A staffer has been accused of stealing nearly $2 million in payroll from other employees at the Art Institute, according to a federal indictment. The staffer is accused of diverting funds meant for other employees into his own bank account. The fraud went on for nearly 10 years before it was discovered when another staffer noted unusual account activity.
According to the Art Institute, they instituted an audit process to review their financials in 2019. That was when the perpetrator was caught. The employee was immediately terminated, and the matter was referred to law enforcement. The employee is now facing charges of wire fraud and bank fraud.
The Heypenny Scheme
This appears to be a heypenny scheme. Most transactions do not perfectly align with our base-10 math that goes to the hundredths. In other words, there may be some money left over when a transaction is complete, like one-hundredth of a penny. That excess can be diverted to another account. In the short term, the amount of money is so small that no one notices it is missing. In the long term, it adds up to a lot of money that was earned by someone else. This scheme played out over 10 years.
Federal prosecutors confronted the defendant about the transactions. He told them it was a test of the payroll system. They did not believe him. He will now face charges for stealing over $2 million by fraud.
Analyzing the Allegations
The defendant has been charged with two counts of fraud — one wire fraud and one bank fraud. While the maximum penalty is 20 years for each, most people do not serve that long. Among the factors that will drive up a fraud sentence is the amount of money stolen, the number of victims, and the sophistication of the scheme.
In this case, the scheme was unsophisticated and did not involve multiple parties. It took a basic audit of the system to catch the perpetrator.
There were, however, several victims, all of them employees abused by an individual who had access to their funds. The amount of money stolen was large, although the prosecution will have to prove the figure. Fraud sentences can be highly variable, so the details of the crime and what the prosecution can prove can make a huge difference at the end of the day.
After being confronted by law enforcement, the defendant attempted to disguise past payments made to himself by making it look like they went to employees.
While wire fraud carries a maximum sentence of 20 years, bank fraud carries a maximum sentence of 30. So, the defendant has a lot of explaining to do.
Talk to a Chicago White Collar Criminal Defense Attorney Today
David Freidberg represents the interests of Chicago residents accused of white-collar crimes. Call our office today at (312) 560-7100, and we can begin preparing your defense immediately.