court-appointed attorney.
Update (3/2/2015): Binkley sentenced to prison:
A nursing home business manager who stole $460,000 from residents of the Oakland County facility has been sentenced to between two years, four months and 20 years in prison.
Forty-four-year-old Tina Binkley of Almont pleaded guilty Jan. 27 to one count of embezzlement from vulnerable adults.
Binkley told an Oakland County circuit judge at Monday's sentencing that she's "very sorry" for what she did and "is not the same person" who committed the crimes.
Michigan Attorney General Bill Schuette has said that Binkley agreed to pay $460,000 in restitution to 136 victims. Schuette says that she stole the money between May 2010 and April 2013 as business office manager at Boulevard Health Center in Rochester Hills.
LAPEER, MI – The Lapeer County woman accused of embezzling more than $460,000 from residents at a Rochester Hills nursing home has been arraigned and is free on bond.
Tina Marie Binkley, 44, of Almont, was arraigned Thursday, Oct. 16, according to the Attorney General's Office. The charges include two counts of embezzlement from a vulnerable adult of $100,000 or more, with each charge punishable by up to 20 years in prison and a $50,000 fine or three times value of the money or property involved, whichever is greater.
Oakland County District Court Judge Julie Nicholson set Binkley's bond at $25,000 cash or surety, which she posted on Friday, Oct. 17, according to the Attorney General's Office.
Investigators allege money was taken from 136 residents from the Boulevard Health Center.
Authorities said Binkley was fired in April 2013 from her job as the facility's business manager after allegedly failing to follow standard financial reporting procedures.
The case was referred to the Attorney General's Office after an accountant hired by the facility noticed bookkeeping discrepancies. Binkley allegedly had access to a general account for facility income and day-to-day expense, as well as a trust fund.
Binkley was arrested Thursday, Oct. 16, by special agents from the Department of Attorney General after an investigation by the state Attorney General's Health Care Fraud Division.
Binkley is scheduled to be in court for a pre-exam conference on Tuesday, Oct. 21, at 10 a.m. and will be assigned a court-appointed attorney.
Update (3/2/2015): Binkley sentenced to prison:
A nursing home business manager who stole $460,000 from residents of the Oakland County facility has been sentenced to between two years, four months and 20 years in prison.
Forty-four-year-old Tina Binkley of Almont pleaded guilty Jan. 27 to one count of embezzlement from vulnerable adults.
Binkley told an Oakland County circuit judge at Monday's sentencing that she's "very sorry" for what she did and "is not the same person" who committed the crimes.
Michigan Attorney General Bill Schuette has said that Binkley agreed to pay $460,000 in restitution to 136 victims. Schuette says that she stole the money between May 2010 and April 2013 as business office manager at Boulevard Health Center in Rochester Hills.
Municipal Clerk In Kansas Sentenced In $190K Embezzlement Case
From the Topeka Capital Journal on 10/18/2014:
A federal judge on Friday sentenced the former Auburn clerk to 12 months and one day of imprisonment after pleading guilty to felony embezzlement.
Alice Riley, 61, was ordered to pay to the city of Auburn full restitution in the amount of $189,594.05 and to serve one year of supervised release after her imprisonment. Chief Judge J. Thomas Marten also issued a special condition to her release: a prohibition on gambling.
As many as five family members and friends came out for Riley’s hearing, including her sister, Grace Bowser, who serves as city clerk of Mayetta in Jackson County. Those there for support could be seen wiping away tears during the proceeding.
“I know that I've done something awful,” Riley said when the judge asked for a comment. The rest of her statement was inaudible from the back of the courtroom.
Marten ordered Riley to self-surrender after Jan. 1, 2015 — so she can have some time to pull things together and get through the holiday season, the judge said.
While incarcerated, Riley will have to make monthly restitution payments to Auburn equal to no less than 10 percent of the funds in her inmate account. When she gets out, Marten said, 5 percent of her monthly income will go toward paying back the city of Auburn.
Riley intends to pay back all the money, said her defense attorney, J. Richard Lake. In advocating for a reduced prison sentence, he said Riley “would like to begin that as soon as possible.”
“In your case, Miss Riley, you are going to have to do some time,” Marten said. “Twelve months and a day might seem like a slap on the hands to some, but it's not.”
The extra day allows Riley to be let out early on good behavior, which, Marten said, likely would reduce her sentence to 10 months.
