Business Attorney Case Studies
PONZI SCHEME PROVED:
Ed Martin prepared and testified in deposition and an oil and gas arbitration in Evanston, IL. The operator of the Oil & Gas company sold limited partnerships to investors but did not produce any results so the investors requested to see the books and records of the company. The operator refused to produce the books and records and financial statement in direct violation of the limited partnership agreement. RESULT: The three-panel judges agreed with Martin’s presentation and findings that the Operator of the Oil and Gas Company ran a Ponzi scheme and damaged his investors.
CLIENT WINS DUE TO MARTIN’S TESTIMONY:
Ed Martin and Sage Investigations LLC were hired to analyze the bank account and related records of a real estate company and render a report and a damages calculation. Martin testified in deposition and at trial in Travis County District Court regarding a real estate matter involving the theft of fees . Martin’s testimony established the client’s loss at $370,000. RESULT: The jury returned with a guilty verdict and assessed the $370,000 loss and $1,000,000 in damages for the client.
PARTNER CAUGHT EMBEZZLING:
Ed Martin and Sage Investigations were hired to analyzed the records of the client and to prepare a report and analysis. Martin investigated and later testified in an embezzlement scheme involving a flight center in Morristown, New Jersey. The one third owner/ manager in a period of eight years used four schemes to embezzle $2,200,000. RESULT: The arbitration judge agreed and the defense agreed that the partner had embezzled $1,700,000 from the partnership using four different schemes to steal money from the partners. The IRS Criminal Investigation prosecuted the partner for four years and unreported income of $870,000.
Prison Terms for Thieves:
Ed Martin testified in deposition and trial in a vendor fraud and theft case in which a Round Rock Computer company had $10,000,000 stolen from the insider dealings of an employee and his two fraternity brothers. Martin testified in a deposition in the matter and later in a hearing. RESULT: Two of the three defendants settled the civil matter. The third defendant went to trial. Martin testified as to his findings and ultimately the judge found in favor of the computer company. The defendant was assessed $10 million in damages and $1.7 million in attorney fees. The case was later adopted by the IRS Criminal Investigation and the FBI and two of the three fraudsters were prosecuted along with a CPA return preparer and all were sentenced to prison.
DEFENDANTS FOUND NOT GUILTY:
Ed Martin and Sage Investigations were retained as the testifying expert on a Federal money laundering and controlled substance case. The purpose of the investigation was to assist in the criminal defense and required the recovery from 15 business outlets and recreate the sales database from the point of sale registers. The original database was corrupted and the sales database required the recreation of the daily sales of individual products to defend the client from the charges to consumers. RESULT: The defendants went to trial in Federal court and were found not guilty.
Ed Martin was retained as the testifying expert in an embezzlement case for Vortex Sprayliners, Inc. of California. The bookkeeper for Vortex was convicted of theft and sentenced to six years in prison. One of the distributors for Vortex was involved in the theft of products. Martin and Sage Investigations was hired to prepare for trial and expert witness testimony. RESULT: Martin rendered his report and the Defendant reached a settlement in the case.
Ed Martin and Sage Investigations, LLC were hired to represent a doctor who created a medical device that was being tested. Investors contributed in excess of $30 Million to the venture. An individual alleged that the venture was a Ponzi Scheme and attempted to get the FBI, IRS and SEC involved an investigation, but was turned down. The individual went further and contacted the investors and ultimately created concern about what was done with the investor funds. A lawsuit was filed for the return of invested funds. Martin was asked to review the flow of investor funds and the books of the venture and to prepare a report that would follow the money and trace the funds to prove that the investor funds were not misused. RESULT: Martin reviewed volumes of records and rendered his report, and the lawsuit was dismissed and settled in favor of the doctor.
IRS SPECIAL AGENT EXPERIENCE WINS THE CLIENTS CASE:
Ed Martin and Sage Investigations, LLC were hired to represent an entrepreneur and his company that was suspected of operating a Ponzi Scheme. The IRS Criminal Investigation and FBI executed search warrants on the office and home of the individual and began an investigation. Martin maintained contact with the FBI and IRS throughout the investigation, monitored the interviews being conducted. Martin himself also conducted strategic interviews and consulted with the entrepreneur. RESULT: The outcome was the creation of a new company by the entrepreneur joining forces with a manufacturing firm. The creation of a viable firm and the refusal of investors to consider their funds misapplied led both agencies to determine there was no violation of the law. The investigations were discontinued and the records were returned. The new firm is proceeding to the private placement.
UTILITY COOPERATIVE ALLOWED AN EMPLOYEE TO DEFRAUD THEM:
Ed Martin and Sage Investigations was hired by a Utility Cooperative to determine what procedures allowed an employee to pose as an electrical engineer for a number of years. The individual was in charge of establishing company standards and when a reorganization occurred the employee complained and resigned. The company was concerned about the employee filing a lawsuit. The investigation involved the interview of employees and outside individuals and determined that the established company standards were plagiarized from a nearby city. Result: The company was concerned about the employee filing a lawsuit, but the investigation proved the false certifications being claimed by the employee.
LOCAL FINANCIAL INSTITUTION SCAM BY BOOKKEEPER.
Ed Martin and Sage Investigations were contacted by the controller of the company because of suspicious activities of their bookkeeper. The company started with only the four officers having access to American Express Credit cards. Over a period of years, the American Express cards increased to 12 cards. Further investigation revealed that the cards were all issued to the bookkeeper and the payments were by wire transfer from company funds and classified as expenditures of the senior partner. The investigation revealed the CFO of the firm was having an affair with the bookkeeper and ignoring her circumvention of company controls. Result: The employee was fired and the CFO agreed to separate from the firm and repay the loss caused by the bookkeeper.
