Dennis Gerwing – Embezzlement – Suicide – The Dark Side of White Collar Crime

April 23, 2008

I remember the day – a fateful day – when it all began to unravel. As soon as the first words were spoken in that phone conversation, I knew that my life was about to change and change for good. For me, all this took place in November of 1990. As I talked to one of my partners on a break from business out of town, I was innocently confronted by a fact that I had kept hidden – the fact that I had embezzled money.

My partner was unaware that there was anything wrong. He was just trying to help me by meeting a clients needs. But by doing so, I knew that my shadow side was soon to be exposed. I was a thief – a white collar criminal – and the time had now come for me to face the consequences of my actions.

Why state that here and what does it have to do with Dennis Gerwing? Well, like Gerwing, I had embezzled money (not the magnitude that he embezzled, but then money is money no matter the amount). The other more significant connection – I, too, considered suicide!

But, let’s look at Dennis Gerwing. Who he was and what happened – as best as it has been reported.

The Island Packet reported in mid March the following:

Dennis Gerwing’s business career on Hilton Head Island goes back to the 1980s. In August 1985, he was named head of the finance and administration division of Ginn Holdings Corp., then the island’s largest resort and development company. Ginn Holdings, led by developer Bobby Ginn, was the company resulting from a leveraged buyout that combined the old Sea Pines Co. and the Hilton Head Co. Gerwing had been vice president and controller for the Sea Pines Co.

The newly formed company controlled developer operations in the Sea Pines, Shipyard, Wexford, Port Royal and Indigo Run communities. But Ginn Holdings unraveled quickly. The company was sold in March 1986, a year after the Ginn purchase, and its name changed to Hilton Head Holdings Corp. Nine months later, it was in bankruptcy. The Hilton Head Holdings bankruptcy was a $100 million affair, with about 2,000 unsecured creditors — many of them local businesses — that were owed about $10 million. The rest of the debt was held in mortgages on prime property in Hilton Head.

After the demise of Ginn Holdings, a company called The Club Group was formed by Mark King, who had been director of sports for Ginn Holdings. The Club Group was a golf and amenity management company. Gerwing joined King at The Club Group by at least 1987, according to Island Packet stories. King is currently president of The Club Group and Gerwing was its chief financial officer.

The story begins an odd twist when John and Elizabeth Calvert, who split their time between their home in Atlanta, GA and a yacht on Hilton Head Island. The couple was last seen in March and effort to find them have been fruitless. Gerwing was the last person to have seen the Calverts. After being questioned by the authorities related to the disappearance of John and Elizabeth Calvert, Gerwing committed suicide on March 11th.

Now, the rest of the story as it is known thus far. Dennis Gerwing, the former chief financial officer of The Club Group, a property management company, handled bookkeeping for John and Elizabeth Calverts’ four island businesses through December, when the couple sought to move those duties in-house. He funneled money from clients into a secret checking account using hand-written checks, bank teller transactions and wire transfers, the audit found. Gerwing, according to a Club Group audit, embezzled a total of $2.1 million from the pair and seven other clients over the past four years, according to the results of a financial audit announced Tuesday.

The Island Packet reported, “In the wake of Gerwing’s apparent suicide, Club Group president Mark King hired Baltimore-based FTI Consulting to examine the company’s books. King, in a statement released after Gerwing died, said he had discovered possible financial irregularities and brought in the crisis management forensic accounting firm.”

CNN reports: Mark King, president of The Club Group, said he met last week with the clients who lost money and promised to repay them using money from his own assets as well as Gerwing’s estate and insurance settlements.

“I am still in shock over the betrayal of trust and the death of my partner of 21 years. I have no idea what might have prompted Dennis to engage in this behavior, but as chief executive, I want to apologize on behalf of our company to all who were adversely affected,” King said in a statement.

Comments: First, I can sympathize with what Mark King is going through. Betrayed trust is hard to deal with and understand. King is finding himself in a situation that I doubt he ever expected to be in – right in the middle of an investigation that likely involves murder. King’s life has been turned upside down and it will not resolve anytime soon.

Again CNN reported, The FBI will review the audit as part of its own investigation into the finances of Gerwing, the Calverts and The Club Group, Beaufort County Sheriff P.J. Tanner told The (Hilton Head) Island Packet.

“I can’t support anything they put in there,” he said of the private audit. “It could be self-serving on their part or it could be what we find in the end. We’re too far from this investigation being over to make that determination.”

Investigators continue to pore over thousands of e-mails and check computers and cell phones in their search for the couple, Tanner said.

So, King finds himself embroiled in a murder investigation, dealing with the death of his partner and now finding that he (Gerwing) had embezzled a substantial sum of money. King is now, in fact, under suspicion considering when funds are missing, any and all associated with the accountability of the funds are considered suspects – of sorts.

As I look back, now some 18 years, I have empathy for my former partners and what they had to deal with in the wake of my misdealings. They knew nothing and had nothing to do with my crime, yet, in many ways that, too, paid the price for the choices I made.