Riley in July pleaded guilty to a federal embezzlement charge. She resigned Feb. 13 amid questions from the Auburn City Council and multiple-year audits into the city’s finances. She served in the appointed position for 31 years.
The federal government alleges Riley, between 2009 and 2014, embezzled at least $186,000 from Auburn, where she managed payroll and other accounts as the city clerk. Prosecutors say Riley issued duplicate payroll checks to herself, as well as other unauthorized checks she deposited into her personal accounts. She attempted to cover up the embezzlement by creating false entries in the city’s books and bank statements.
Auburn Councilwoman Micki Bicknell was present for Friday’s sentencing, but declined to comment given the ongoing civil suit the city is pursuing against Riley in Shawnee County District Court. The case still is in the pretrial phase, said Auburn’s attorney Todd Luckman. However, with the sentencing and guilty plea in the federal case, he doesn’t imagine it will be fought to the end.
Riley's guilty plea can be used against her in the civil suit, and prevents her from filing an appeal in federal court.
The city’s civil case claims Riley embezzled more than $196,000, so it will be required to prove that figure, Luckman said.
...
A federal judge on Friday sentenced the former Auburn clerk to 12 months and one day of imprisonment after pleading guilty to felony embezzlement.
Alice Riley, 61, was ordered to pay to the city of Auburn full restitution in the amount of $189,594.05 and to serve one year of supervised release after her imprisonment. Chief Judge J. Thomas Marten also issued a special condition to her release: a prohibition on gambling.
As many as five family members and friends came out for Riley’s hearing, including her sister, Grace Bowser, who serves as city clerk of Mayetta in Jackson County. Those there for support could be seen wiping away tears during the proceeding.
“I know that I've done something awful,” Riley said when the judge asked for a comment. The rest of her statement was inaudible from the back of the courtroom.
While incarcerated, Riley will have to make monthly restitution payments to Auburn equal to no less than 10 percent of the funds in her inmate account. When she gets out, Marten said, 5 percent of her monthly income will go toward paying back the city of Auburn.
Riley intends to pay back all the money, said her defense attorney, J. Richard Lake. In advocating for a reduced prison sentence, he said Riley “would like to begin that as soon as possible.”
“In your case, Miss Riley, you are going to have to do some time,” Marten said. “Twelve months and a day might seem like a slap on the hands to some, but it's not.”
The extra day allows Riley to be let out early on good behavior, which, Marten said, likely would reduce her sentence to 10 months.
Riley in July pleaded guilty to a federal embezzlement charge. She resigned Feb. 13 amid questions from the Auburn City Council and multiple-year audits into the city’s finances. She served in the appointed position for 31 years.
The federal government alleges Riley, between 2009 and 2014, embezzled at least $186,000 from Auburn, where she managed payroll and other accounts as the city clerk. Prosecutors say Riley issued duplicate payroll checks to herself, as well as other unauthorized checks she deposited into her personal accounts. She attempted to cover up the embezzlement by creating false entries in the city’s books and bank statements.
Auburn Councilwoman Micki Bicknell was present for Friday’s sentencing, but declined to comment given the ongoing civil suit the city is pursuing against Riley in Shawnee County District Court. The case still is in the pretrial phase, said Auburn’s attorney Todd Luckman. However, with the sentencing and guilty plea in the federal case, he doesn’t imagine it will be fought to the end.
Riley's guilty plea can be used against her in the civil suit, and prevents her from filing an appeal in federal court.
The city’s civil case claims Riley embezzled more than $196,000, so it will be required to prove that figure, Luckman said.
...
Possible $700K Embezzlement Investigated In Oklahoma
From KJRH Ch. 2 on 10/17/2014:
MUSKOGEE, Okla. - Police are currently investigating reports of possible embezzlement from the Muskogee Children’s Clinic.
According to Muskogee police, funds in excess of $700,000 have been reported missing from the clinic, located at 3101 Chandler Road.
Clinic staff called police to report the crime Friday.
Police say the funds were discovered missing during an inquiry by the Internal Revenue Service. They were confirmed when an independent auditor was hired by the clinic.
The IRS said payroll taxes haven't been paid since the clinic hired an independent auditor.
Police say the man who worked on finances for the Muskogee Children's Clinic funneled money from the business into his personal account.