Embezzlement Discovered and Company Repaid:
A CFO and partner for a large small business hired a female employee in the accounting department shortly after the CFO became physically involved with the employee. Within six months, she was embezzling large sums of money from the company via credit card payments. The CFO allowed the employee to circumvent internal controls and the segregation of duties and he signed off on month ending documents that were supposed to account for the receipt and disbursement of funds of the company. Over the years, the female employee became demanding and controlling and the CFO did nothing to improve the situation. Ultimately, she got into a fight with an employee and was asked to resign, which she did. A closer review of the company records by the Controller revealed the female had a corporate credit card issued to her and had made over $200,000 in personal purchases for which the company paid. She was contacted and agreed to pay the money back and did. Two years later, Sage was hired to covertly investigate further and found that the female employee had a criminal record. It was determined that the CFO was still in a relationship with the female and was providing her with financial support. Sage found the CFO violated his fiduciary duties to the company and found that in the past the female employee paid personal credit cards with corporate funds in the amount of $1.4 Million. RESULT: The CFO was confronted regarding the continued relationship and confessed that he had given the female the money to repay the company the $200,000. He resigned and the repayment of the additional credit card payments was withheld from his partnership interest.
Theft by Controller Confirmed:
A large family owned company employed a Controller and an Information Technology person and together they embezzled $350,000. The Controller was on the verge of retirement, never took a vacation and ruled with an iron fist. They stole the money over a period of 4 years during which the son of the owner was enrolled in college and studying accounting and finance to gain the knowledge to take over the family business. The owner’s noticed their bank account did not have the balance they thought should be present. They placed the Controller on paid leave after an altercation in the office. Sage was hired to determine what happened to their money and learned that the controller prepared and signed the checks issued by the company and he reconciled the bank accounts and destroyed the third-party invoices as they were paid. Sage inspected the bank account for checks over $1,000 and compared them to the QuickBooks transactions journal. Sage found an anomaly that the controller wrote checks to himself and the IT person and changed the payee name on QuickBooks and the classification to indicate a draw by a family member. A number of years were analyzed to find the extent of the embezzlement. Sage learned that the controller built a second home in Colorado and the IT person built a home in Texas with the stolen proceeds. RESULT: They were terminated and the case was presented to the local district attorney.
IRS Declined to Recommend Prosecution:
The home and office of a husband and wife business owners were raided by IRS CI based on allegations made by a disgruntled employee. The employee alleged all sorts of wrong doing within the company. The search warrant netted hundreds of boxes of records. The investigating agent chose to conduct the investigation by use of the specific item instead of indirect methods – Net Worth, Bank Deposits or Expenditure. The investigation lasted 4 years. Sage was hired by the attorneys representing the individuals and reconstructed their income and reconciled their returns to their books and records. Sage accessed the records seized by the IRS and scanned the meaningful records and organized them for further review. RESULT: Sage rendered its findings to the attorneys and after two years of waiting by the taxpayer IRS declined to recommend prosecution.
Alleged Structuring by Bar Owner Dismissed:
Bar owners in Texas were charged with structuring and conspiracy by the federal prosecutor and IRS CI. One of the bar owners because of the deposits to his bank account was identified by the IRS and he and his brothers were indicted on violations of Title 31 Structuring and Title 18 Conspiracy. The structuring charge was the result of his depositing just under $10,000 to his company bank account daily over a period of months. Conspiracy was charged because he and his brothers operated other bars in the past with similar deposits but an overt act was not alleged in the indictment. Sage was hired to assist their attorney, so Sage reviewed the accounting records down to the cash register tapes and found that the combined revenue for the nights being charged in the indictment were just under $10,000 on each day. During discovery Sage assisted the attorney on the case and reviewed records to which the government requested be stipulated into evidence. Sage identified the meaningful records to be less than an inch thick out of the one foot thick pile of documents. In discussion with the attorney, Sage discussed the relevant evidence and they realized that there was no evidence of an overt act of conspiracy. RESULT: The attorney went to the judge and explained what was found and the judge dismissed all charges.
Innocent Man Acquitted of Money Laundering (8300 Form):
A car dealer leased expensive vehicles to individuals of questionable professions. The IRS CI investigated his business Form 8300 filed with the IRS. The IRS conducted an undercover operation and purchased a car. They let it be known that the buyer did not want any paperwork in his name, that the purchaser was purchasing the car for his girlfriend. They completed the transaction and the Form 8300 and a few weeks later the IRS CI returned and executed a search warrant and seized records and vehicles. Later they indicted four individuals including the owner, sales manager, a salesman and the collection manager. Sage was retained to assist as an expert witness for the defense. Sage analyzed the transactions and created a schedule of the Forms 8300 filed by the dealership. The trial consisted of the government parading a number of the individuals that leased the vehicles, most of whom had criminal records for drug and prostitution charges and some were in prison at the time. The IRS CI put up a Special Agent who analyzed the bank records. He did not analyze the sequence of Form 8300 chronologically. Sage testified as an expert witness as to the timeline of the Form 8300 filing and the fact that the collection manager was no more guilty of money laundering than the driver of a Brinks Truck who was hired to transport money. RESULT: Three of the four individuals were convicted and the Collections manager was acquitted.