Fraud, Embezzlement, and Ponzi Schemes
Representative cases:
INVESTOR FRAUD – G. Michael Porter was the subject of criminal investigation for his activities as a custom home builder in Arizona from 2005 through 2008. Initially arraigned on 10/8/2012, Defendant was charged with 7 Counts of Theft (ARS 13-1802), and 7 Counts of Fraudulent Schemes (ARS 13-2310). Defense interview on 10/31/2017. Defendant accepted a plea bargain after the first day of his trial and agreed to a lengthy prison term. The sentencing order was dated 3/28/2018. Restitution orders were also granted to several victims.
EMBEZZLEMENT - Investigation of an alleged payables related related embezzlement at a family owned business. The case involved the inhouse accountant who stole preprinted check stock and forged or caused the authorized signature to be forged on 51 business checks. The accountant entered fake invoices for authorized vendors and began to print a second copy of the checks offsite payable to accounts under her control. To further conceal the thefts, she ran the payable payment cycle probably on blank paper so the real check numbers matched what was entered into the payables system. Defendant was sentenced to eight months in jail.
EMBEZZLEMENT - Investigation of an alleged payroll related embezzlement at a company providing a variety of services to clients receiving special assistance from a State of Arizona agency. The case involved one employee (a bookkeeper) who conspired with four separate independent contractors to successfully embezzle funds via “padded” payroll check disbursements. The ringleader met the individual contractors at the bank to receive her share of the overpayments when checks were cashed. The contractors settled their cases and the ringleader served a five month jail sentence.
ASSET MISAPPROPRIATION - Consulting expert for a fraud investigation of a special studies program of a public school district. Investigated allegations of asset misappropriation by the Director and staff of the department who organized a large fund raiser, the proceeds of which were used to provide college scholarships to graduating high school seniors. Sources and uses of cash were traced in detail. Alleged related party conflicts were investigated and resolved. No evidence of wrong doing or misappropriation of funds identified.
EMBEZZLEMENT - Worked with local law enforcement to prepare a Controller embezzlement for criminal prosecution. Employer's funds stolen via unauthorized ATM withdrawals, forging duplicate paychecks, and other check fraud. Concealment included failing to transmit payroll taxes and transferring restricted cash into operating accounts. While the Controller was being held on the first case, grand jury testimony was offered, and a 2nd indictment on another embezzlement was obtained, thereby precluding him from making bail. The 2nd Indictment - Retained as expert to work with local law enforcement to "package", for prosecution, an embezzlement from a local branch of a national truck trailer sales operation. Thefts began after the Controller identified internal control weakness where he would record daily cash collections and deliver the cash deposits to the bank. Concealment included use of "white-out" to erase entries from daily cash receipts report including manipulation of the general ledger to reverse revenues earned. Defendant Kevin Frasier sentenced to 8.75 years prison time.
SECURITIES FRAUD (PONZI SCHEME) - Expert for forensic investigation of ponzi scheme. $70 million loss of private funding raised by a Missouri consumer finance company via nine securities offerings. Reported on the insolvency of consumer finance company, external facilitators to the fraud, independent audit reports, management abuse, manipulation of income, capitalization of losses as assets, and fictitious bookkeeping entries. CEO Clarence Stevens and the company’s independent auditor were indicted. Defendant was convicted and sentenced to two years prison time concurrent with federal bank fraud sentence of five years. Independent CPA auditor pled to perjury charges and received limited jail time and a four year suspended sentence. Outside securities counsel and preparer of POMs suspended from practicing law for three years. Global civil settlement of $9 million. Successful reorganization as a publicly traded company.
ADULT ENTERTAINMENT - Consulting expert for Chapter 11 Debtor, a multi-state retail and internet operation. The bankruptcy filing coincided with a separate ponzi scheme investigation where investors, the source of the construction funds, were no longer receiving their promised returns. Examined the loan proceeds and traced the co-mingling of funds between entities and construction projects, as well as the exorbitant fees, costs, commissions, and interest rates (35%-60%). Report used to negotiate settlement with Creditors as part of Debtor's reorganization plan.
FINANCING VIA EMBEZZLEMENT - Fraud investigation. $1 million Controller embezzlement from health care supplement company. Absentee owner entrusted financial officer with a $1 million personal check meant for a separate enterprise. Controller used the funds to establish himself as the owner of the 2nd entity, recording the funds received as a loan. Funds were then disbursed to fund a 3rd business venture which failed. Fraudulent expense reports were also submitted by the employee to the 1st entity for reimbursement. Case settled.