Case Study: Federal Embezzlement Charges Against California Controller. Top 5 Things to Learn From This Indictment

As attorneys specializing in white collar crime, we have represented businesses who wanted help in presenting a fraud case to the local police or FBI as well as representing those who have been charged with such offenses. 

Recently, a controller for two Southern California companies was charged in  a federal grand jury Indictment with embezzling $3 million. After providing you with a summary of the allegations, we will delve into what can we learn from this recent Indictment. 

With respect to this particular case, remember that an Indictment does not mean that the accused is guilty, nor is it proof of guilt since our Constitution provides that the accused is presumed innocent until proven guilty beyond a reasonable doubt.

On November 18, 2021, a federal grand jury in Santa Ana, California in the Central District returned a 15-count Indictment accusing the former controller, Rosalba Meza, for two Anaheim-based companies, Trilogy Plumbing, Inc. and Matrix Management, LLC, of embezzling more than $3 million by directing the transfer of company funds to bank accounts that she controlled. She is scheduled to be arraigned on the indictment today (November 29) in United States District Court in Santa Ana.

It is alleged that in February 2019, Ms. Meza told executives in these two companies that they did not have funds to meet payroll obligations but failed to inform the executives that she had been embezzling from the companies. Several months later, while the companies were the subject of an IRS enforcement action because of unpaid payroll taxes, Ms. Meza allegedly told the executives that she did not pay the quarterly payroll taxes because she instead had used those funds to pay employees. 

The Indictment alleges that, once the funds were transferred to her accounts, Ms. Meza used the stolen money to make approximately $292,137 in cash withdrawals at bank branches and more than $1 million in withdrawals at ATMs in the United States and Mexico. Ms. Meza also allegedly wired approximately $870,209 to bank accounts in Mexico owned by a family member and another $250,000 in transfers to other family members and friends. The Indictment also alleges that Ms. Meza filed tax returns for the years 2017 through 2019 that failed to report as income the embezzled funds.

What can we learn from this Indictment? First, like most other people accused of embezzlement, Ms. Meza does not have any criminal history. Past studies have shown that less than 10 percent of people charged with embezzlement have any prior criminal history. This means that background checks alone will not protect you. 

Pennsylvania Operating Officer Charged Along With Her Husband With Mail Fraud, Embezzlement from Healthcare Benefit Program for Alleged False Reimbursement Expenses

Given that hospital employees are paid essentially out of government healthcare and insurance funds, cases involving hospital officers and key employees are often prosecuted in a higher profile and federal manner than other types of businesses. In addition, government employees - especially those in law enforcement - can also be charged more harshly due to their position of authority and special skills. 

A recent Indictment shows how this played out for one couple where the wife worked as an executive at a hospital and the husband worked as a detective with the local district attorney's office. 

On April 19, 2019, Stephanie J. Roskovski and her husband, Scott A. Roskovski, were indicted by a federal grand jury in Pittsburgh on charges of mail fraud, conspiracy to commit mail fraud, embezzlement from a healthcare benefit program, conspiracy to commit money laundering, money laundering and false statement in a loan application. An Indictment is an accusation and is not evidence. A defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

The Indictment alleges that the Roskovskis, during the years 2011 through December 2017, perpetrated a fraud totaling more than $1.3 million on Butler Healthcare Providers, d/b/a Butler Memorial Hospital, where Stephanie Roskovski was employed and, for much of that time, served as the hospital’s Chief Operating Officer. 

During the time, Scott Roskovski was employed as a detective with the Butler County District Attorney’s Office where he conducted investigations involving fraud and other financial crimes. Counts One through 23 of the Indictment allege that the defendants conspired to and did defraud Butler Healthcare Providers by submitting requests to Butler Hospital for alleged business-related expenses that were used, or intended to be used, for personal expenditures. 

Ex-Controller Of California Court Services Firm With Gambling Addiction Admits Embezzling $3.3 Million And Pleads Guilty In Federal Court

I receive many calls from businesses and individuals where the government - federal, state, or administrative boards - or insurance companies are requesting records.  Some records are requested for an audit.  Other records are requested by a subpoena or grand jury subpoena. 

One of the keys in responding is not to panic. Obtain sage advice and proceed intelligently so you do not make matters worse. Even if there are some issues with the records, it may be a damage control case and you may not be objective or thinking clearly when receiving this request for records. 

