ALBANY – A Texas man was swept up in the criminal case of MyPayrollHR CEO Michael Mann and charged with several felonies by federal prosecutors for allegedly aiding Mann with his $100 million bank fraud scheme.
Derek Schwartz, 52, of Coppell, Texas, becomes the third person charged in Mann’s scheme. He is facing one count of conspiracy to commit wire fraud and four counts of wire fraud after he was indicted Thursday by a federal grand jury. He is being prosecuted by Assistant U.S. Attorneys Michael Barnett and Cyrus Rieck in Albany but has yet to be arraigned.
Mann, 51, was sentenced earlier this month to 12 years in federal prison and ordered to pay $101 million in restitution after pleading guilty to 12 felonies in the scheme.
Mann admitted to defrauding a group of banks and lenders from 2013 until Labor Day weekend in 2019 when Mann’s Clifton Park payroll company, MyPayrollHR, collapsed as his scheme was uncovered.
Mann had diverted millions of dollars of his customers’ payroll money, leading to hundreds of companies nationwide not being able to pay their employees or their payroll taxes for weeks.
The collapse of MyPayrollHR received national headlines, although the payroll company’s demise was just a side effect of Mann’s crimes, which involved him tricking several finance companies into giving him tens of millions of dollars in loans for his various businesses, some of which only existed on paper.
Mann operated all of the businesses, some of which were real and some of which were fake, under a holding company called ValueWise he operated out of his Clifton Park office.
Schwartz is the third person to be charged with aiding Mann. The other is Luke Steiner, a former employee of Optum, a division of UnitedHealth Group in Minnesota. Schwartz used to work for Optum as well but then went to work for Mann in 2013 to operate a consulting company called TrueHR that Mann ran as a ValueWise subsidiary.
Optum did not immediately respond to a request for comment. Schwartz could not be reached either.
Schwartz allegedly recruited Steiner, whom he supervised, to falsify invoices that said that Optum owed Mann’s company millions of dollars in consulting fees. The falsified invoices were used by Mann as collateral to get business loans from so-called factoring companies that lend money to companies based on their receivables and expected cash flow. In reality, many of Mann’s businesses had no actual operations and therefore did not have any income from consulting work.
At one point, when Steiner indicated that he had an employment offer from another company, Schwartz and Mann tried to get him to remain at Optum so he could continue aiding their scheme.
“I know you were going to talk to him about staying put a little longer,” Mann wrote Schwartz in an undated email, according to prosecutors.
Mann then told Schwartz they might have to recruit other Optum employees to continue the deception.
Schwartz also allegedly helped Mann deceive his lenders into believing that TrueHR was a vendor to another of Mann’s consulting companies, Weitz & Associates, and that Weitz & Associates needed a loan to pay its vendors, including TrueHR, which was not actually a vendor to Weitz & Associates.
“Mann, with Schwartz’ help, fabricated the names and contact information of non-existent people working at fake Weitz vendors,” federal prosecutors said in a statement issued Friday.
Schwartz is facing up to 20 years in federal prison if convicted at trial. Steiner, 33, pleaded guilty in February 2020 to aiding Mann to deceive his lenders by falsifying invoices from Optum and awaits sentencing. Steiner was compensated by Mann with $11,300 in Amazon gift cards.
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