Saturday, March 1, 2014

Ex-Little League boss admits embezzlement

A former president of Hilo Little League has pleaded guilty in federal court to embezzling tens of thousands of dollars in league funds, plus money from two youth soccer teams, a pageant organization and a car repair and alignment shop.

According to the plea agreement, Cheryl L. Octavio, a former Bank of Hawaii business banking officer, “willfully stole, embezzled, and misapplied funds entrusted to Bank of Hawaii’s custody and care.”

The plea agreement states that Octavio, who has no prior criminal record, could be sentenced to up to 30 years in prison, fined up to $1 million and receive up to five years of supervised release, the federal equivalent of probation, for “theft, embezzlement, or misapplication by a bank officer or employee.”

The 43-year-old Octavio, who is free on $25,000 bond, is scheduled to be sentenced April 28 at 3 p.m. by U.S. District Judge Susan Oki Mollway in Honolulu. Terms of her plea deal allow her to appeal her sentence.

“All you can do in federal cases is build the factors you believe favor your client into the plea agreement,” Marcus Sierra, Octavio’s Honolulu-based attorney, said last week. “So you’ll see factors in there like the government’s agreeing that she took responsibility early. The government’s agreeing on the amount that’s lost in the case. … So there’s now more flexibility for the defense to present a good argument … for less incarceration time.”

The document states that between about Dec. 17, 2009, and Nov. 7, 2012, Octavio stole at least $22,627.09 from Hilo Little League accounts, at least $13,969.43 from Big Island Futbol Club, dba Haaheo Soccer Club, accounts, at least $4,873 from Na Hoa O Puna soccer club’s account, at least $4,491.38 from Lehua Hawaii Productions account, and $10,000 from East Hawaii Auto Center’s account.

Octavio, who was indicted on Aug. 7, 2013, pleaded guilty on Nov. 21. She is to make restitution to the bank under terms of her deal.

In November 2010, Octavio received a silver award from the U.S. Small Business Association for her work for Bank of Hawaii.

Naomi Campbell, Little League district administrator for Hawaii and Maui counties, said she suspected something was awry with Hilo Little League’s books starting in 2011.

“I would ask for documents and the numbers didn’t make sense. I wouldn’t get the numbers on time; there was procrastination,” she said. “So I asked (former Hilo Little League information officer) Marcie Greenwell if she would be courageous enough to step up to the plate and ask for an internal audit, which at the district level I’m not immediately allowed to do. … And I thank her for that.”

Campbell said that she then took over the investigation.

“I came up with $30 thousand, but that more or less includes things that I knew were not appropriate disbursements. The FBI’s Greg Tomonaga, who was excellent to work with, went with strictly what could be proven. That amount was $22 thousand,” Campbell said.

The embezzled funds are covered by the Federal Deposit Insurance Corp., and Campbell said the bank, “who was really good to us,” reimbursed the league $30,000.

“They paid us in advance. I asked them to do so because the league did not have any funds to start up the 2014 season. That’s how bad it was,” she said adding that over the past two years, HLL has “struggled with funds to meet certain requirements and/or purchasing uniforms, equipment, etc.”

Campbell said that Hilo Little League is “slowly rebuilding.”

“As far as the rest of the island, it’s blossomed,” she said. “We have West Hawaii Little League coming back under another name. We have Ka‘u Little League being developed. All in all, we have seven leagues on the island, and the rest are all doing well.”

Haaheo Soccer Club President David Dinkle said his club no longer uses the name Big Island Futbol Club and none of the current officers were on board when the theft occurred.

“We sat with Bank of Hawaii, the president of the club at the time (Reginald Arceo) and me. I was VP at the time and had only been there for a few months,” he said. “… We didn’t know any of this stuff going into it, we just wanted the kids to play soccer and said, ‘Hey, we’ll step up and do this.’ We got a board of directors going and then we found out about this. So we met with the Bank of Hawaii because we noticed on our bank account that we had 70 bucks at one point. Then at one point, boom, we got about $10,000 and we were like, wait, I don’t understand this. We were brushed up on the situation, that there was some embezzlement, but we don’t know how much.”

Dinkle said that Arceo, who has moved to Texas, was also not on the board when the misappropriation took place.

“We’re really tried to distance ourselves from this,” he said. “We want everybody to know that Haaheo Soccer Club is functioning extremely well now. We’ve got a really strong board and great people. And ultimately, we function for kids. We meet once a month and our board members go over the expenses.” Dinkle added that the board also goes over bank statements monthly.

