Tag Archives: kickback scheme to defraud

Former CEO of Marketing Agency Sentenced to Prison for $2 Million Fraud and Kickback Scheme

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The former CEO and president of a pharmaceutical marketing company was sentenced to three and one half years in prison for participating in a scheme to defraud the company in which he obtained more than $2 million in fraud and kickback proceeds, and for willfully failing to report that unlawful income to the Internal Revenue Service (IRS), announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Preet Bharara of the Southern District of New York.

Michael J. Mitrow Jr., 48, of Whitehouse Station, New Jersey, was sentenced to serve 42 months in prison to be followed by three years of supervised release and 200 hours of community service in each of those years.  He was also ordered to pay $83,219 in restitution to the IRS and $1,468,259.43 to Access Communications.  In January 2015, Mitrow pleaded guilty to one count of conspiracy to commit wire fraud and one count of tax evasion before U.S. District Judge Paul A. Engelmayer of the Southern District of New York, who also imposed today’s sentence.

“Corporate officers who engage in fraud and kickback schemes and fail to report their illegal gains are defrauding their employers and cheating honest taxpayers,” said Acting Assistant Attorney General Ciraolo.  “The sentence handed down today sends a strong message that these individuals will be held to account for committing offenses that were made possible by violating their fiduciary obligations.”

“Michael Mitrow defrauded the marketing agency that he led as its CEO out of over $1 million, using it to pay personal expenses including $600,000 to fly in private jets,” said U.S. Attorney Bharara.  “His fraud and his failure to report the proceeds as income resulted in a federal conviction for Mitrow.  At his sentencing today, he learned that the price of his crimes is not only repayment of the ill-gotten money but also the loss of his liberty.”

According to the indictment and superseding information previously filed in Manhattan federal court, other court filings and statements made during the proceedings in this case:

Mitrow was the CEO and president of the company from 1998 through approximately 2009.  From approximately 2008 through 2009, Mitrow defrauded the company by submitting fraudulent invoices for consulting services that were purportedly provided to the company but were, in fact, never provided.  Instead, Mitrow used the proceeds from those invoices to fund more than $600,000 in private jet travel.  Mitrow further defrauded the company by causing it to pay $415,000 in payments by the company to a relative of Mitrow and his co-defendant and brother, Matthew Mitrow, despite the representations made by the Mitrows to a private equity firm that acquired the company that the relative had severed all ties to the company. In addition, Mitrow willfully failed to report to the IRS his income from the fraudulent consulting invoices, which exceeded $600,000; $1.4 million in kickback payments he received from Creative Press and East Coast Vending, printing and direct mail marketing companies owned by co-defendant Robert Madison and located in Phoenix, in order to help grow the business through additional  printing and direct mailing contracts for Creative Press with his company; and more than $200,000 in personal purchases that Mitrow made with his corporate credit card and fraudulently coded as business expenses of the company.

Matthew Mitrow, 42, of Westfield, New Jersey, previously pleaded guilty to one count of filing a false tax return for the 2008 tax year, and was sentenced in July 2015 to serve three months in prison.  As part of his plea agreement with the government, Matthew Mitrow paid $30,822 in restitution to the IRS.

Robert Madison, 44, of Henderson, Nevada, pleaded guilty to one count of conspiracy to commit honest services fraud in the payment of undisclosed kickbacks to the Mitrow brothers, and was sentenced in May 2015 to serve 18 months in prison and 18 months of home confinement.  As part of his plea agreement with the government, Madison will be subject to an order of restitution in an amount to be determined by the court.

Assistant Attorney General Ciraolo and U.S. Attorney Bharara thanked the IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated this case, and Assistant U.S. Attorney Andrew Young of the Southern District of New York and Senior Litigation Counsel Nanette L. Davis of the Tax Division, who are prosecuting this case.  The U.S. Attorney’s Office of the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling this case.

Former Owner of Florida Airline Fuel Supply Company Pleads Guilty in Scheme to Defraud Illinois-Based Ryan International Airlines

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A former owner and operator of a Florida-based airline fuel supply service company pleaded guilty today to participating in a kickback scheme to defraud Illinois-based Ryan International Airlines, a charter airline company located in Rockford, Ill., the Department of Justice announced.

  Sean E. Wagner, the former owner and operator of Aviation Fuel International Inc. (AFI), pleaded guilty in the U.S. District Court for the Southern District of Florida in West Palm Beach to one count of conspiracy to commit honest services wire fraud.  On Aug. 13, 2013, a grand jury returned an indictment against Wagner and AFI, charging them for their roles in a conspiracy to defraud Ryan International Airlines.  According to the indictment, Wagner and AFI made kickback payments to Wayne Kepple, a former vice president of ground operations for Ryan, in exchange for awarding business to AFI.  According to court documents, from at least as early as December 2005 through at least August 2009, Wagner and others at AFI made kickback payments to Kepple totaling more than $200,000 in the form of checks, wire transfers, cash and gift cards.  The charges against AFI were dismissed on Feb. 21, 2014.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“These types of kickback schemes subvert the competitive process and increase costs to American consumers,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “The Antitrust Division will vigorously prosecute individuals who defraud American taxpayers and businesses.”

Wagner pleaded guilty to one count of conspiracy to commit honest services wire fraud.  The count carries a maximum sentence of 20 years in prison and a $250,000 criminal fine for individuals.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either amount is greater than the statutory maximum fine.

As a result of the ongoing investigation, four other individuals have pleaded guilty and have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $580,000 in restitution.
The investigation is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the U.S. Department of Defense’s Office of Inspector General’s Defense Criminal Investigative Service, Southeast Field Office, headed by Special Agent in Charge John F. Khin, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.  Anyone with information concerning anticompetitive conduct in the airline charter services industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit  www.justice.gov/atr/contact/newcase.htm.