Suicide. Yes, sad to say, I gave that serious consideration. It was an easy escape from the consequences that I knew were before me. But, thankful to God, someone – a stranger – made a statement that I will never forget – a statement that changed my thought process and my life.

He said, “You have made a terrible mistake! YOU, however, are not a mistake. The choices you make tonight will define the legacy you will leave for your children.”

Every choice has a consequence. I know that to be true as I had to experience the consequences of my actions – which took me to federal prison. Today, some 18 years later, my youngest son is graduating from High School and preparing to enter college. What I was told so many years ago was accurate. Today as I speak around the country on business ethics and fraud avoidance, I know so well the fact that you reap what you sow. Likewise, the consequences one faces from choices made, serve only to make the person stronger.

My heart goes out to the family of Dennis Gerwing. He made a terrible mistake! Apparently, he was unprepared to face the consequences. How sad!

Comments are welcome!


Former Georgia Tech Employee Donna Renee Gamble Indicted! ‘P-Card’ Fraud – What was She Thinking? Comments by White Collar Crime Speaker Chuck Gallagher

March 4, 2008

Working for the Parker H. Petit Institute for Bioengineering and Bioscience at Georgia Tech in Atlanta, Donna Renee Gamble, age 43, was indicted by a federal grand jury on charges credit card abuse.

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According to United States Attorney Nahmias, and other information presented in court: GAMBLE was employed by Georgia Tech in Atlanta, where she was assigned to the Parker H. Petit Institute for Bioengineering and Bioscience. As an employee of Georgia Tech, GAMBLE had access to one or more Georgia Tech credit cards, also known as Procurement Cards or “P-Cards,” which she was allowed to use for authorized official business purchases only. GAMBLE was prohibited from charging personal purchases on her Georgia Tech P-Cards. From April 2002 through April 2007, GAMBLE allegedly used her Georgia Tech P-Cards to purchase more than 3,800 personal items, at a total cost of more than $316,000. In an effort to conceal and disguise the personal nature of certain charges on her Georgia Tech P-Cards, GAMBLE allegedly created fake receipts, which she submitted to her supervisor, and made false entries in Georgia Tech’s accounting records. Grant money provided to Georgia Tech by the NSF was used to pay for GAMBLE’s personal purchases.

Now, as a white collar crime speaker, there are times when I have the feeling that a person might have gotten caught up in something that might have been unintended. However, in this case, it appears that there was clear thought in how the crime was committed.

Generally there are three components to any fraud: (1) need (or perceived need); (2) opportunity and (3) rationalization. Alleging to have purchased more than 3,800 items for personal use indicates that what might have started as need – grew! The opportunity was there – as often it is with ‘P-Cards’ in that it is difficult to have complete control (effective internal controls) when each person is given a card that is honored.

While most respect the responsibility that comes with such a card, there are always issues of fraud that seem to arise from those who get caught up in the opportunity for abuse. GAMBLE was on of several current and former university employees who have had their card usage scrutinized after an audit. What is astonishing in this case is the effort used to conceal the nature of the alleged fraud.

Gamble is charged with 22 counts of mail fraud and theft each of which carry a maximum sentence of 20 years in prison and a fine up to $250,000.

Stay tuned as I’ll report more later. Business ethics and white collar crime speaker, Chuck Gallagher, signing off…

Your comments welcome!


Georgia Man – Anthony Christou – Convicted of Massive Mortgage Fraud Ponzi Scheme!

February 25, 2008

Christou was a gambler, in more than one way. But every choice has a consequence! It is like the law of gravity. The bold statement above is factual – you will reap what you sow. The question is here – what will the final consequence be for Anthony Christou, age 57, who was just convicted on charges of wire fraud and money laundering relating to an investment fraud scheme.

According to a Department of Justice News Release:

“This defendant personally met with dozens of victims, telling each that he would use their money to underwrite legitimate mortgages. He knew at the time that he had no intention of using his investors’ money legitimately, but rather that their funds would be put to use in keeping a massive Ponzi scheme afloat,” said United States Attorney David E. Nahmias. “Mr. Christou racked up more than $29 million in fraudulent investment in just two years, a significant portion of which was diverted to his gambling activities. The jury’s verdict after only five hours of deliberation and the likelihood of a long prison sentence in this case should send a clear message that this type of fraud will not be tolerated.”

Note: Christou has been convicted but not yet sentenced.

Between January 2004 and January 2006, CHRISTOU, who was at the time president of his own mortgage company, “Atlas Mortgage Inc.,” engaged in a scheme wherein he and others acting on his behalf solicited individuals, including business associates, personal friends and members of his church, to invest with him. CHRISTOU informed his investors that he would use their money to underwrite safe and secure “bridge loans” for wealthy individuals who were selling a house and needed funds to use as a down payment on newly acquired real property or to assist real estate developers with their short term capital needs. CHRISTOU entered into short term promissory notes with his lenders, the terms of which were dictated by
CHRISTOU, to memorialize their investment.

