Letter of Apology » Embezzlement

Two Indicted In $132 Million Section 1031 Scheme

Dave Westheimer — Wed, 23 Jul 2008 07:11:14 +0000

A federal grand jury in Richmond, Virginia on July 10 returned a superseding indictment in the case of Edward Okun of Miami, who was indicted in March (earlier) in connection with the theft of $132 million in client funds held in trust by 1031 Tax Group (1031TG), his qualified intermediary company. Okun allegedly converted the funds for his personal and business use, including the purchase of a $6.7 million house and a $15.5 million yacht. There are allegedly 577 victims in the case. The 27 count superseding indictment charges Okun and Lara Coleman of Richmond, his Chief Operating Officer,with conspiracy wire fraud, mail fraud, money laundering and bulk cash smuggling and forfeiture. Okun also faces one count of making false statements. Coleman made her initial appearance in the case on July 10. Both Okun and Coleman pleaded not guilty on July 18 (Richmond Times-Dispatch, DOJ).

Former Credit Union Head Teller Gets 97 Month Prison Sentence In $7 Million Embezzlement

Dave Westheimer — Wed, 07 May 2008 07:10:17 +0000

“She walked into the vault and took stacks and stacks of money.” That’s how AUSA Susan Dowd described the actions of Patricia Sherman of New Albany, Indiana, former head teller for Obelisk Federal Credit Union in New Albany. Willie Sutton would have pointed out that that’s where they keep it. Sherman, who had pleaded guilty to a single count of embezzlement by a credit union employee, was sentenced on April 25 to 97 months in prison by US District Judge David Hamilton in New Albany. She admitted embezzling $7 million from Obelisk over a 46 month period starting in 2003 until she was caught in early 2007. According to the DOJ press release:

She accomplished her embezzlement by taking large amounts of currency from the vault, secreting it on her person and taking it out of the credit union. She was able to conceal the embezzlement by making journal entries to the Vault Cash account whenever there was an audit or cash count by the credit union supervisory committee and then making adjusting entries after those counts were completed. In addition, when Sherman was going on vacation or had jury duty, she would make an entry to the cash account before she left so that it would properly reflect the amount of cash in the vault; when she returned, she would reverse the entry. As Head Teller she was responsible for ordering and accounting for all cash replenishments for the credit union. She was also responsible for reconciling and overseeing vault activity. She also was responsible for the general ledger and reconciling the vault cash account to the physical count of cash on hand.

As a direct result of Sherman’s actions, Obelisk had to merge with another credit union in July 2007 after the NCUA placed it into conservatorship and determined that it was no longer viable. Judge Hamilton stated “This is a theft, a case of grand theft, on an astonishing scale, driving what had been a healthy credit union into insolvency” (News and Tribune).

Former House Staffer Sentenced For Embezzlement, Helps In New Investigation

Dave Westheimer — Mon, 05 May 2008 07:30:56 +0000

Laura I. Flores of Arlington, Virginia, a former congressional office manager for House Democrats Jane Harman of California and Neil Abercrombie of Hawaii, was sentenced on Friday to six months in prison for wire fraud by US District Judge Leonie M. Brinkema in Alexandria. Flores, who pleaded guilty to a single wire fraud count in January (earlier), admitted receiving approximately $200,000 from false expense vouchers she submitted during 2005 and 2006 and diverting the funds to her personal account.

The Washington Post story here reports that prosecutors filed petitions to reduce her sentence because she is helping them with a previously unreported investigation into whether members of Congress used phones, supplies and staff time for campaign purposes. The motions were filed under seal.

Medical Supply Exec Guilty Of Medicare Fraud

Dave Westheimer — Wed, 30 Apr 2008 06:44:00 +0000

Angela Isley of Atlanta, former COO of medical supplier Orthoscript, Inc., was convicted on Monday by a federal trial jury in Atlanta on 52 counts including health care fraud, mail fraud and money laundering. Isley was indicted in February 2007 in connection with a three year scheme in which she allegedly submitted $600,000 in fraudulent claims to Medicare and embezzled $360,000 to pay her and her partner’s credit card bills. The Medicare billing fraud involved assigning incorrect product codes to certain products to obtain higher reimbursements.The embezzlement entailed coding company checks as legitimate business expenses while using them to pay her bills. Sentencing is scheduled for July 28 before US District Judge Charles Pannell (Atlanta Business Journal).

Former Prosecutor Gets 8.5 Years For Stealing $52 Million From Widow

Dave Westheimer — Mon, 21 Apr 2008 07:45:33 +0000

In Anchorage, Alaska on Thursday, US District Judge Ralph Besitline sentenced Mark Avery of Anchorage to 8 1/2 years in prison for embezzling the entire $52 million trust fund of May Wong Smith, a wealthy San Francisco widow who suffered from Alzheimer’s; she died in 2006. Avery pleaded guilty to wire fraud and money laundering charges in March 2007.