One of the first things I tell clients is NOT to destroy records. Why? Destroying records does a number of things. First, it helps show intent to defraud. Second, it also provides a basis for an obstruction of justice charge. So even if the government decides not to charge health care fraud, it can charge obstruction of justice. Third, it also means you will not be able to use those records in your defense at any time and you do not know where the investigation is going at an early stage.  

A recent case shows what can happen when records are destroyed. On June 11, 2014, a New Jersey chiropractor, Mary Jean Negri, DC, RN, admitted destroying patient appointment records sought by federal agents investigating potential billing fraud at her medical office. Dr. Degri DC pleaded guilty in federal court to an information charging her with one count of obstructing an investigation of a health care offense. Dr. Negri DC had been practicing for 24 years and now this will cause her to lose her license and have a federal criminal conviction. 

According to documents filed in this case and her own statements made in court, Dr. Degri DC discovered in May 2012 that the FBI and the U.S. Attorney’s Office were investigating her chiropractic corporation for potentially fraudulent billing practices. Dr. Negri DC  suspected that investigators were interested in obtaining the clinic's patient appointment books as evidence of potential fraud. In an effort to obstruct the government’s investigation, she discarded those patient appointment books.

Dr. Negri DC's sentencing is scheduled for September 29, 2014. The maximum sentence on this charge is 5 years, a $250,000 fine, or twice the gain or loss caused by the offense. It is doubtful that she will receive the maximum but the sentence will depend on the judge and the facts and circumstances.  There will be significant collateral consequences to Dr. Negri DC as well such as being excluded as a Medicare provider by OIG and discipline to her license including revocation.  

Do not let your office respond to subpoenas or request for records in a manner that exposes you to greater problems. Seek advice and handle these requests in a professional manner. Even if you need to assert the 5th Amendment or are concerned about billing exposure, remember that not every case investigated is charged but it makes the government's job easier to prove fraudulent intent if there are records destroyed or "lost" in a flood or disaster.

Posted by Tracy Green, Esq.

Green and Associates, Attorneys at Law

Phone: 213-233-2260

Email: tgreen@greensasoc.com

Embezzlement Cases On Rise In California As Economy Is In Decline -- Will I Have To Go To Jail For Embezzlement?

I was in Los Angeles County Superior Court this week on a relatively small embezzlement case (under $5,000).  The judge remarked that he had over 20 embezzlement cases in his courtroom alone that week and his is not a settlement or early disposition court.  The economic pressures have made these cases more common even though embezzlement is more complex than the economy since there often can be an addictive component to the behavior.

In some other cases the past, the embezzlement was discovered and we were able to work out civil settlement agreements with the employer without any criminal action. In many cases, the client faces both the criminal and the civil case.  Some companies file civil cases so they can be in control of the litigation which they do not have in criminal cases.

In the small amount case this week, the client discovered the case when he was was contacted by a LAPD detective for an interview. I intervened and refused to let him be interviewed.  The detective shared the documentation against him and informed me that he had already decided to charge him. I arranged a self surrender and bail. The case against him was well documented and the client was very remorseful. There was an offer of no jail time if restitution was paid in full.  

In contrast, in downtown Los Angeles last week, I saw a plea and sentence on April 18 in Division 50 (the early disposition state court) by a woman who admitted to embezzling more than $4.6 million from 17 different companies from 2003 to 2009. She did not have a plea agreement with the D.A.'s Office but instead "plead open" to 17 counts of grand theft and Judge Horowitz sentenced her to 5 years in state prison. One interesting thing about this case was that she was not charged until April 4, 2012 -- which was over 3 years after she left the company and the charges related back to 2003.

I also did a consultation last week on another embezzlement case where the loss was over $200,000 and a civil case has been filed before the criminal case. Strategies considered included whether to stay the civil case, settle the civil case and seek cooperation if any criminal reporting has been done, and how to handle the client's inability to pay significant restitution. 

In some cases, we are able to use our expertise and show that there was no embezzlement or that the amounts are greatly overstated. For example, if the claim is that the client abused his or her expense account or was reimbursed for expenses that are now claimed to be unauthorized -- it is not a simple taking case.

In other cases, the evidence is overwhelming and the taking involves falsification of expenses, checks and the client has already confessed to his or her former employer or law enforcement. In those cases, a common question is "will I have to go to county jail or state prison?" There is no one answer to this question but it depends on a number of factors. 

