Jimmy Choo shoes and Million Dollar Home – Chad Read and Emily Read now sentenced to Federal Prison!

January 5, 2010

From California to Lubbock, Texas – Chad and Emily Read lived a modest life.  Then Emily began working for Reaction Fitness Clubs (a modest health club chain) – and things changed.

From living with Emily’s mother to owning a series of large homes and a condo in Dallas, the Reads had a dramatic change in lifestyle.  From a $1.2 million home, to expensive cars, to a recreational vehicle, to designer clothes and Jimmy Choo shoes – the Reads enjoyed life in a way few experience.  But where did the money come from?  According to the Reads their new found wealth came from a trust fund her father left to her.  Reality…well there was no trust fund only embezzlement or theft!

Seems that Emily worked as a bookeeper for the fitness clubs referred to as the Reaction Fitness Clubs.  During that time she wrote a large number of checks from the club and either would cash the checks or deposit them into their personal accounts.  Likewise, they used funds from the club accounts to pay for their personal credit cards and purchase other luxury items.

EVERY CHOICE HAS A CONSEQUENCE!

Emily J. Read – now Chad Read’s ex-wife – was sentenced in September 2009 to 41 months in federal prison and ordered to pay more than $670,000 in restitution.

Chad Read was sentenced in December 2009 to 18 months in federal prison and ordered to pay restitution remaining of $15,000.

WHAT HAPPENED?

Obviously, both husband and wife were convicted and sentenced.  But, since Chad received a substantially lower sentence (in terms of time spent in prison), was it possible that he was not fully aware of the crime being committed by his (now) ex-wife?  And, what motivated Emily to change her former lifestyle and enter into an obvious life of crime?  Lastly, how was she so easily able to effect the crime?

There are three components of a white collar crime – NEED – OPPORTUNITY and RATIONALIZATION.  In this case, it is clear that Reaction Fitness Clubs did not have sufficient internal controls opening the door to “opportunity”.  Seems that Read had free reign and, management must have been asleep at the wheel in order for a fraud of this magnitude to have gone undetected for so long.

LESSON

To avoid fraud you either have to have someone so strong in their ethical beliefs or foundation that they won’t cross the line or you have to eliminate one of the three components – and in this case the easiest way to have avoided this disastrous consequence would have been the elimination of opportunity.  Any good CPA or business owner knows that internal controls are there to protect the business assets and preclude the likelihood of succumbing to temptation.

I can’t address the Read’s need or rationalization, but had sufficient controls been put in place, Emily would not have easily had the opportunity to effect her massive life changing fraud.

Your comments are welcome!


Theft of Dead Mothers VA Benefits Earns Lyndell Simmons 5 Years in Prison!

May 17, 2008

And who says that every choice has no consequence? Bull! No matter what you do, the choices you make today will have a profound impact on you tomorrow and in the future.

A Lubbock man, Lyndell Simmons,age 46, who pled guilty in January to theft of government money or property, was sentenced to 60 months (five years) in prison and ordered to pay $21,529 restitution to the Department of Veterans Administration (VA).

According to documents filed in Court, Louise Simmons, Lyndell Simmons’ mother, was a beneficiary of VA Dependency and Indemnity Compensation Benefits. In March 2007, an investigation was initiated by the VA, Office of Inspector General, Criminal Investigation Division, after a complaint alleged that Ms. Simmons had not returned a marital status questionnaire. An investigation revealed that Ms. Simmons died on November 10, 2004.

STOP…She died in 2004? Well, how in the world did a dead woman cash checks? That is the question that began Simmons undoing!

Further investigation revealed that from approximately December 1, 2004 to March 1, 2007, Lyndell Simmons cashed approximately 22 VA benefits checks made payable to his mother, forging endorsements on each check. He cashed the checks and used the money for his own personal use.

NOTICE: Often it is not the magnitude of the crime and causes the time. In this case it seems the judge considered in the sentence not only the amount stolen, but the form the crime took. Stealing from the government your dead mothers benefits is cold.

White Collar Crime speaker – Chuck Gallagher – signing off…


Paid Tax Preparer Earns Prison Time – Don’t Mess With The IRS! Comments by Ethics Speaker Chuck Gallagher

February 22, 2008

Lubbock, Texas is known for many things. Now, one of its citizens, Martin Fungai Mandegu brings attention to Lubbock – but in a different way. Martin, it seems, along with Paul Ntahonkiriye and Carl Riley, Jr. were named in September 2007 in a 29 count indictment alleging false claims and conspiracy to defraud the government.

Mandengu was just sentenced to 16 months in federal prison and ordered to pay $100,725 in restitution. Ouch…an active prison sentence and restitution – all for 57 fraudulent returns.

According to the US Attorney’s news release here’s the story:

From October 2004 through April 2005, Paul Emile Ntahonkiriye began operating an income tax return preparation business in Abilene, Texas, by the name of PNT Tax Service (PNT). Beginning in January 2005, Mandengu, Ntahonkiriye and Riley began preparing tax returns through PNT. For the 2005 tax filing season, PNT prepared approximately 100 income tax returns. Approximately 57 of those returns were fraudulent and claimed false income tax refunds.