Avery is a former San Francisco prosecutor who had moved to Alaska. The fund had been administered by his father, a prominent trust attorney; he took over administration of the fund after his father’s death in 2001. He withdrew all the funds during a six month period in 2005 and started several companies including Security Aviation in Anchorage. His spending spree brought him to the attention of federal investigators, “ especially the purchase of weapons, body armor, fighter jets and rocket launchers” (Anchorage Daily News, San Francisco Chronicle).

Oregon Education Department Accountant Pleads Guilty To $925,000 Theft

Dave Westheimer — Mon, 14 Apr 2008 07:28:45 +0000

Brent Crosson of Salem, Oregon, a former accountant with the Oregon Department of Education who was charged in February by federal prosecutors with embezzling $925,000 in federal education funds (earlier), on April 3 pleaded guilty to single count of fraud before US District Judge Garr King in Portland. He admitted diverting the funds from the state to the accounts of an online guns and ammunition dealership he had started, and then to his personal accounts. The missing funds were federal grants for charter schools, anti-drug programs and health programs. $750,000 has been recovered, but much of that will have to be repaid to the US Department of Education because the deadline for spending it has passed. Sentencing is scheduled for June 17; Crosson could receive up to ten yearsin prison but prosecutors are recommending a two year sentence because of his cooperation (The Oregonian).

Part-Timer Admits Stealing 800K From Employer

Dave Westheimer — Thu, 10 Apr 2008 05:13:14 +0000

Leslie Tavolacci of Southbury, Connecticut waived indictment and pleaded guilty on April 3 to one count of wire fraud and one count of income tax evasion before US District Judge Stefan R. Underhill in Bridgeport. Tavolacci acknowledged that she embezzled $816,000 from RZM Imports Inc. of Southbury while working part-time for the firm between 1997 and 2004. She admitted opening accounts for herself in the name of RZM Imports Inc. and depositing legitimate checks made out to the firm into the accounts which she controlled, then withdrawing the money and using it for her own enrichment. Sentencing is scheduled for June 20; she faces a possible maximum of 25 years in prison (DOJ press release).

Miami Man Charged With Stealing $132 Million Held In Trust

Dave Westheimer — Wed, 19 Mar 2008 06:44:31 +0000

A federal grand jury in Richmond, Virginia on Monday indicted Edward Okun of Miami on three counts in connection with a scheme which allegedly defrauded clients of $132 million. Okun was charged with one count of mail fraud, one count of bulk cash smuggling and one count of false statements and forfeiture. Okun operated 1031 Tax Group (1031TG), a qualified intermediary company which acted as a neutral party to hold transaction funds for property investors deferring taxes under IRS Section 1031. The indictment alleges that between 2005 and 2007, Okun misappropriated $132 million in client funds held in trust under agreements and converted it for his personal and business use. He was arrested in Miami and has waived extradition to Virginia. AP, DOJ (via PRNewswire).

Florida Man Pleads Guilty In $1.3 Million Theft From Lab

Dave Westheimer — Tue, 04 Mar 2008 07:18:03 +0000

The US Attorney’s office in Tampa on Friday announced that David Alan Smith of Wesley Chapel, Florida has pleaded guilty to three counts of wire fraud, three counts of mail fraud and two counts of aggravated identity theft. Smith was the facilities manager for the Tampa laboratory of Quest Diagnostics, Inc. Beginning in 2001, he created fake shell companies which he controlled, submitted fake invoices to Quest seeking reimbursement for expenses, and obtained approval for the payments by forging the names of two supervisors. He obtained almost $1.2 million in payments to his shell companies and over $100,000 in additional unauthorized expense payments. Smith could face a maximum of 124 years in prison; no sentencing date has been announced. Bizjournal here, DOJ press release (.pdf) here.

Former Texas Kickapoo Tribal Manager And Family Sentenced To Federal Prison

Dave Westheimer — Tue, 19 Feb 2008 07:08:00 +0000

Isidro Garza, Jr., the former manager of the Kickapoo Traditional Tribe of Texas, was sentenced last week to 235 months in prison by US District Judge Walter Smith in Waco for his role in the embezzlement of over $2 million from tribal funds, including over $1.7 million from tribal community health services and more than $200,000 from the tribal casino. Also sentenced were his son, former state Rep. Timoteo Garza, who received a 78 month prison sentence; his wife Martha Garza, sentenced to 24 months in prison; and former tribal casino manager Lee Martin, sentenced to 60 moths in prison. All four are non-Indians. In October 2007 they were convicted after a jury trial on multiple counts of substantive theft from an Indian gaming establishment and other charges including conspiracy and tax evasion. AP here, San Antonio Express-News here.