Ten common factors include: (1) criminal history, (2) facts and how easy the case is to prove and whether there are any viable defenses, (3) ability to pay restitution including borrowing money or selling assets to do so, (4) venue or where the case is filed -- Los Angeles downtown can be very different from other parts of Los Angeles County or from Ventura or Orange Counties, (5) the victim's agreement to prefer no jail so restitution can be paid, (6) other factors like mental health, addiction, and family issues, (7) the effect the loss had on the victim, (8) the role the person had in the victim's company and life, (9) whether the client is able to work and pay a significant percentage of earnings to restitution in lieu of custody, and (10) other mitigating or favorable facts that can be developed. 

Each case is different and working up the facts and mitigating circumstances can go a long way in reducing the risk of custody time. However, courts are getting tougher on sentencing for all white collar crimes, including embezzlement. Restitution is king and can make all the difference in the case. I have structured many different ways and the only limitation is our own creativity and willingness to do everything we can to get the best result possible. 

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

Any questions or comments  should be directed to Tracy Green, a very experienced criminal defense attorney and civil attorney who understands and is adept at the interplay between the two. The firm focuses its practice on the representation of businesses and licensed professionals, individuals and businesses in civil, administrative and criminal proceedings. Their website is: http://www.greenassoc.com/

CPA Charged With Grand Theft For Taking Money From Rotary Club While Club Treasurer Ultimately Had To Surrender CPA License

On September 2, 2009, Patrick David Dugan, a Certified Public Accountant, was arraigned in Orange County Superior Court on charges of unlawfully taking $49,000 from the Los Alamitos Rotary Club (LARC) by transferring money into his personal account while serving as the club treasurer. Mr. Dugan is charged with one felony count of grand theft and two felony counts of money laundering. The bail was set at $49,000 - the loss amount. The maximum sentence on these charges is four years and four months in state prison.

According to the complaint, Mr. Dugan, a Certified Public Accountant, had worked as the financial officer for LARC since 1998 and was solely responsible for maintaining the club’s financial records and presenting financial statements to the executive board and club members. Between December 2005 and December 2007, Mr. Dugan is alleged to have taken $49,000 from LARC by transferring the money from the club into his personal account. Mr. Dugan is accused of attempting to hide the embezzlement by altering LARC’s financial statements.

The alleged offense was discovered in April 2008, when Mr. Dugan became ill and was unable to perform his duties for LARC. The theft was discovered in May 2008 when members of the club noticed discrepancies between official bank records and the financial reports presented by Mr. Dugan. LARC reported the theft to the Los Alamitos Police Department, who referred the case to the Orange County District Attorney’s Office for investigation to avoid the appearance of a conflict of interest.

Plea Agreement And Subsequently Surrendered License As Part of Stipulated Settlement. On March 30, 2010, Mr. Dugan plead guilty to the two counts and was ordered to serve 90 days in jail, pay fines and fees and be on 3 years' probation. In 2011, the Board of Accountancy filed an Accusation alleging the conviction and Mr. Dugan's failure to report his conviction within thirty (30) days. 

Given the conviction and the Board's intention to seek revocation, Mr. Dugan then surrendered his license effective September 30, 2012 which allows him to petition for reinstatement after a statutory period if he pays the investigation costs (over $10,000) and shows proof of rehabilitation and mitigating evidence. 

Attorney Commentary: Embezzlement cases are becoming more common with the economic pressures facing our economy. Normally law-abiding people can be tempted when given unfettered access to funds. Even if the person intends to pay it back later, the unlawful or unauthorized taking is designated a theft. It also seems to be one of those offenses that once it begins, it is difficult to stop.

The best time to address one of these cases is before charges are filed. Civil settlements can be useful and help avoid criminal charges since often the company or business or individual simply wants the money returned. Thus, the ability to pay restitution is paramount. However, if someone has had financial problems, repayment can be an issue. This is the time to obtain a second job, cut every possible expense and do everything to amass funds for repayment.

In addition, bail arrangements need to be made in advance to ensure that there is self-surrender and a bail amount that is affordable. Usually in theft or embezzlement cases, the bail amount is the amount of the loss. There are creative ways to reduce bail in order to have more funds to pay restitution and to make sure the individual is out of custody and able to work to pay restitution.

If charges are filed, restitution is still critical. The days, however, when repayment alone will suffice are over in some jurisdictions. My clients and I have heard more than one blistering speech from a judge recently regarding "white collar crime." It takes a comprehensive plan to avoid jail time in these cases -- of which restitution and satisfying the alleged victim are key.

Posted by Tracy Green. 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 licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have handled numerous civil and criminal cases where embezzlement or theft allegations or charges have been filed. The firm website is http://www.greenassoc.com/