Fraud Vortex

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A vortex has the tendency to draw everything toward its center. (Whether the vortex is as gentle as the water draining down a sink or as strong as the violent winds of a tornado, the power of the air or water involved can be hard to escape.) An article posted on Fortune.com tells about a man in Kentucky who was described by prosecutors as a vortex of fraud. He was able to pull multiple bank executives into his $53 million tax fraud scheme through bribery.

The story states that this case was opened because of a probe into a bank that was closed during the subprime mortgage crisis. (The bank’s former president happened to be the first person to be convicted for stealing funds from the U.S. government bank bailout funds from the Troubled Asset Relief Program (TARP)).

Apparently, the Kentucky businessman had a couple of fraud schemes going on at the same time. For two years, the man controlled a Florida payroll management company. He allegedly stole money from clients who paid the company to cover their federal taxes and workers’ compensation and used it to pay for personal expenses such as mortgages, designer clothing and luxury vehicles.

He also conspired with the senior vice president and president of the closed bank to create false transactions that made it look like the failed bank had received $6.5 million in cash. (This made it easier for the bank to receive TARP money.) He continued to suck these two bank executives into his tax fraud scheme by bribing the men to provide fraudulent letters of credit so his companies could receive millions of dollars in loans.

As if that were not enough, the fraudster, the two bank executives and yet another executive from a different bank conspired to defraud the second bank by causing the issuance of a $30 million loan, according to authorities. (The loan was used to finance the fraudster’s purchase of an Oklahoma insurance company.)

The Kentucky businessman pleaded guilty to four counts including failure to pay taxes and impeding the administration of Internal Revenue Service laws. The 53-year-old is facing up to 12 years in prison. He has agreed to pay nearly $140 million through forfeiture and restitution. The senior vice president of the first bank pleaded guilty in a separate trial, while the second bank’s executive is scheduled to go to trial.

Even though this fraudster’s vortex of deception was pretty powerful, it is fortunate that the government was able to stop any further destruction of the tax system. It looks like these fraudsters are going to get sucked into the penal system where they will not be able to avoid punishment.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Kentucky Businessman Pleads Guilty to $53 Million Tax Fraud,” posted on Fortune.com on December 23, 2014.

A Kentucky businessman pleaded guilty on Tuesday to perpetrating a $53 million tax fraud, conspiring to bribe bank executives and scheming to defraud regulators, in a case that stemmed from a U.S. investigation of a failed New York bank.

Wilbur Huff, 53, faces 12 years in prison at his sentencing in April and agreed to pay nearly $140 million in forfeiture and restitution.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.