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FRAUDBARON.com
The Anti-Fraud Professionals'
Source for Fraud News
#504 Updated: 11/9/07 10:03 a.m.

Orange County to audit sheriff's department
The Mercury News | 11/8/07 | Associated Press
SANTA ANA, Calif.—Orange County officials have begun an audit of the Sheriff's Department
after Sheriff Michael Carona was indicted last week on corruption charges. The county's
audit oversight committee met Wednesday and decided to look at 21 department accounts,
Supervisor John Moorlach said. Auditors also will examine Carona's travel expenses.  
Carona said earlier this week he will take a two month leave of absence to fight federal
charges that he and others took nearly $700,000 in bribes and kickbacks.  "There is no
indication by reading the indictment or through other sources that there's any nefarious
activity in the Sheriff's Department," said county Auditor-Controller David Sundstrom, who
added the probe was precautionary.  Carona, 52, has pleaded not guilty to a count of
conspiracy, four counts of mail fraud and two counts of witness tampering after a federal
indictment was unsealed last week. His wife, Deborah Carona, pleaded not guilty to one
count of conspiracy and Debra Hoffman, a woman identified in court papers as his mistress,
pleaded not guilty to one count of conspiracy, four counts of mail fraud and three counts of
bankruptcy fraud.  Moorlach also suggested that Carona should be prohibited from using a
county credit card while he's on leave.  Carona's spokesman, Michael Schroeder, said the
sheriff did not have a card in his possession. Carona will be paid $33,166 during his leave.

FBI arrests 5 in $20M D.C. tax scam
USA Today | 11/8/07 | Marisol Bello
WASHINGTON — Tax officials for the District of Columbia government moved quickly
Thursday to put in new accountability controls after two employees were arrested on
charges of stealing at least $20 million.  Natwar Gandhi, the city's chief financial officer,
asked for the resignation of four top-ranking managers in the district's Office of Tax and
Revenue and assigned more auditors full time to oversee operations there. Federal
prosecutors say manager Harriette Walters, 51, and tax specialist Diane Gustus, 54, used
friends and relatives to defraud the district of millions of dollars that they used to buy
homes, luxury cars, fur coats, jewelry and designer purses and shoes.  FBI agents arrested
the pair Wednesday, along with three others, including Walters' brother and niece. All were
charged with mail fraud, bank fraud, money laundering and conspiracy.  "When you see
frauds like this, usually one of two things have happened — a breakdown in supervision
and a lack of documentation," said Sebastian Lorigo, appointed Thursday as the interim
deputy chief financial officer for Tax and Revenue. "In this case we had both."  Prosecutors,
who say the activity might go back to 2000, say they began the probe after a bank
employee raised questions about a transaction by one of Walters' relatives.  A federal
affidavit lays out the case: Walters, Gustus and other city employees created or approved
phony property tax refund requests that they used to issue more than 40 refund checks,
each averaging $388,000.  The checks were deposited into sham corporate accounts
controlled by Walters' relatives, who then doled out the money to co-conspirators and
family members, the affidavit says. A 26-year district employee, Walters' duties as the
manager included authorizing or declining refund requests.  "This would not have happened
without her," said Channing Phillips, spokesman for Jeffrey Taylor, the U.S. attorney for the
district.  Walters' attorney could not be reached. A. Scott Bolden, Gustus' lawyer, said his
client's job was to sign vouchers brought to her by her boss, Walters. "It seems she is
being charged for doing her job," he said.  A raid of Walters' home turned up thousands of
dollars in designer merchandise, such as Chanel and Hermès, said Debbie Weierman, a
spokeswoman for the FBI's D.C. office. Prosecutors say that since 2000, Walters had spent
more than $1.4 million at Neiman Marcus.

Safety-Kleen Ex-Finance Chief Gets 70-Month Jail Term
bloomberg.com | 11/8/07 | David Glovin
(Bloomberg) -- Ex-Safety-Kleen Corp. Chief Financial Officer Paul Humphreys was sentenced
to almost six years in prison for overstating earnings at the waste management company
by $267 million, helping drive it into bankruptcy.  Humphreys, a Canadian citizen, pleaded
guilty in June to federal charges that he led the scheme to artificially boost earnings in 1999
and 2000 to meet Wall Street estimates. Investors say they lost more than $250 million.
``I am ready to accept the sentence of the court and deal with the consequences of my
actions,'' Humphreys told U.S. District Judge Laura Taylor Swain today at his sentencing
hearing in New York federal court. ``I know what I did was wrong.''  Humphreys, 48, was
sentenced to 70 months in prison for conspiracy, securities fraud and bank fraud. A resident
of Alberta, he faced up to 87 months in prison under federal guidelines. Swain didn't impose
a fine or order restitution because investors previously won a $190 million judgment
against Humphreys, who must report to prison Jan. 18.  Safety-Kleen, once the fourth-
largest U.S. waste-disposal firm, filed for bankruptcy in 2000. The company was formed
when Laidlaw Environmental Services, a spinoff of Laidlaw Corp., acquired Safety-
Kleen Corp. in May 1998 and adopted the Safety- Kleen name. Based in Plano, Texas, the
firm is privately held.  ``This involved an enormous breach of trust,'' Swain told Humphreys
at the hearing. In 2002, Safety-Kleen's former controller William Ridings admitted he helped
Humphreys defraud investors. Ridings, who pleaded guilty, is scheduled to be sentenced in
January.