CHRISTOU falsely represented that his investors’ money would be secured by his borrowers’ equity and would be repaid, with substantial interest, in a short period of time. Between January 2004 and January 2006, CHRISTOU took in more than $29 million from investors, purportedly to fund bridge loans. Instead, he used his investors’ funds to repay his principal and interest obligations to earlier investors and, unbeknownst to his later investors, laundered more than $7 million of their assets to fund his gambling activities at casinos in Nevada, Mississippi, and New Jersey.

So how can such a fraud be accomplished? Easy! First there have to be three components present for a fraud like this to work. As a white collar crime speaker, I speak to groups nationwide about ethics, fraud and how to avoid it in your organization. What gives me the credential – training and experience. As a former CPA – trained with a Masters in Accounting – I am also (regrettably) a white collar criminal – having been convicted and spent time in federal prison for a ponzi scheme just like the one shown above.

The components of the crime: Need, Opportunity and Rationalization! Obviously, Christou needed the money. He needed it to fund his addition – gambling – and pay off the former folks defrauded. As long as he could pay them off he could continue the scheme. It appears that he made his own opportunity by using his skills in sales to convince others to invest in him. Rationalization – well I can’t begin to speak to his mindset. In my case, however, I convinced myself that it was a loan and even set up fake loan documents to support that illusion.

You cannot avoid the consequence of the choices you make. Consider wisely your choices and know that – stated again – Every choice has a consequence.


White Collar Crime is Alive and Well in South Carolina – 1st Week of February Results!

February 11, 2008

From February 1st thru February 6th there were four folks who were sentenced, indicted or convicted of white collar crime in South Carolina.

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Atlanta Man Sentenced: Charles Mahaffey, age 41, of Atlanta, Georgia, was sentenced to 40 months imprisonment for conspiracy to pass counterfeit traveler’s checks. Mahaffey was arrested in a drugstore parking lot after passing several counterfeit Visa $100 traveler’s checks at various Florence businesses. Recovered from his car were 11 additional counterfeit traveler’s checks, each bearing the same serial number. Federal investigators have since discovered that an additional 122 identical checks were successfully passed in 11 states just prior to Mahaffey’s arrest.

Guess here, but since other frauds have been discovered, my educated guess is that Mahaffey will be facing more time.

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Florence, SC Woman Sentenced: Susan Celeste Edwards, age 33, of Florence, South Carolina, was sentenced to 31 months in federal prison for using company credit cards to steal from her employer, Carolinas Refrigeration of Florence. Now…that is bad – but not that unusual. Here’s where the story takes a twist. This wasn’t her first time in prison!
Carolinas Refrigeration hired Edwards as a bookkeeper, unaware of her recent release from federal prison for embezzling from Advance America from 2000-2002. While working in the employee benefits section of that company, Edwards stole more than $243,000.00 from that scheme in which she filed insurance claims for fictitious employees, collecting insurance
payments which she spent for herself. Edwards served 37 months on that conviction.
Edwards admitted in court that from February 2006 to August 2006, she stole company funds and used her employer’s credit cards to make purchases for her personal use. By the time her thefts were detected, she had embezzled approximately $150,000.00.

So much for a background check! While not all people who have committed white collar crime will repeat that offense, it clearly illustrates some simple truths – use internal controls to avoid the likelyhood of abuse.

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Easley, SC Man Guilty: Charles E. Atwell, age 57, of Easley, was found guilty by a jury yesterday in federal court in Anderson of four counts of tax evasion and one count of making false statements in a bankruptcy petition.

Evidence presented at trial revealed that from 2000 to 2003, Atwell made
more than $2,000,000.00 in commissions as a financial planner selling insurance policies, annuities, and mutual funds. Atwell did not file tax returns or pay any income taxes during any of these years. In fact, evidence at the trial revealed that Atwell had not filed personal tax returns since 1995, and that the only tax returns attributed to Atwell during this period were bogus documents he presented when applying for loans. The evidence also showed that Atwell used bank accounts of several entities that he controlled, such as Professional Planning Inc., of Greenville, T and E Associates, and the Atwell Family Trust, to divert income for his personal use.

Evidence was also introduced that Atwell signed and filed a bankruptcy
petition claiming that his income in 2001 was only approximately $17,000.00 dollars, when in fact it was approximately $800,000.00. The petition further stated that his 2002 income was approximately $41,000.00, when in fact it was approximately $400,000.00.

Unlike the Wesley Snipes trial, Atwell could not claim he didn’t know the rules or law. Perhaps an actor could be that ignorant of the law, but a financial planner earning that amount couldn’t claim ignorance as an excuse!

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Chester, SC Woman indicted: Michelle Waters Dawkins, age 37, of Chester, South Carolina, was indicted for embezzling money from First Citizens Bank. The Indictment alleges that while employed at First Citizens between January and June 2007, Dawkins stole more than $1,000 from the bank. Get this…the maximum penalty Michelle Dawkins could receive is a fine of $1 million and imprisonment for 30 years.

Comments: As a business ethics and white collar crime speaker, (www.chuckgallagher.com) I see the effects of choices that are made. Generally when frauds like those mentioned above are effected there are three components: (1) need; (2) opportunity and (3) rationalization. Regardless of what motivates white collar crime, the outcome is always a negative consequence. Every choice has a consequence.

Your comments are welcome!