Stephens Media Hawaii was unable to make contact with Na Hoa O Puna or Lehua Hawaii Productions officials, and a phone number for Octavio had been assigned to someone else. She also didn’t respond to a Thursday email requesting an interview or answers to questions in the email.

Sierra described Octavio as “highly educated in terms of her position” and “not your typical criminal or mastermind.”

“People fall into debt and sometimes they can’t climb out. And that could be this case,” he said. According to state court records, on Aug. 29, 2012, Hilo District Judge Barbara Takase entered a judgment of $6,987.19 in favor of Midland Funding LLC, a company that buys unpaid debt, against Octavio. Octavio, who had been served with a summons nine days earlier, didn’t show up in court. The judge issued a garnishee order on her wages on Jan. 16, 2013, records state.

Sierra said that Octavio was still seeking employment “as of about a month ago” and that federal supervised release requires probationers to work.

“There are things you can do in the community that may not be paid jobs,” he said. “… I think what she wants to do is to rebuild the trust that she’s lost and undo the harm that she’s done, if that can be undone, a little bit. She’s gonna try. We’re geared up to do things such as restitution and to do community programs that will help others avoid this situation. And she’s gonna use whatever skills she has for good now.”

Campbell said she hasn’t spoken to Octavio since the indictment.

“Cheryl’s a really good lady, but she got caught up in all her activities, trying to be a good mother, that she just fell from one thing to another, from the way I see it. But, of course, that matters not. It’s a lot of money that the kids were deprived of. It’s a very sad situation,” she said. She added that Hilo Little League “depended too much on Cheryl.”

“It’s a big disappointment, what can I say. … There should be a double-check situation in every league as far as youth sports is concerned. There’s a lot of loose money. … Leagues should not allow their organizations to bank where an employee is is employed at. There are so many things that we learn by this, but by the changing of hands on the boards yearly, it’s difficult.”

Former SNHU official sentenced for embezzlement

The former budget director of Southern New Hampshire University was sentenced Tuesday to 7 ½ to 15 years in prison for stealing $1.1 million from the school over the course of 14 years.
Raymond Prouty, who had worked at the Manchester school for 34 years, pleaded guilty to two felony counts of theft by deception and theft by unauthorized taking. He did not comment at his sentencing hearing in Merrimack County Superior Court, but prosecutors said he gave no specific explanations for the thefts.
‘‘He explained, ‘It just started. It just started and somehow, it just escalated,'’’ Assistant Attorney General Geoffrey Ward said, according to WMUR-TV ( ‘‘He explained that it was just for paying bills and perhaps living beyond his means.’’
The allegations span from 1998 into 2012 and were uncovered after authorities noticed an unauthorized scholarship for Prouty’s niece and took a closer look at financial records. Ward said one of his schemes involved steering money he said was for sports officials into a dummy company he created and controlled.
Investigators said Prouty also stole more than $95,000 from Hooksett Kiwanis, where he served as treasurer, and then had the university reimburse the organization. They also found a checking account dating back to 1999 that the university didn’t know existed.
Prouty was ordered to repay the money, reimbursing the university $100,000 per year.

Conn. man sentenced for fraud of church, investors

 A former Connecticut securities broker been sentenced to 25 years in prison after pleading guilty to federal charges that he swindled investors, including a Greek Orthodox church, out of more than $27 million.

Fifty-four-year-old Gregory Loles (LOW-liz) of Easton pleaded guilty in 2011 to single counts of mail fraud, wire fraud, securities fraud and money laundering. He was sentenced Wednesday.

Prosecutors said Loles stole from more than 50 victims over nearly a decade. He allegedly took about $14 million from a family in Greece and about $2 million from St. Barbara church in Orange, whose investments he managed. Prosecutors said Loles' broker registration had been cancelled but he convinced the victims he was an investment manager and misrepresented his successes.

Authorities say he used the money to support his auto racing businesses and for personal bills.