Update from the Muskogee Phoenix on 10/20/2014:
A Muskogee medical clinic filed a civil suit Monday seeking damages resulting from the alleged embezzlement of $791,959 by a company that provided staffing and management services.
Office Medic and its principal owner, David Edwards, were named as defendants in the lawsuit. The case was filed Monday in Muskogee County District Court by Childrens Clinic and the four physicians who practice at the clinic.
The doctors allege in their petition that Edwards obtained access to funds belonging to the clinic during the course of his contractual relationship with the physicians. The petition alleges the funds embezzled or diverted by Edwards to entities in which is said to have an interest exceeded what his company was owed for staffing and services provided.
The alleged diversion or wrongful transfer of funds was discovered Sept. 11. According to the petition, the amount of money missing was calculated by a forensic audit conducted subsequently to the discovery of the “wrongful conversion” of funds.
MUSKOGEE, Okla. - Police are currently investigating reports of possible embezzlement from the Muskogee Children’s Clinic.
According to Muskogee police, funds in excess of $700,000 have been reported missing from the clinic, located at 3101 Chandler Road.
Clinic staff called police to report the crime Friday.
Police say the funds were discovered missing during an inquiry by the Internal Revenue Service. They were confirmed when an independent auditor was hired by the clinic.
The IRS said payroll taxes haven't been paid since the clinic hired an independent auditor.
Police say the man who worked on finances for the Muskogee Children's Clinic funneled money from the business into his personal account.
Update from the Muskogee Phoenix on 10/20/2014:
A Muskogee medical clinic filed a civil suit Monday seeking damages resulting from the alleged embezzlement of $791,959 by a company that provided staffing and management services.
Office Medic and its principal owner, David Edwards, were named as defendants in the lawsuit. The case was filed Monday in Muskogee County District Court by Childrens Clinic and the four physicians who practice at the clinic.
The doctors allege in their petition that Edwards obtained access to funds belonging to the clinic during the course of his contractual relationship with the physicians. The petition alleges the funds embezzled or diverted by Edwards to entities in which is said to have an interest exceeded what his company was owed for staffing and services provided.
The alleged diversion or wrongful transfer of funds was discovered Sept. 11. According to the petition, the amount of money missing was calculated by a forensic audit conducted subsequently to the discovery of the “wrongful conversion” of funds.
New Mexico Couple Sentenced In $874K Embezzlement Case
From the Associated Press on 10/20/2014:
A former New Mexico couple has been sentenced to five years of supervisory probation after pleading guilty to embezzlement and tax evasion charges in a case that involved the theft of hundreds of thousands of dollars from an Albuquerque family business.
State authorities say 37-year-old Antoinette Greenlee and her husband, 48-year-old James Greenlee Jr., were sentenced last week.
In addition to probation, they must pay restitution to the woman's father for embezzling money from his construction materials business.
A criminal complaint says the couple stole $874,000 from Post-Tensioning Reinforcing Services during an 18-month period in 2010 and 2011 while they worked for the company.
The Greenlees, who now live in Texas and operate their own steel business, also failed to pay state income taxes on the embezzled income.
A former New Mexico couple has been sentenced to five years of supervisory probation after pleading guilty to embezzlement and tax evasion charges in a case that involved the theft of hundreds of thousands of dollars from an Albuquerque family business.
State authorities say 37-year-old Antoinette Greenlee and her husband, 48-year-old James Greenlee Jr., were sentenced last week.
In addition to probation, they must pay restitution to the woman's father for embezzling money from his construction materials business.
A criminal complaint says the couple stole $874,000 from Post-Tensioning Reinforcing Services during an 18-month period in 2010 and 2011 while they worked for the company.
The Greenlees, who now live in Texas and operate their own steel business, also failed to pay state income taxes on the embezzled income.
Former Receptionist For Medical Practice In New Jersey Allegedly Embezzled $446K
From the Associated Press on 10/20/2014:
Federal prosecutors say a woman has admitted embezzling more than $446,000 from the northern New Jersey medical practice where she formerly worked as a receptionist.
They also say 53-year-old Gwendolyn Muller used fraudulent credit cards to obtain more than $200,000 in goods and services and evaded taxes on that illegal income.
Muller, who formerly lived in Kearny, pleaded guilty Monday to embezzlement, credit card fraud and tax evasion charges. She faces up to 25 years in prison when she's sentenced Feb. 19 and will forfeit $556,000 to the United States government.