Embezzlement case dropped against Haywood nonprofit ex-chief
Citizen-Times.com | 11/8/07 | Adam Behsudi
WAYNESVILLE – A woman charged with embezzling more than $100,000 in flood relief
money from the now-defunct Haywood County Council on Aging had her case dismissed
Thursday after prosecutors said they were unable to find evidence proving she intended to
defraud the agency.  Denise Mathis, who directed the agency, was indicted last year on 14
counts of felony embezzling money from the relief account from December 2004 through
September 2005.  “They couldn’t prove that any property ever came in her possession,”
said Russell McLean, Mathis’ attorney. “The woman has to have her reputation restored
and her economic loss compensated.”  He said Mathis is pursuing civil libel and slander suits
against government agencies, individuals and newspapers. District Attorney Mike Bonfoey
said the criminal case would have been thrown out in court without evidence showing
fraudulent intent.  “If we miss that piece it’s not even going to go to the jury,” he said.

Employee gets probation for embezzlement
Chicago Tribune | 11/9/07 | George Houde
An Elk Grove Village woman who pleaded guilty to embezzling funds from her longtime
employer handed over a check Thursday for $530,000 in partial restitution, prosecutors said.

Susan Coconate, 52, of the first block of Evergreen Street, was sentenced Thursday to 4
years of probation and ordered to do 60 days of community service at a hearing before
Cook County Circuit Judge Thomas Fecarotta Jr. in Rolling Meadows. Coconate was charged
with stealing $553,000 from Taylor Chicago Distributors Inc., a restaurant equipment sales
and service company in Elk Grove Village. She had worked there for 10 years as an office
manager, authorities said.  Authorities said she stole the money by using electronic
transfers from company accounts to pay for her credit card debts and personal items,
including car payments.  Assistant State's Atty. Karyn Stratton said the amount paid in
restitution was unusual.  "She was a trusted long-term employee," Stratton said. "In a lot
of these cases, you don't get that kind of restitution."  Stratton said the theft put the
company on the brink of bankruptcy after new owners bought it four years ago.  "It almost
killed them," Stratton said. "The victims were very happy to get the money back." Defense
lawyer Todd Pugh said Coconate relied heavily on family and friends to come up with the
money.  "She had a gambling problem that nobody knew about," Pugh said.  The new
owners discovered earlier this year that the funds were missing. Coconate was charged in
August with one count of felony theft.  She is to pay back another $14,000.

Ex-Waco civic leader indicted in embezzlement probe
Houston Chronicle | 11/08/07 | Associated Press
WACO, Texas — A former leader of the Downtown Waco economic development group has
been indicted in an embezzlement investigation.  A McLennan County grand jury on
Wednesday indicted Margaret Mills on a charge of first-degree felony theft, alleging she
stole more than $200,000 from the nonprofit organization.  The Texas Attorney General's
Office, which is prosecuting the case, said Mills is accused of embezzling as much as
$511,000 from the organization she led for nearly two decades.  Mills, who has been free
on $25,000 bond since her April arrest, is accused of diverting Downtown Waco Inc. funds
for her personal use.  If convicted, Mills, 66, faces from five years to life in prison and a fine
of up to $10,000. She could also get probation.  Mills' attorney Rick Bostwick declined
comment, but said a response will be offered "in due course."  Downtown Waco Inc., whose
books had not been formally audited for years, notified the city of Waco about the problems
in September 2006. Since then the organization has been dormant but has remained intact
in hopes of getting restitution to pay off the credit card debt Mills reportedly ran up and to
reimburse former members' dues, said vice president Mark Boyd.  Last year, Downtown
Waco's board received a restitution check for $70,000 that was written from an account of
the former law firm of Coke Mills, the suspect's husband.  McLennan County District Attorney
John Segrest has recused his office from prosecuting the case because of his family's ties to
Mills and her husband.  
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