Examples of Corporate Fraud Investigations - Fiscal Year 2014
The following examples of corporate fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Idaho Contractor Sentenced for Conspiracy, Wire Fraud and Tax Fraud
On Feb. 27, 2014, in Boise, Idaho, Elaine Martin, of Meridian, Idaho, the former president and majority stockholder of MarCon, Inc., was sentenced to 84 months in prison, three years of supervised release and ordered to pay $98,825 in restitution to the IRS and $32,575 to the Idaho Disadvantaged Business Enterprise (DBE) Program. Martin was convicted by a federal jury on Sept. 19, 2013, on 22 criminal counts, including filing false individual and corporate tax returns, conspiracy to defraud the United States, wire fraud, mail fraud, false statement, interstate transportation of property taken by fraud, conspiracy to obstruct justice and obstruction of justice. Prior to sentencing, Martin paid in full a forfeiture amount of $3,084,038. Martin’s co-defendant, Darrell Swigert, of Boise, a minority shareholder in MarCon, was found guilty of obstruction of justice and conspiracy to obstruct justice and will be sentenced at a later date. According to evidence presented in court, as early as 1997, Martin concealed a portion of MarCon’s business income by diverting customer payments for the sales of used materials into a separate bank account. Martin did not tell MarCon’s accountant about the bank account or the unreported sales, and in fact organized the company’s business affairs to help conceal these sales from the accountant. When the IRS initiated a civil audit, Martin lied to the IRS revenue agent and told him that all business income was reported on MarCon’s tax returns. The evidence at trial, however, showed that neither MarCon nor Martin reported the income they received from the used material sales on their tax returns from 1997 through at least 2006. Martin also submitted false and fraudulent applications to have her construction company, MarCon, admitted and/or remain in two different federally funded programs, the U.S. Small Business Administration (SBA) 8(a) Program, and the Department of Transportation DBE Program. Martin took steps to artificially lower her personal net worth, by failing to report all of her income from MarCon, causing MarCon to pay for personal expenses such as renovations and landscaping for her home, and acquiring, holding and transferring assets into the names of nominees in order to appear to be economically disadvantaged. This allowed MarCon to qualify for the DBE and SBA 8(a) programs. Martin also caused false and fraudulent tax returns to be filed for herself and MarCon, Inc., which did not report all of the income received by Martin or the company. The false returns were submitted in support of MarCon’s applications to the SBA 8(a) Program and DBE Programs for Idaho and Utah, along with false personal financial statements. Martin omitted, deleted, altered and mis-categorized entries in MarCon’s financial books and records. Martin also concealed her role or relationship in other business entities that dealt with MarCon, Inc. MarCon received more than $2.5 million in government contracts based on the company’s fraudulently obtained SBA 8(a) status, and MarCon received more than $15 million in government contracts based on the company’s fraudulently obtained DBE status in the states of Idaho and Utah.
CEO of Debt Collection Agency Sentenced for Role in Multi-Million Dollar Fraud Scheme
On December 19, 2013, in Bridgeport, Conn., Peter Pinto, of East Quogue, N.Y., was sentenced to 48 months in prison and five years of supervised release. Pinto pleaded guilty on May 11, 2012 to one count of conspiracy to commit wire fraud, bank fraud and money laundering and wire fraud for his role in a multimillion dollar fraud scheme at Oxford Collection Agency, where Pinto served as Chief Executive Officer. According to court documents and statements made in court, Oxford Collection Agency was a private financial services company that engaged in accounts receivables management, primarily debt collecting. Businesses and other entities contracted with Oxford to collect debts on their behalf. Oxford collected debts from consumers under the pretense that it would report all such collections to its clients and remit the appropriate amount to the client. However, Pinto and other Oxford executives routinely caused Oxford to collect debts that were never remitted to its clients. The co-conspirators referred to these unremitted collections as a client’s “backlog.” To hide the backlog, co-conspirators would make periodic fraudulent collection reports to certain clients that under-reported the amount of funds collected. Pinto and others diverted various funds from their client remittances and used them for their own needs. Oxford’s victims lost more than $10 million as a result of this scheme. The investigation also revealed that Oxford sometimes obtained and retained business with its banking clients by paying bribes and kickbacks to bank officials. Five other Oxford executives have pleaded guilty, including Pinto’s father and Chairman of the Board, Richard Pinto. Richard Pinto was sentenced to 60 months in prison. The other defendants await sentencing.