From 2007 through 2011, prosecutors say Muller used her position to take, conceal and cash more than $446,000 in checks paid by insurance companies to the medical practice for services to patients.
Federal prosecutors say a woman has admitted embezzling more than $446,000 from the northern New Jersey medical practice where she formerly worked as a receptionist.
They also say 53-year-old Gwendolyn Muller used fraudulent credit cards to obtain more than $200,000 in goods and services and evaded taxes on that illegal income.
Muller, who formerly lived in Kearny, pleaded guilty Monday to embezzlement, credit card fraud and tax evasion charges. She faces up to 25 years in prison when she's sentenced Feb. 19 and will forfeit $556,000 to the United States government.
From 2007 through 2011, prosecutors say Muller used her position to take, conceal and cash more than $446,000 in checks paid by insurance companies to the medical practice for services to patients.
Monday, October 6, 2014
FraudTalk Interview With Terrorism & Global Security Expert Brian Michael Jenkins
Do not miss today's episode of FraudTalk on the Voice America network (http://www.voiceamerica.com/show/2349/fraudtalk). My very special guest will be Brian Jenkins, a world renowned expert on terrorism and global security issues. We will be discussing ISIS, al-Qaeda, the Middle East, Ebola, Russia, and much more. Brian is Senior Advisor to the President of the RAND Corporation. Read his bio here: http://www.rand.org/about/people/j/jenkins_brian_michael.html
Join me live at 10 a.m. EST or listen to us at your leisure to the audio file.
Here is the link to the audiofile: http://www.voiceamerica.com/episode/80844/global-security-and-risks-with-brian-michael-jenkins
Join me live at 10 a.m. EST or listen to us at your leisure to the audio file.
Here is the link to the audiofile: http://www.voiceamerica.com/episode/80844/global-security-and-risks-with-brian-michael-jenkins
Thursday, October 2, 2014
Business Journal: Embezzlement Survival Guide
From the Central Valley Business Journal (10/1/2014):
STOCKTON — Dealing with the possibility of betrayal by employees is one of the hardest aspects of owning and operating a business. Still, with the growing number of embezzlement cases both in the Central Valley and across the nation, it’s something no business owner can ignore.
“The owner says, ‘We treated this person like family. We couldn’t imagine them doing something like this,’” said Chris Marquet, CEO of Marquet International, a boutique investigative firm. “The owners need to do the right thing and take care of their fiduciary duties. Many entrepreneurs love the creating, social and business aspects of their jobs. A lot don’t care about the back end, the office aspects of it.”
Ignoring those “office aspects” can be costly. In two recent Stockton-area cases, employees were accused of stealing more three quarters of a million dollars from their employers.
In January 2011, Brenda Kemper pleaded guilty and was sentenced to three years in prison for stealing nearly $500,000 from Big Valley Aviation. The 59-year-old bookkeeper was a longtime, respected employee of the firm.
Sawtantar Singh Jaspal, a manager at hat manufacturer Dorfman Pacific Company, was arrested in June at his home in Tracy, accused of embezzling $277,000 from the company. In September, Jaspal entered guilty pleas to embezzlement and tax evasion and was sentenced to five years in prison.
These are just two of the most recent in what has been an uptick in embezzlement cases across the country.
“The first thing to understand is this phenomena is happening all the time, all over the country,” said Marquet. “Employers really have to keep on eye on things.”
One of the biggest traps that employers fall into is placing too much trust in a single employee. Bakul Patel, Dorfman Pacific Company’s chief financial officer, found that out the hard way when the company discovered irregularities with Japsal’s work.
“You give managers a certain level of trust,” Patel said. “A manager can create a fictitious business, and he then has the power to pay those businesses.”
That is a fairly common scam used by embezzlers, according to San Joaquin County Deputy District Attorney Stephen Taylor. Taylor prosecutes many of the embezzlement cases in the county and has seen an increase in cases since the recession.
“I don’t know that there are more crimes being committed now,” he said. “When you have harder economic times, businesses are more conscious of where every dollar is going. More of these crimes are discovered. You look back in history, and you see the same thing during the depression in the ‘30s.”
Marquet International released a report in 2013 that studied the trend nationwide. The average embezzlement scheme went on for 4.7 years before being discovered and the median loss for companies was $340,000. The average prison sentence for a convicted embezzler was 49 months.
