Fraud Friday – To Steal & Protect: One of the Craziest Public Embezzlement Cases in History


Usually, embezzlement cases in public agencies are, if not boring, at the very least extremely predictable:

  • Municipality/Agency/Authority X finds out that Trusted Longtime Employee Y has been running a fake vendor scam for several years, and has stolen $Z.Z million dollars in order to satisfy their addiction to Indian casino slot machines and flowery Vera Bradley purses.
  • Everyone is “shocked. shocked I tell you” that Y is a con-artist. Why, she went to church every Sunday and fed the local stray cats, and she used to always bring in her famous turducken/donut sandwiches for the employee holiday potluck! A person such as this COULDN’T POSSIBLY be a (whispered) criminal. I mean, she’s not even a black guy for chrissake!
  • The Mayor/City Council/Board of Trustees of said public entity shits bricks in private, then professes to have known nothing in public, having been hoodwinked by a Master Criminal and kept in the dark by the career managers.
  • The media creates a temporary firestorm of publicity, whipping up the locals into a state of understandable rage. Then, as quickly as they appeared, the Nancy Grace’s of the world are off to the next Pretty White Girl Kidnapping or heartwarming animal story
  • Staff who aren’t fired or indicted are left to figure out what the hell happened and how to continue to do the business of the agency with little or no executive management, reduced budgets, and sky-high stress levels
  • The perp tearfully confesses to the judge at her sentencing hearing, insisting that “she just doesn’t know what got into her,” and blaming her financial transgressions on the death of her labradoodle ten years ago. The judge, while moved by this vacuous display of self-interested apologia, realizes he can’t just let this perp walk free, because he’s been handing out 25-to-life sentences to the poor and the unconnected like traffic tickets to the locals in Ferguson, Missouri, so he gives her eighteen months in County and a “strong admonishment” not to do it again.
  • Perp does her time quietly, and then, once paroled, seems to spend an awful lot of time in her flower garden, digging up something that appears to have been buried there.
  • Lather, rinse, repeat. The names, places, and amounts change, but it’s always some variation of that timeline.

Not in this story, though. This shit is NUTS. It’s got it all: Embezzlement, money laundering, perjury, wire fraud, bank fraud, insurance fraud, suicide, document fabrication, death threats, the entire county executive team getting indicted by a grand jusry, and so much more. Seems like sleepy little Front Royal, Virginia was more less like Mayberry (per the story), and more like Twin Peaks. From the WaPo:

FRONT ROYAL, Va. — Before the $21 million allegedly went missing, before the sheriff put his gun in his mouth and fired, before Tuesday’s announcement that the entire top tier of the Warren County government had been indicted, there was the dream.

It was a dream of renewal for this town 70 miles from Washington, which fell on hard times after a rayon manufacturing plant closed in 1989, leaving 1,300 people jobless and 440 acres full of toxic waste… 

Twenty-five years later, with the land cleaned up and Front Royal increasingly attractive to tourists and former city dwellers, officials announced plans for a data center and retail complex that would bring 600 jobs and act as a catalyst for other projects.

The deal was brokered by Jennifer McDonald, a longtime Front Royal resident who directed the Warren County economic development authority. Washington-area developer Truc “Curt” Tran pledged to finance it with $40 million from wealthy immigrant investors and a $140 million federal contract his technology company had secured. As an added bonus, Tran would fund a police training academy overseen by longtime Sheriff Daniel T. McEathron.

But those were lies, documents in Warren County Circuit Court allege.

Tran never had the money to build the data center project on the 30 acres his company bought from McDonald’s agency for $1, a civil lawsuit alleges. And the training academy was one of several hoaxes that, prosecutors and civil lawsuits claim, allowed Tran, McDonald, McEathron and others to siphon away millions in public funds, which they allegedly used to buy properties, pay bills and gambling debts, and enrich relatives and friends.

Now McEathron is dead, Tran is being sued by the economic development authority and there are state and federal investigations underway. McDonald faces 28 state counts of embezzlement, money laundering and obtaining money through false pretenses. She has denied the allegations and did not return interview requests, while Tran declined to comment through his attorney.

The claims against them, industry groups say,reflect the perils of weak oversight in economic development agencies — quasi-public entities that oversee large, complicated transactions, and whose boards often lack the financial savvy and investor scrutiny that protect their corporate counterparts.In Montgomery County, Md., an economic development official pleaded guilty this year to embezzling $6.7 million. The head of economic development in St. Louis pleaded guilty to steering lucrative contracts to the county executive’s political donors. In New Jersey, a grand jury is investigating how $500 million in tax incentives went to firms that, in part, allegedly lied on their applications.

“The lessons here are that there’s a need for better financial accountability,” said Jeff Finkle, head of the nonprofit International Economic Development Council. “People beyond one person who is managing a project where the temptation may be too great.”

On Tuesday, the Virginia State Police announced that 14 current and former local officials — including all five county supervisors — were charged with misdemeanor misfeasance and nonfeasance “based on the individuals’ knowledge of and inaction [regarding] the EDA’s mismanagement of funds.”

Read the full, insane story here

Here’s another account from the Northern Virginia Daily, a local newspaper that’s done a lot of investigative work on the story as well.

Then there’s the Mad Mother, a Facebook page that has become a repository of news about the case, run by a Front Royal local who is, well, mad as Hell. Apparently, there’s been a proverbial GOBN (Good Ole’ Boy Network) in picturesque Warren County for many decades. I can’t say the info posted on her site is verified journalism, but it sure makes for interesting reading…

At the end of it all, one can only reach the same conclusions that are always there in these cases: Where was the oversight? The internal controls? Why wasn’t this caught sooner? What will it take for people to learn that when the opportunity for fraud exists, there WILL be (not MAY be) people who steal. As the anonymous quote states: “The lesson will be repeated until it is learned.”

