What the U.S. Attorney’s Fraud Crackdown Means for Businesses in Indiana and Beyond

Nationwide, federal prosecution of white-collar offenders may be hitting an all-time low. According to an analysis by Syracuse University, the last time white-collar prosecutions reached this level was during the Reagan administration: The number of charges in January 2020 was down 25% from five years ago and 8% from a year ago. But, in Indiana, the number of charges tells a different story.

The U.S. Attorney’s Office for the Southern District of Indiana has shown a persistent commitment to prosecuting fraud and other crimes. Since July 2019, the federal prosecutor’s office for southern Indiana has announced charges that demonstrate U.S. Attorney Josh Minkler’s “firm commitment” to prosecute large-scale fraud. Minkler’s October 2017 strategic plan, according to the office, was “designed to shape and strengthen the District’s response” to the “most significant public safety challenges,” including “large-scale fraud schemes that warrant federal resources and arrest” of individuals “who abuse their positions of trust.”

In July 2019, the government announced charges against a sanitary district administrator and a property owner including conspiracy to commit wire fraud, wire fraud, false statements, and document falsification related to a multiyear investigation into the alleged payment of kickbacks for public works projects in Muncie, Indiana. According to the government, if convicted, the defendants face up to 20 years in prison on each charge and payment of full restitution.

In a related case, the government also announced charges in November 2019 against a local official in Muncie, Indiana, who allegedly accepted a $5,000 illegal cash payment to steer lucrative excavation work to a local contractor. The charges were part of an ongoing investigation into illegal payments associated with public works projects in the city, resulting in multiple cases against other local officials, contractors and businesspersons.

Then, in October 2019, the government announced charges against a bookkeeper who allegedly mishandled donations as part of a multiyear scheme to steal $450,000-plus from a charity organization. The charging document alleges the now-former employee began stealing donations from the nonprofit in 2012 by pocketing donations received by the organization, typically in the form of money orders. The employee would alter the “pay to” line to herself and then deposit the money in her own bank account. By 2016, the employee was stealing 150 donations annually until she was caught in late 2018.

The employee concealed her fraud by entering the donations into the organization database, which ensured that donors received thank-you cards and tax deduction information. The organization’s chapters also would see “accurate” giving totals when they checked the organization’s website. At the same time, the employee would change the organization’s books to hide the alleged theft. And the employee provided altered documents to the organization’s auditor. The conduct was identified when a fraud examiner at the employee’s bank noticed what looked to the examiner like a doctored money order.

Earlier in 2020, a community district payroll clerk entered a guilty plea for paying herself more than $352,588.89 since 2017. According to the agreed facts supporting the guilty plea, the employee clerk used her access to the school’s employees’ accounts (mostly part-time or substitute teachers) to charge the direct deposit account, falsely input hours worked by these employees, and then redirect the money to herself. The clerk would intercept Internal Revenue Services (IRS) tax forms for the employees to alter the amounts earned by the employees. Because the clerk was unable to access IRS records, however, many of the employees received deficient tax notices. The clerk also failed to pay taxes on the embezzled income. The scheme lasted for three tax years.

In January 2020, the U.S. Attorney’s Office reiterated its firm commitment to continue to investigate and prosecute individuals who engage in complex fraud and violate the public trust. This effort will include:

• A Health Care Fraud Task Force, including federal agencies and the Indiana Medicaid Fraud Control Unit (MFCU), to prioritize prosecution of individuals – particularly providers of health care – who undermine the health care system.
• Coordination with the Federal Bureau of Investigation’s (FBI) public corruption squad, the IRS, federal inspectors general, and Indiana State law enforcement to target bribery, kickbacks, theft, extortion and fraud by elected and appointed officials and individuals that hold public trusts to enforce the law.
• Prosecution of individuals who evade income taxes, commit identity theft and launder money.

Companies in the Southern District of Indiana, as well as businesses with a presence in the state, should be aware of the office's commitment to rooting out fraud and other illicit business conduct. Moreover, organizations navigating audits and investigations should seek counsel to resolve potentially contentious issues.