Marquet said that tough economic times can also prompt people to do things they wouldn’t otherwise do.
“Many times, these people led a regular life and any number of issues led them to just say, ‘I’ll borrow this money and pay it back,’” Marquet said. “Well, they can’t pay it back, and it just keeps going on. You have people that are faced with losing a house or maybe a spouse’s business is suffering, and they do things they might not otherwise.”
Another contributing factor that Taylor often sees is compulsive behaviors that contribute to the thefts. Nearly a third of cases nationwide involved perpetrators who had gambling issues.
“People have drug or gambling problems that they fund this way,” said Taylor. “We’ve had several cases where people used the money for gastric bypass surgery.”
So what are business owners to do? Investigators and police agree that monitoring employees’ financial activities is the key to uncovering and preventing such crimes.
“These are not difficult crimes to uncover,” said Taylor. “They are all in writing.”
That means keeping track of where expenses are going. Employers need to make certain the vendors and employees being paid really exist. That can be a challenge for smaller businesses that lack the employees to doublecheck the books.
“Our accountant came in and helped us put in some additional processes,” said Dorfman Pacific’s Patel. “Now we have dual signing of checks instead of just one manager signing.”
Doing extensive background checks and knowing the history of those in charge of a company’s financial dealings is also vital.
“We had a case where a lawyer was ripped off by an eighth grade dropout,” said Taylor. “We have had companies that have hired people right out of drug rehab and put them in charge of large sums of money.”
Getting stolen money back from an alleged embezzler is often impossible. Embezzlers have often already spent the money that they stole from an employer by the time they’re caught.
“It’s not like they usually have the money laying around,” said Taylor. “They have usually spent that money on trips, or gambling or items they wanted.”
That is one reason that protecting one’s business beforehand is so important. Getting various forms of insurance is an important and relatively inexpensive way for businesses to protect themselves. Dorfman Pacific Company had such policy which made up for the majority of the loss.
“Our insurance paid us back for most of the loss,” said Dorfman’s Patel.
A fidelity bond is a form of insurance protection that covers policyholders for losses they incur as a result of fraudulent acts by specified individuals.
While called bonds, these obligations to protect an employer from employee-dishonesty losses are similar to insurance policies in most respects. A $5,000 bond for a company with five employees or fewer can cost as little as $100 per year. A $25,000 bond for the same employer can cost around $170 per year. The larger policies are determined by the employers size, and industry but can still be a company-saving investment.
“We recommend these to our business clients,” said Rick Sanguinetti, insurance agent and customer service representative at Sanguinetti Insurance. “The bond will cover whatever you amount you choose. The only hangup is there is a conviction clause in most cases.”
Many insurance policies have endorsements that also cover these kinds of crimes, but business people need to check to make sure the policies cover embezzlement.
One of the best things business owners can do is to help prevent theft before it ever occurs. Keeping track of exactly what comes in the mail each day may not be the most exciting part of running a business, but it can save owners a lot of headaches, according to area insurance and law enforcement officials.
“Creating an environment where this kind of crime isn’t easy to occur is a big step in preventing losses for businesses.” said Taylor.
STOCKTON — Dealing with the possibility of betrayal by employees is one of the hardest aspects of owning and operating a business. Still, with the growing number of embezzlement cases both in the Central Valley and across the nation, it’s something no business owner can ignore.
“The owner says, ‘We treated this person like family. We couldn’t imagine them doing something like this,’” said Chris Marquet, CEO of Marquet International, a boutique investigative firm. “The owners need to do the right thing and take care of their fiduciary duties. Many entrepreneurs love the creating, social and business aspects of their jobs. A lot don’t care about the back end, the office aspects of it.”
Ignoring those “office aspects” can be costly. In two recent Stockton-area cases, employees were accused of stealing more three quarters of a million dollars from their employers.
In January 2011, Brenda Kemper pleaded guilty and was sentenced to three years in prison for stealing nearly $500,000 from Big Valley Aviation. The 59-year-old bookkeeper was a longtime, respected employee of the firm.
Sawtantar Singh Jaspal, a manager at hat manufacturer Dorfman Pacific Company, was arrested in June at his home in Tracy, accused of embezzling $277,000 from the company. In September, Jaspal entered guilty pleas to embezzlement and tax evasion and was sentenced to five years in prison.