Whistleblower Wednesday – Inspector’s General & Defending the Rule of Law in our Republic

Welcome to a new (semi)regular series – Whistleblower Wednesday. I can hardly think of a better day to kick this one off. Truth is stranger than, well, any episode of The West Wing ever aired.

If there is a single non-political takeaway that is relevant to the audit/investigation community from the past few days, it’s that many, many, MANY people have no idea how the concept of whistleblowing and independent public investigative functions are supposed to work.

Rather than a long-winded exposition from me on the philosophical concepts of morality/ethics/freewill and the duty individuals have to protect organizational integrity, I’ll just share a link to one of my favorite websites, www.oversight.org, managed by the association of Inspectors General. COGIE have produced an outstanding free informational publication, Whistleblowing Works: How Inspectors General Respond to and Protect Whistleblowers that lays out all the basic principles. If you’re not familiar with it, I highly suggest downloading it and giving it a thorough review. If you ARE familiar with this world, but get frustrated trying to explain it to non-audit/investigative professionals, point them to this document.

Regardless of how this whole mess plays out politically, it’s clear that, once again, auditors and investigators are being called to defend the rule of law upon which our republic is based. Without that, we are just a kleptocracy on a long, slow, painful decline.

Tax Evasion Tuesday – Sackler Family Wires a BILLION dollars in Opioid Blood Money Offshore Prior to Bankruptcy Declaration

Outrage Fatigue. It’s a thing, people. I don’t know about you, but I feel like the past few years have been one non-stop freakshow parade of horrors. If you’re a semi-sentient being, there’s no need for me to list them all, and I’m sure you’ve got your own personal hit parade of disturbing, enraging idiocy that you mentally project onto your bedroom ceiling each night before the Xanax/Ambien/Kava Kava takes hold and drags you down into the slumbery depths. I’ve got three words that are quite enough for me: Children in cages.

However, I’d like to think that I possess enough residual humanity to still be startled into a “WTF?” moment now and then. Today was one of those moments. From FoxBusiness:

Purdue Pharma’s Sackler family wired billions through Swiss bank accounts: Report

“The Sackler family, which owns embattled OxyContin maker Purdue Pharma, may have gone to great lengths to shield their profits and fortune from litigators.

The New York attorney general’s office on Friday said the family made about $1 billion in wire transfers through Swiss bank accounts, as reported by The New York Times.

A spokesperson for the company declined to comment.

The Purdue family was paid more than $4 billion from Purdue Pharma over the course of about a decade.

According to Forbes, the family is worth an estimated $13 billion.

As reported by The Associated Press last week, the Sacklers shielded much of that wealth in “an intricate web of companies and trusts,” some registered in offshore tax havens like Bermuda.

New York has issued subpoenas to 33 investment advisers and banks to get more information on funds transferred out of Purdue.

Earlier this week, there was a tentative settlement announced for the part Purdue Pharma played in the national opioid crisis – which would require the company to file for structured bankruptcy and pay $12 billion – including about $3 billion from the Sackler family.

The family would also have to give up ownership of the company and sell another one of its pharmaceutical companies – Mundipharma.

Not everyone is satisfied with the terms, however.

When there is a bankruptcy filing, often all other litigation is halted. It is unclear whether a settlement would shield the family, however.

New York Attorney General Letitia James said in a statement on Wednesday that the company continued to “lowball the millions of victims of the opioid crisis,” adding that she would “continue to seek justice for victims.”

Sixteen states have sued family members by name.

The Sacklers paid $75 million as part of a $270 million settlement with the state of Oklahoma earlier this year.

Opioid addiction has resulted in hundreds of thousands of American fatalities.”

 

Outrageous doesn’t BEGIN to cover the depth and breadth of the “alleged” actions of the Sackler family and their army of paid enablers – the shadow inhabitants of the global underground finance infrastructure. It would be most interesting to find out the current locations of the transferred funds. Someone should get on that.

If the Sacklers were your garden-variety members of the kleptocratic elite, these revelations would hardly raise an eyebrow anymore. OF COURSE weasely billionaires are going to use any means at their disposal to avoid giving up even a nickel to the jurisdictions whose populations they’ve fleeced. It’s kind of built into the Late Stage Capitalism model.

In this particular instance, however, it’s appears that the Sacklers and their front corporation, Purdue Pharma, have stepped over the invisible line that even the present administration realizes exists. The public has a really difficult time understanding how mortgage securitization blew up the global financial system a decade ago, but even the slowest among us get how a drug dealer operates, and we’ve all seen, directly or indirectly, to paraphrase Neil Young, The Needle and the Damage Done.

The hubris is staggering. A family already worth an estimated $13 billion goes to enormous lengths, breaking all sorts of laws, to hide a billion dollars beyond the reach of virtually anyone, international law enforcement authorities included. Think about that: They were willing to brazenly wire unfathomable sums of money via the SWIFT interbank transfer system, knowing full well that U.S. authorities would receive SAR reports on the transfers, and literally NOT GIVING A SHIT and doing it anyway. The only logical explanation: They figured they would get away with it. That they were, quite literally, above the law. This would be bad enough if the transferred money was earned ‘honestly,’ through corporate M&A or selling shares in one of their companies. But this cash is the very definition of Blood Money. Each dollar in that fortune represents human suffering, and the Sacklers know it, and simply do not care.

I desperately hope the Southern District of New York can get individual indictments and eventual convictions on these despicable weasels, but I won’t hold my breath.

Thoughts? Questions? Comments? email me at jdmcdaid@gmail.com, or follow me on Twitter @JustinMcDaid, Facebook, or LinkedIn.

 

A WordPress.com Website.

Up ↑