Five Examples of Corporate/Shareholder Fraud

Corporations large and small have a financial interest in promoting a robust reputation for themselves among their shareholders. Historically, this promotion has not always been done ethically. Corporate fraud, commonly known as shareholder fraud, takes place when a company deliberately distorts information. To combat this, President George W. Bush launched a Corporate Responsibility Plan in 2002. More than a decade later, these issues persist. Below are five examples of how shareholder fraud continues to sweep the nation.

Angel Food Ministries – Founding Family Sentenced

In August 2013, Georgia based Angel Food Ministries, a nonprofit tax exempt 501(c) organization founded in 1994, came under fire when Founder Wesley Joseph (Joe) Wingo, his son, Andrew (Andy) Wingo and his wife, AFM Co-Founder Linda Wingo (Linda), were sentenced for unlawful financial conduct. With Joe at the helm of all financial activities, corporate accounts mingled with personal benefits, which included the purchase of homes, cars and family “bonuses.” The courts ordered the forfeiture of nearly $4 million, five years of probation for Linda, and 84 months of prison for both Joe and Andy.

Tax Crimes Catch Up With Florida Business Executive

Failing to file tax returns and impeding an IRS audit of his company lead Tampa, Florida business executive John D Stanton, III to a sentence of 120 months in prison, with a court order to repay nearly $38 million to the IRS. As former president of Florida Engineered Construction Products Corporation (FECP), known as Cast Crete Corporation, Stanton attempted to cover his audit trail by producing two fake promissory notes, equaling $500 million, coupling them with false 1099 forms, and then failing to file corporate tax returns for the company. Trial evidence revealed that during a five-year period, Stanton’s company profits exceeded $100 million, all without filing a single corporate income tax return.

Avoiding Payroll Taxes and Committing Bank Fraud in Ohio

Columbus, Ohio became the scene of another corporate fraud sentence in April 2013, when Robert Jeffrey Johnson, president of Smith & Johnson Construction Company, received 15 months in prison, three years of supervised release and was ordered to repay $1,334,052 in restitution to the IRS and $252,500 to the financial institution he defrauded. In 2004 and 2005, Johnson had borrowed $20 million from lenders, but soon transferred $7 million to his personal business entities. He failed to pay employee payroll taxes, concealed documents in a bankruptcy proceeding, and invented a scheme to make it appear (falsely) that all accounts and debts for Smith and Johnson were paid in full, giving him access to use funds for his personal uses.

Fraud Scheme Turns into Financial Group Sentence

One count of conspiracy to commit wire fraud and nine counts of wire fraud resulted in a Houston, Texas prison sentence of 20 years for Gilbert T. Lopez, Jr., former chief accounting officer of the Stanford Financial Group Company, and Mark J. Kuhrt, former global controller of the Stanford Financial Group Global Management. In 2013, Court documents revealed that Lopez and Kuhrt helped Robert Allen Stanford perpetrate a plot involving Stanford International Bank (SIB). Stanford had previously been sentenced 110 years for his involvement. The scheme included misuse of assets, covering up that misuse, and a conspiracy to falsely convey that Stanford had allocated hundreds of millions of dollars into SIB in an effort to boost shareholder confidence. Their main tactic – a fraudulent real estate transaction inflating the value of purchased properties from $63.5 million to an alleged value of $3.2 billion.

Fraud Scheme Takes Down President of Costa Rican Company

In October 2012, more than 3,500 victims throughout America and abroad saw Minor Vargas Calvo brought to justice in Richmond, Virginia. Vargas, the majority owner of Provident Capital Indemnity (PCI) Ltd., an insurance company registered in the Commonwealth of Dominica and doing business in Costa Rica, was sentenced to 60 years in prison after engaging in a half-billion-dollar corporate fraud scheme. With the aid of Jorge Castillo, PCI’s independent auditor, Vargas lied about the company’s ability to pay claims on guaranteed bonds issued by PCI. More than $23 million went from Vargas’ scheme to professional soccer teams in Costa Rica, and to a multitude of unrelated and private family expenses. Vargas was eventually sentenced for three counts of mail fraud, three counts of wire fraud and three counts of money laundering.