These are just two of the most recent in what has been an uptick in embezzlement cases across the country.
“The first thing to understand is this phenomena is happening all the time, all over the country,” said Marquet. “Employers really have to keep on eye on things.”
One of the biggest traps that employers fall into is placing too much trust in a single employee. Bakul Patel, Dorfman Pacific Company’s chief financial officer, found that out the hard way when the company discovered irregularities with Japsal’s work.
“You give managers a certain level of trust,” Patel said. “A manager can create a fictitious business, and he then has the power to pay those businesses.”
That is a fairly common scam used by embezzlers, according to San Joaquin County Deputy District Attorney Stephen Taylor. Taylor prosecutes many of the embezzlement cases in the county and has seen an increase in cases since the recession.
“I don’t know that there are more crimes being committed now,” he said. “When you have harder economic times, businesses are more conscious of where every dollar is going. More of these crimes are discovered. You look back in history, and you see the same thing during the depression in the ‘30s.”
Marquet International released a report in 2013 that studied the trend nationwide. The average embezzlement scheme went on for 4.7 years before being discovered and the median loss for companies was $340,000. The average prison sentence for a convicted embezzler was 49 months.
Marquet said that tough economic times can also prompt people to do things they wouldn’t otherwise do.
“Many times, these people led a regular life and any number of issues led them to just say, ‘I’ll borrow this money and pay it back,’” Marquet said. “Well, they can’t pay it back, and it just keeps going on. You have people that are faced with losing a house or maybe a spouse’s business is suffering, and they do things they might not otherwise.”
Another contributing factor that Taylor often sees is compulsive behaviors that contribute to the thefts. Nearly a third of cases nationwide involved perpetrators who had gambling issues.
“People have drug or gambling problems that they fund this way,” said Taylor. “We’ve had several cases where people used the money for gastric bypass surgery.”
So what are business owners to do? Investigators and police agree that monitoring employees’ financial activities is the key to uncovering and preventing such crimes.
“These are not difficult crimes to uncover,” said Taylor. “They are all in writing.”
That means keeping track of where expenses are going. Employers need to make certain the vendors and employees being paid really exist. That can be a challenge for smaller businesses that lack the employees to doublecheck the books.
“Our accountant came in and helped us put in some additional processes,” said Dorfman Pacific’s Patel. “Now we have dual signing of checks instead of just one manager signing.”
Doing extensive background checks and knowing the history of those in charge of a company’s financial dealings is also vital.
“We had a case where a lawyer was ripped off by an eighth grade dropout,” said Taylor. “We have had companies that have hired people right out of drug rehab and put them in charge of large sums of money.”
Getting stolen money back from an alleged embezzler is often impossible. Embezzlers have often already spent the money that they stole from an employer by the time they’re caught.
“It’s not like they usually have the money laying around,” said Taylor. “They have usually spent that money on trips, or gambling or items they wanted.”
That is one reason that protecting one’s business beforehand is so important. Getting various forms of insurance is an important and relatively inexpensive way for businesses to protect themselves. Dorfman Pacific Company had such policy which made up for the majority of the loss.
“Our insurance paid us back for most of the loss,” said Dorfman’s Patel.
A fidelity bond is a form of insurance protection that covers policyholders for losses they incur as a result of fraudulent acts by specified individuals.
While called bonds, these obligations to protect an employer from employee-dishonesty losses are similar to insurance policies in most respects. A $5,000 bond for a company with five employees or fewer can cost as little as $100 per year. A $25,000 bond for the same employer can cost around $170 per year. The larger policies are determined by the employers size, and industry but can still be a company-saving investment.
“We recommend these to our business clients,” said Rick Sanguinetti, insurance agent and customer service representative at Sanguinetti Insurance. “The bond will cover whatever you amount you choose. The only hangup is there is a conviction clause in most cases.”
Many insurance policies have endorsements that also cover these kinds of crimes, but business people need to check to make sure the policies cover embezzlement.
One of the best things business owners can do is to help prevent theft before it ever occurs. Keeping track of exactly what comes in the mail each day may not be the most exciting part of running a business, but it can save owners a lot of headaches, according to area insurance and law enforcement officials.
“Creating an environment where this kind of crime isn’t easy to occur is a big step in preventing losses for businesses.” said Taylor.
Subscribe to:
Posts (Atom)
