3 Top White Collar Crime Scandal Reports

New York, NY

Melissa King, former administrator of the Sandhogs’ Union employee benefit funds, was sentenced to six years in prison for embezzling approximately $40 million from the employee benefits funds she administered.

According to the 12-count indictment and other documents filed in Manhattan federal court, from September 2002 until December 2008, King was the employee benefits fund administrator for the Compressed Air and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams, Sewer Construction Workers Local 147 of New York, New Jersey States and Vicinity AFL-CIO (“Local 147), also known as the “Sandhogs.”

Local 147, which as of 2008 had approximately 1,000 members, represents workers employed in some of the toughest, grimiest mostly underground construction projects in the New York City area.

Background: The Sandhogs Union and the employers with whom it has collective bargaining agreements have plans that provide various employment-related benefits to Local 147’s members, including retirement benefits, pension annuities, workers’ compensation, severance payments, unemployment benefits, medical expenses and death benefits.

These plans include the Local 147 construction Workers Retirement Fund; the Local 147 Construction Workers Annuity Fund; and the Local 147 Construction Workers Additional Security Benefits Fund (“ASB Fund”; collectively, the “Local 147 Funds”).

Problem: King provided administrative services to these Funds through the company that she controlled, King Care LLC (“King Care”). Among other things, King, through King Care, was responsible for administrative tasks of the Local 147 Funds, such as collecting employer contributions, maintaining bank accounts, determining eligibility for benefits, paying claims to beneficiaries, filing reports with regulators, maintaining a general ledger of the funds’ income and expenses, and providing reports to the funds’ trustees.

Since 2003, King had written agreements with Local 147, which provided that King Care was to be paid up to $15,000 per month for each of the Local 147 Funds-for a total of $45,000 per month for the three Funds-$540,000 annually. The agreements also provided that King Care might bill the Local 147 funds for hiring staff and for expenses related to King Care’s services.

The fraud: Between 2002 and 2008, King had more than $42 million transferred by check from the bank accounts of the Local 147 Funds into an account at Bank of America controlled by King Care.

Red flag: The checks were in round numbers in amounts ranging from $20,000 to $65,000, sometimes several in a single day. Amounts embezzled annually between 2002 and 2008 ranged from $1 million to $11.2 million.

Moreover, between 2002 and October 2009, more than $40 million was transferred out of the King Care Account and used, primarily to pay King’s personal expenses. Examples:

• $7 million paid to American Express.
• $5 million to pay for horses and horse-related expenses.
• $500,000 transferred to an account at E-Trade Securities as payment for a horse.
• $300,000 paid to Neiman Marcus primarily for women’s clothing.
• Over $300,000 to purchase several luxury cars.

Charges: King was charged with one count of theft and embezzlement in connection with employee benefit plans, and 11 counts of money laundering.

Though convicted, the six-year term she received is considerably less than the maximum sentence of five years in prison on the embezzlement count, and 10 years on each of the 11 money laundering counts, for a total of 115 years.

Madrid, SPAIN

One of the world’s top bankers accused of fraud-in midst of country’s near financial meltdown. A Spanish court opened a fraud case against former executives of state-rescued lender Bankia, including one-time International Monetary Fund (IMF) chief and former Bankia Chairman Rodrigo Rato and 32 other bank executives.

Key Charges: That the executives falsified the bank’s books and misled investors about its disastrous stock market listing.

No specific charges have been brought against Mr. Rato or the other directors.

Shockingly, however, this alleged fraud comes in the midst of public rage over the bank which is in line for the biggest share of a European Union (EU) bailout.

Making matter worse: Hundreds of thousands of small savers were persuaded to buy shares in Bankia in 2011, only to see their investments all but wiped out in less than a year.

Protestors took to the streets by the thousands, banging pots and pans and blowing whistles outside Bankia branches.

Politics meet litigation: According to news reports, the judge assigned to the Bankia case, Fernando Andreu, is likely to handle the probe aggressively. Andreu is friendly with human rights investigator Baltasar Garzon, best known for ordering the arrest of former Chilean military leader Augusto Pinochet in 1998.

The High Court is demanding that Rato and other executives appear in person. Bankia Chief Executive Francisco Verdu, the only director left at the bank since Rato stepped down in May, announced his resignation after learning about the probe.

The court also wants former Bank of Spain Governor Miguel Angel Fernandez Ordonez to appear as a witness, alongside the partner at Deloitte who was in charge of signing off on Bankia’s financials, and the chairman of the Spanish stock market regulator.

Jeffersonville, IN

A southern Indiana woman faces 59 forgery and theft charges after investigators alleged that she embezzled more than $300,000 from pet insurance company, PetFirst Healthcare.

Christina Heaven, an “administrative worker,” according to investigators, was charged with 59 forgery and theft counts, accusing her of embezzlement from Jeffersonville-based PetFirst.

Investigators accused Heaven of using her supervisor’s Social Security number and an existing credit card account to open a secret checking account in the PetFirst name in 2010.

Heaving then allegedly deposited checks from PetFirst customers totaling $314,723 into that checking account and subsequently withdrew $293,703.

(White-Collar Crime Fighter V.14 No.7)