Victims of Gregory P. Loles, the Easton man who pleaded guilty in July 2011 to embezzling more than $10 million, including $2.1 million from St. Barbara’s Greek Orthodox Church in Orange, will have to wait a few more days to see him sentenced.
The trade-off, however, is that Loles could receive the maximum 30-year penalty his charges carry.
The Rev. Peter Orfanakos, the pastor at St. Barbara’s, arrived at U.S. District court along with several of Loles’ other victims on Monday morning thinking the sentencing would finally occur later that day, this after Loles had seen his sentencing postponed five times.
But a day of brisk and at times intense cross-examination, where Loles was grilled about his role in a $14 million scheme in Greece in which he allegedly stole money from a prominent Greek family, means he won’t be sentenced until Wednesday.
“It’s sad,” Orfanakos said about Monday’s ordeal, and the pain Loles has inflicted upon his victims, many of whom are parishioners.
Loles, 55, was originally slated to be sentenced in October 2011 but his attorney, Jeremiah Donovan, has said the date has been held up as investigators attempt to determine exactly how many victims were defrauded.
Paperwork filed by the government on Sunday places the tally somewhere north of 250.
“Most recently he had the temerity to testify under oath that $14 million of funds that he took from a Greek family, after the father of that family had unexpectedly died, was in fact his money,” states the memorandum.
Loles’ alleged swindling of the Greek family, especially the estate of the late John Missailidis, was at the heart of Monday’s testimony.
Donovan argued that accusations Loles stole the family’s money should be dismissed as hearsay, since none of the family members traveled from Greece to Hartford to testify.
U.S. District Court Judge Alvin Thompson, however, determined otherwise.
Thompson listened as Loles took the witness stand and described how he ingratiated himself within the Missailidis family and ultimately won the trust of the family’s patriarch. Loles spoke of how the elder Missailidis formed several small holding companies, all aimed at supporting a lucrative medical device business.
The company at the heart of his testimony, the London-based medical device company Smith & Nephew Inc., sold medical devices to Greek state-run hospitals, Loles explained.
“A middle company was introduced,” he said. “Another Greek company (owned by Missailidis) inflated invoices because by law there can only be a 25 percent profit when selling to Greek hospitals.”
The middle company collected the profits, Loles said. A 5 percent fee went to Milbury Holdings, another company run by Missailidis. Loles testified that the family kicked cash back to Greek government officials to keep the scheme afloat.
After Missailidis died, a $14 million sum was transferred into Loles’ Apeiron Capital, the institution he ran out of his Easton mansion.
“I put myself in this position,” Loles told the court. “If I had the money I’d 100 percent give it to the victims.”
The $14 million, whoever it truly belonged to, is all gone, allegedly spent by Loles to fund a lavish lifestyle that included owning a Porsche race car company.
Assistant U.S. Attorney Michael McGarry used his chance at cross-examination to try to shred any claim from Loles that the $14 million belonged to him.
McGarry also painted a portrait for Thompson, through his line of questioning, of how profits from sales of medical devices to Greek hospitals were laundered by investing the money into initial public stock offerings.
“It was a lot of money, especially in pre-Olympic years,” Loles testified, referring to the financial boom that lit up much of Greece in the years leading up to the 2004 Summer Olympics in Athens.
He testified that the true profit made in the scheme by the Missailidis family ranged from $30 to $35 million.
Loles bristled whenever McGarry used the term “laundered” to describe how the business made cash, but McGarry pointed out that from the beginning the money was made by committing a fraud upon Greek hospitals.
McGarry then went down the line of victims named in the federal report.
“I created this horrible mess,” Loles said.
“And that list goes on and on, not counting the gymnasium (at St. Barbara’s) that these schoolkids tried to raise money for,” McGarry noted.
Loles said that it was “obvious in retrospect I couldn’t make everyone whole” but McGarry again pointed to the $14 million.
“You never let them (his victims) benefit from the sale of those Greek IPOs,” McGarry countered. “They could have benefited from an actual investment and not a Ponzi scheme.
“And you never brought this $14 million from abroad until he (Missailidis) died.”
Loles is due to back in court Wednesday at 9 a.m. He has been incarcerated since Dec. 15, 2009.

Former church employee accused of embezzling $100K

 A former church employee has been arrested and charged with stealing from a church in Pender County.
According to WECT, Gloria Douglas Hardee was charged with embezzlement of over $100,000.
Hardee was the former secretary/treasurer for Riley’s Creek Baptist Church.
Deputies say someone in the church noticed problems with the finances last summer. Two different audits were conducted at the church, which verified the discrepancies.
WECT reported that evidence found in those audits led to the arrest of Hardee in connection to the embezzlement charge.
Hardee is expected in court March 1

Green Bay woman charged with writing bad checks to local churches

A Green Bay woman who was previously convicted of embezzlement is now accused of writing worthless checks to a half-dozen Catholic churches.

39-year-old Vicki Patterson is charged with four counts of writing bad checks. Two felony counts were filed earlier this month, and she's scheduled to have a preliminary hearing on those Friday in Brown County Circuit Court.

Online court records also list two misdemeanor bad check charges -- and the status of that case will be reviewed Friday.

Patterson is accused of writing almost $5,700 in bad checks to Catholic parishes to buy scrip cards, used by churches to raise funds. Scrip cards allow buyers to make purchases at local businesses, with the parishes to get part of the proceeds.

