In the past, we have written about how during these economic times, small to medium size businesses are especially vulnerable to fraud by trusted employees or business partners. In addition, we have represented licensed professionals and business people who have committed financial crimes such as embezzlement. We have seen an increase in the prosecution of these cases and increased sentences.
The lessons to be learned are that businesses need to be vigilant about having checks on those with access to money. Individuals need to recognize that during economic crises they will have access to money but if they take funds (even with the intent to repay), they will face prosecution more often than they would have in the past. Financial crimes are being prosecuted with a greater vigilance. Felony theft charges can ruin a career and are not worth the risk. Sentences have increased significantly for state and federal white collar crimes.
Where the case is prosecuted has a significant impact on the sentence. For the most part, prosecutions in Orange and Ventura Counties result in more jail time than those cases in Los Angeles. Embezzlement of public institutions on non-profits will stand a greater risk of prosecution than embezzlement from private companies or individuals.
We have represented a number of individuals where repaying immediately and reaching a civil settlement has avoided criminal prosecutions. Each case is different and often the victims simply want repayment. The tougher cases are where there are no funds for restitution or repayment.
Here are a summary of four recent California prosecutions. Remember that complaints and arrest warrant affidavits contain only allegations against an individual and all defendants must be presumed innocent unless and until proven guilty:
Embezzlement From State Bar Of California
The charges include: (1) One criminal count of embezzlement for violating section 504 of the state Penal Code and (2) Six counts of filing false tax returns for violating section 19706 of the state Revenue and Taxation Code.
The facts underlying the felony complaint are alleged to be as follows. In 1999, the State Bar purchased an office building at 180 Howard Street, San Francisco, for use as its headquarters. The State Bar inherited tenants who leased retail space within the building. As the Director of Real Property, Ms. Pearl handled building management and was responsible for collecting tenant's rent. The complaint alleges that as early as 2002, Ms. Pearl began to embezzle a portion of the rental funds she collected.
The means of embezzlement was allegedly as follows: Ms. Pearl directed some tenants to make their rent checks payable to "PLOT-The State Bar of California." Unknown to the renters, "PLOT" stood for the Piedmont Light Opera Theatre. Ms. Pearl deposited some of the checks into accounts held by the Piedmont Light Opera Theatre (PLOT). Ms. Pearl, who was a signatory on the theater's accounts, would then transfer funds from the theater accounts to her personal bank account. She would then use the embezzled funds to pay for her personal expenses.
The State Bar contends that Ms. Pearl was able to continue doing this for years because the State Bar did not keep track of the rent payments it was owed. It had no reconciliation mechanism and did not track any gaps in payments. It simply deposited the payments it received from Ms. Peal. The State Bar contended it did not uncover Ms. Pearl's involvement until 2008 when she requested a check that she claimed was for a tenant's security deposit refund. Because there were no records that the tenant in question had ever paid a security deposit, the State Bar launched an internal investigation into the financial discrepancies.
The State Bar also claims it discovered that Ms. Pearl was maintaining two sets of books, and the investigation was referred to the Attorney General's Special Crimes Unit for prosecution. These allegations regarding “date of discovery” are set forth in order to allege why the statute of limitations should not begin to run until the date the State Bar discovered the alleged embezzlement. Ms. Pearl could face up to nine years in state prison if convicted on all charges.
Copies of the complaint and arrest warrant declaration can be found at:
http://ag.ca.gov/cms_attachments/press/pdfs/n1712_pearl_complaint_-_filed.pdf
http://ag.ca.gov/cms_attachments/press/pdfs/n1712_pearl_arrest_declaration_-_filed.pdf
Trustee of 401(k) Account Convicted For Taking 401(k) Funds
On March 19, 2009, after a 6 day trial, a jury in Ventura County found Michael Joseph Pearns guilty of grand theft of more than $50,000 for stealing $97,186 from his former employees and business partners. Pearns and two business partners ran MJP Financial, a.k.a Mountain View Financial, a real estate loan firm in Westlake Village from 1995 to 2000. In 2000 the loan firm closed. While the firm was in business, 12 employees made 401(k) contributions from their personal paychecks. The company's 401(k) had a total value of $97,186. Pearns was one of the trustees of the 401(k) account.