In preparing the fraudulent returns, Mandengu, Ntahonkiriye, and Riley would tell their clients that in order to get a larger refund, one or two false dependents could be listed on the return as either a nephew or niece, and in some instances the wages earned were increased to increase the earned income tax credit. Using fraudulent dependents and inflated wages created a fraudulent income tax refund to which Mandengu knew that the client was not entitled. Ntahonkiriye would add the names of the false dependants from a list he obtained from Burundi.

Mandengu would not have the clients sign any documents and often would not furnish them with copies of the return or any documents or forms he used in the preparation and filing of theft tax return. Mandengu would prepare the returns and then Ntahonkiriye would electronically file the client’s return with the Internal Revenue Service. The preparation fee for each return varied from approximately $20 to more than $900 and was electronically deposited by HSBC Taxpayer Financial Services, located at New Castle, Delaware, into Mandengu’s savings account at the First Financial Bank, in Abilene, Texas. When the refund was received, an additional fee was requested from some of the clients; often clients did not know about the first fee being deducted.

The total amount of the fraudulent income tax refunds claimed by Mandengu, Ntahonkiriye, and Riley on the false returns was $100,725.

As the 2008 tax season gets well underway, it’s interesting to watch the flurry of tax related cases either come to trial or folks found guilty get sentenced. We operate under a system of voluntary compliance and so this punishment and public notice is designed, not only to punish for violation of the law, but to also alert those who might make unwise choices to consider their choices carefully.

As a business ethics speaker, I know first hand the effect of poor choices and the consequences that follow. While I am not proud of my past, I, too spent time in federal prison for a tax related crime. I learned my lesson. Federal prison is not fun and Mandengu will not find his experience pleasant. Not only is his career in the tax related field over, but he will face issues with being a convicted felon the rest of his life.

Rick Martinez, Special Agent in Charge of Internal Revenue Service, Criminal Investigation for the Dallas Field Office, said, “While most return preparers provide excellent service to their clients, a few unscrupulous tax preparers file false and fraudulent returns to defraud the government, the tax paying public and their own clients. Internal Revenue Service, Criminal Investigation always strives to ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the law.”

Every choice has a consequence. Think first about the choices you make. You do reap what you sow. Sow, with your choices wisely and reap a harvest that you can be proud of.

Business ethics speaker, Chuck Gallagher, off for now…


Texas Preacher Convicted of White Collar Crime – $500,000 Worth! What Happened To Thou Shalt Not Steal? Comments By Ethics Speaker Chuck Gallagher

January 31, 2008

While I speak nationwide on white collar crime, fraud and ethics – I must say you don’t see this one often. I had to take a second read.

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Reverend James Cornell Clark – a former Lubbock pastor – was convicted on 41 counts of various indictments charging him with various offenses related to defrauding the federal government of more than a half million dollars. Likewise, Clark was also found guilty in another trial of importing an alien for immoral purposes. Apparently, James Clark forced a Kenyan exchange student into prostitution.

James Clark was heard on tape; telling the young woman that she would have to provide sexual favors in return for what he had done for her after bringing her to Lubbock from Kenya. Apparently, Clark had paid for the young woman’s living expenses and college tuition at South Plains College and was now expecting something in return.

Sex and theft – Clark is working on breaking commandments in a big way!

Specifically the jury convicted Clark on 23 counts of mail fraud, five counts of making false statements or entries, three counts of possession of false papers to defraud the U.S. and 10 counts of money laundering. The entities that were charged in the superseding indictment, Mt Vernon Faith-In-Action Outreach Project, Mt Vernon United Methodist Community Development, Trinity Christian Outreach Ministries, Mt Vernon United Methodist Church Community Outreach Corporation and Clark Evangelistic Outreach Ministries, Inc., were also all convicted on money laundering charges.

I can’t begin to imagine how the members of Clark’s congregation must feel. Hopefully, they will have the foresight to know that the Bible is right – you do reap what you sow – and in Clark’s case his consequences will be severe.

The government presented evidence at trial that from April 2003 until April 2006, Clark negotiated Summer Food Program contracts and agreements for the Mount Vernon United Methodist church as being the non-profit corporation entity that was the sponsor of the program. The purpose of the Summer Food Program is to provide nutritious meals to needy children when schools are normally closed and the National School Lunch/School Breakfast Programs are not operational. The program is administered by the Texas Health and Human Services Commission and funded by the U.S. Department of Agriculture. Clark created the five charged corporate and business entities under his control, to receive funds for the Summer Food Program that allowed him to convert federal monies to his own personal use. Clark used these stolen federal monies to purchase his residence, vehicles and rental property; remodel his personal residence; and pay personal tuition.

Every choice has a consequence. Afraid in this case, Clark won’t see freedom for a long time to come.

Your thoughts and comments?

Ethics and Fraud Speaker Chuck Gallagher – signing off…