One church reportedly tried canceling a scrip card once it learned about the bad check -- but Patterson had already reportedly used it.

She was freed from prison last fall, after a three-year term for embezzling $44,000 as an officer at the Green Bay Swim Club. She was also convicted in 2001 for stealing $3,000 while she was a part-time dance instructor for De Pere's recreation department.

Rialto Unified dumps longtime accounting firm in wake of Judith Oakes embezzlement allegations

Citing a failure to catch financial irregularities, including the alleged embezzlement of former accountant Judith Oakes, the Rialto Unified school board has dumped its old auditing firm.

At its Wednesday night meeting, the board voted unanimously to have Glendora-based accounting firm Vicenti, Lloyd and Stutzman perform the district’s annual audit. The firm’s first audit will cover the period from July 1, 2013, through June 30, 2014.

“A lot of things weren’t caught” by the Rancho Cucamonga office of Vavrinek, Trine, Day and Company, board member Edgar Montes said, just prior to the vote.

Representatives of the firm could not be reached for comment.

A series of financial irregularities have come to light in the past six months:

• Former district accountant Judith Oakes is accused of stealing $1.8 million in lunch money from the district’s Nutrition Services Department over the past eight years.

• A Jan. 6 Fiscal Crisis and Management Assistance Team review of the district’s contract and purchasing processes found that “the highest level of administration” did not follow proper purchasing procedures and that contracts were sometimes approved by Cebrun or his office without proper oversight.

• A Jan. 14, FCMAT’s review of the district’s special education programs found “a systematic lack of focus on instruction and lack of guidance from the highest level of leadership,” along with more than $1 million in unnecessary expenses.

(FCMAT helps public school districts with their finances. Both reviews were requested of FCMAT in summer 2013, prior to Oakes’ initial arrest in August.)

Vavrinek, Trine, Day and Company handled the district’s audits for more than a decade, according to spokeswoman Syeda Jafri.

The company will still be doing district business, though, specifically handling voter-approved bond measures.

“We have to honor that contract,” Jafri said Thursday.

Former Woodhaven High School dance coach bound to stand trial for embezzlement

A former high school dance dance coach was bound over for trial Wednesday in 33rd District Court on an embezzlement charge.

Patricia Lee Daraban, 22, of Flat Rock waived a preliminary examination of the evidence against her before Judge Jennifer Coleman Hesson.

The charge is a felony punishable by up to 10 years in prison.

She is free on a personal bond.

By waiving her preliminary examination, Daraban has declined to have the judge determine if there is probable cause that a crime has been committed, and committed by her.

It moves the case forward to Wayne County Circuit Court. A trial date eventually will be set.

According to police, Daraban is accused of embezzling more than $21,000 of school funds in the Woodhaven-Brownstown School District.

Police said Daraban had checks in her possession that she tried to manipulate and use for her own benefit.

According to Deputy Police Chief Robert Matthews, police confronted Daraban with the allegations Aug 26, 2013.

Matthews said she attempted to make full restitution the following day, which was not acceptable. An investigation already was underway.
School officials said they became aware of the alleged illegal activity when venders began calling and questioning unpaid bills in connection with a dance program.

After an investigation involving the school and township police was conducted, the information was presented to the Wayne County Prosecutor’s Office for review.

The prosecutor’s office approved a warrant for Daraban and determined the embezzlement charge.

Funds connected to a dance competition and camp are among the activities under investigation, according to Mark Greathead, school superintendent.

News of the charge against Daraban and her arraignment were published in The News-Herald Newspapers in early February.

The story generated heated comments among readers on the newspaper's website.

Some defended the former dance coach, saying, “Things like this can happen by mistake,” and “She was railroaded.”

Another person was critical of the story for being “one-sided” against Daraban.

In part, another post read: “She is a sweet, kind, honest, broke college student. There is no way this young lady embezzled $21,000. I would put everything I own on it.”

On the other hand, some readers appreciated the information, taking note of where the information was derived.
“I don’t think the prosecutor’s office would waste taxpayer money if there wasn’t a case,” one post read.

Another reader urged people to be patient, give the process time to play itself out and wait for an update.

Former college cashier pleads guilty to embezzlement charges

A former cashier at Bethany College pleaded guilty Friday to embezzlement and falsifying accounts.
Shelly Lough took at estimated $1.38 million from the school between July 2011 and May 2013. She has said she did so because she was being blackmailed by Jason and Rachell Wees. They’ve been indicted on federal charges.
Prosecutors said Lough has been cooperating with authorities and believed the plea bargain agreement was fair.
Lough faces 2-20 years in prison at a sentencing hearing set for April 8.