In April 2003 Pearns was having financial difficulties. Based on Pearns' status as a “trustee,” he submitted paperwork to Morgan Stanley, the investment company where the 401(k) money was held, that allowed him to transfer all the employees' 401(k) contributions into his own personal IRA. When a former business partner of the loan firm and co-trustee of the 401(k) learned what Pearns had done, she pressured him to return the $97,186. Pearns returned approximately $72,000. The remaining money was never paid back. Thus, repayment of the majority of funds in this case did not cause the case to go away.
It is not clear why this case proceeded to trial. It may have been due to a breakdown in plea negotiations regarding jail or prison time. After the jury's verdict, Judge Kevin DeNoce revoked Pearns' bail and remanded him into the Ventura County jail pending sentencing. Pearns faces a maximum sentence of four years in state prison.
Ventura College Athletic Director and Basketball Coach Diverted Public Funds
http://ag.ca.gov/cms_attachments/press/pdfs/n1712_pearl_complaint_-_filed.pdf
http://ag.ca.gov/cms_attachments/press/pdfs/n1712_pearl_arrest_declaration_-_filed.pdf
Trustee of 401(k) Account Convicted For Taking 401(k) Funds
On March 19, 2009, after a 6 day trial, a jury in Ventura County found Michael Joseph Pearns guilty of grand theft of more than $50,000 for stealing $97,186 from his former employees and business partners. Pearns and two business partners ran MJP Financial, a.k.a Mountain View Financial, a real estate loan firm in Westlake Village from 1995 to 2000. In 2000 the loan firm closed. While the firm was in business, 12 employees made 401(k) contributions from their personal paychecks. The company's 401(k) had a total value of $97,186. Pearns was one of the trustees of the 401(k) account.
In April 2003 Pearns was having financial difficulties. Based on Pearns' status as a “trustee,” he submitted paperwork to Morgan Stanley, the investment company where the 401(k) money was held, that allowed him to transfer all the employees' 401(k) contributions into his own personal IRA. When a former business partner of the loan firm and co-trustee of the 401(k) learned what Pearns had done, she pressured him to return the $97,186. Pearns returned approximately $72,000. The remaining money was never paid back. Thus, repayment of the majority of funds in this case did not cause the case to go away.
It is not clear why this case proceeded to trial. It may have been due to a breakdown in plea negotiations regarding jail or prison time. After the jury's verdict, Judge Kevin DeNoce revoked Pearns' bail and remanded him into the Ventura County jail pending sentencing. Pearns faces a maximum sentence of four years in state prison.
Ventura College Athletic Director and Basketball Coach Diverted Public Funds
On February 25, 2009, Greg Winslow was arrested for grand theft and misappropriation of public funds. The six-count felony complaint alleges Winslow, the former men's head basketball coach and athletic director at Ventura College, misappropriated public funds when he received and diverted money directed to the Ventura College men's basketball program into his personal bank account.
It is also alleged that Winslow assisted in and/or provided fraudulent information on admission applications for certain student athletes. This false information caused the school to classify some student athletes as California residents rather than out-of-state residents. This false information allegedly resulted in a loss of approximately $40,000 in tuition money to Ventura College.
It is also alleged that Winslow assisted in and/or provided fraudulent information on admission applications for certain student athletes. This false information caused the school to classify some student athletes as California residents rather than out-of-state residents. This false information allegedly resulted in a loss of approximately $40,000 in tuition money to Ventura College.
Soccer Club Treasurer Sentenced To 28 Months For Embezzling Funds
On February 25, 2009, Alan Olin was sentenced in Ventura County Superior Court to 28 months in state prison and ordered to pay $120,735 in restitution to the Conejo Valley United Soccer Club. Olin had plead guilty to one count of felony grand theft and admitted a special allegation that he stole more than $65,000.
According to the prosecuting agency, from December 2002 through November 2007, Olin embezzled $120,735 while acting as treasurer for the Conejo Valley United Soccer Club. The fraud was discovered in 2008 after a review of the soccer club's bank records.
According to the prosecuting agency, from December 2002 through November 2007, Olin embezzled $120,735 while acting as treasurer for the Conejo Valley United Soccer Club. The fraud was discovered in 2008 after a review of the soccer club's bank records.
Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, licensed professionals and businesses in civil, business, administrative and criminal proceedings.
