how was she able to go on for so long? No one bothered to audit the account until after so much was solen? ? 80 cars? the fuck. people get 25+ to life for much smaller amounts. 15 years, of which she will likely only serve 9 at a minimum security prison camp, almost seems lenient. Had she taken a much smaller mount ,like a few million, and stashed it in some secret bitcoin accounts probably could have gotten away with it and be wealthy. Like most criminals, her downfall was greed.
> "Mello played on the trust she had developed over the years with her supervisors and co-workers to secure the necessary approvals," court documents said. "After receiving the necessary approvals, the paperwork was then passed on to (Defense Finance and Accounting Service) for payment."
Correct. Although I'm recently seeing some get little bits shaved off, seemingly for programs, and some early releases to mandatory halfway houses. It's crumbs, though. Don't mess with the feds.
Just so it is clear for everyone, time in pretrial detention is generally counted as part of your prison sentence when calculating your release date.
In Illinois, for instance, until cash bail was removed, a bulk of all prison sentences were actually served in county jails awaiting trial and sentencing. This is a problem since jails generally cannot, by law, offer rehabilitative services since they are dealing with unconvicted persons. And then when convicts get to prison they have too little time left to start any rehabilitation programs before release.
Now that most suspects are not held prior to trial in Illinois, the bulk of any sentence will actually be served in the much better conditions and options of prisons.
I guess being at it for 6 years and having no consequences? Kinda wild that if she had "just" lived a modest life stealing enough for an ok house and a nicer Camry she might have gone unnoticed.
Normalization of deviance. You get away with it for a while, and it becomes the normal state. Your sense of the risks you are taking is completely diminished.
You don’t feel paranoid because the discovery phase is gradual. You don’t wake up one morning and find a loophole. It takes time exploring it from different angles. And that time provides you with the mindset not to worry about the consequences.
"Suspicion always haunts the guilty mind; the thief doth fear each bush an officer." -- Bill Shakespeare
They do feel paranoid constantly. This is why it's a 'sin' that puts you in 'hell'. And why if you 'repent' (change your ways) and atone, you will find that 'heaven' (peace) is right at hand.
Once you take the supernatural out of religion, it actually makes a lot of sense. Be decent, attend to the present, minimize your selfishness. These are a prescription for a life well-lived and without unnecessary stress.
I've been at businesses that were defrauded by internal employees. The common theme was that the criminals thought they were very smart, and that the company was very dumb.
They weren't paranoid or even all that careful because they believed they were the smartest person in the company. They thought they knew everything inside and out and therefore could cover their tracks well enough that the not-smart people around them would never figure it out.
I never realized they were any different form your typical SUV, lol. I would've guessed they were $30k before looking it up. Crazy that cars have such variance...
Really? My Crosstrek was that price and seems perfectly fine, and a huge upgrade from a Civic or whatever. It's got fancy-to-me things like power windows, heated seats, and Bluetooth, lol. Meanwhile my partner's car doesn't even have air conditioning or a working door remote.
What kind of luxury do you get for an additional $200k? I can't imagine anything in a car that I'd want to spend that much money on. I keep thinking it might be nice to get an electric or plug in hybrid at some point, but even then I wouldn't want to spend more than $40-$50k.
$100 million is a lot and people have gotten arrested for way less. You'd have to loot a huge company or a government, as she had done, for this to possibly go undetected for so long.
We'll never know because there is no transparency. Public funds should not be distributed in cash or with checks like in the 19th century. The technology to make stealing our taxes impossible exists, but interestingly politicians of all people have been fighting against recognizing and properly regulating it.
More alongside the banking system, but we could have governments spend their budget in crypto. They would mint new coins at the beginning of every fiscal year. The coins could pass from department to department being recorded every time they exchanged hands within the government. To exchange the coin for cash, any vendor or individual would have to exchange the coin at a bank while showing identification, and the bank would record the transaction alongside the individuals name and reason for spending the money. The bank would then give the individual cash, and the government would in turn give the bank cash. 100% of government spending would be fully transparent to the taxpayer, they could see which departments received how much money and what they spent it on.
It has some flaws in the system -- it essentially creates a new government minted currency and the banks would need an incentive to be party to this transaction. It solves the problem of lost government funds, and helps create a paper trail that anyone can audit to detect embattlement faster. It might impact the government's ability to fund some classified operations. You can't exactly say "I am {First Name}, {Last Name} and I am cashing my paycheck for working at the CIA" to the entire world.
What you describe is just a ledger, you don't need a convoluted system for maintaining consensus when the system you are building is naturally centralized.
> To exchange the coin for cash, any vendor or individual would have to exchange the coin at a bank while showing identification, and the bank would record the transaction alongside the individuals name and reason for spending the money. The bank would then give the individual cash, and the government would in turn give the bank cash. 100% of government spending would be fully transparent to the taxpayer, they could see which departments received how much money and what they spent it on.
This would have no impact whatsoever on the fraud in this article.
The person claimed they were spending money on approved purchases and provided documentation to support it. The government then gave her the money.
Adding crypto would change nothing, other than making it more convoluted.
That's not really true, it sounds like she skipped a lot of accounting where inconsistencies would have cropped up possibly detecting a conflict of interest if accomplices weren't added to keep her at a distance from signature access and payments.
> We'll never know because there is no transparency.
How would you have recognized this fraud even if every number and piece of paperwork landed in your lap? The person created a real-looking business and leveraged her connections to get real-looking approvals for grant programs. If it wasn't immediately obvious to the people reviewing the grant paperwork who understand the system, what makes you think you or anyone else would be able to spot it?
The fraud investigation requires a lot of resources, investigation, and access to personal banking records. That's how they discovered what the money was spent on.
> Public funds should not be distributed in cash or with checks like in the 19th century. The technology to make stealing our taxes impossible exists, but interestingly politicians of all people have been fighting against recognizing and properly regulating it.
What are you talking about? There is no technology that makes fraud like this impossible. The means of transferring money is not the part of the story that enabled the fraud. Investigators had no problem identifying where the money went. The article spells out exact dollar amounts spent on everything from jewelry to property.
Fraud against private companies happens all the time as well. There was an infamous case about a guy who sent fake $100+ million total invoices to Facebook, Google, etc[0]. If they had just stopped after a single interaction, probably would have gotten away with it free and clear.
I think the general rule is that if the amount that the person is embezzling is less than the anticipated PR cost to the organization (of the embezzlement being public knowledge), then the organization will seek to not draw attention to it.
>Although Pharaon had been a wanted fugitive by the F.B.I since 1991 for massive fraud in the financial collapse of BCCI Bank; Pharaon was awarded a total of $120 million in contracts by the United States military in 2008.
I have no idea how this went on so long. I work in banking and we have so many automated systems for automatic fraud detection. There is no way the bank should have let the gigantic deposits go unchecked for so long. I’ve had my own checks I write to myself go flagged for far less money. Complete systemic negligence all around.
I mean I dunno, every year in Investment Banking/Trading there is a new scandal about someone hiding billions of exposure by going around the risk systems.
After Kerviel(the SocGen trader who lost 5 billion in 08) most IBs basically "shadowbanned" the Middle Office(risk/compliance/reconciliation) to trading desk lateral, precisely because a middle office guy can hide a lot of risk quite easily.
Part of the problem is the Army is not receiving goods or services in exchange for this money so if the money is being misdirected it is not immediately obvious. I'm guessing this grant system is able to work based on the reputation of the grantees not to scam the Army but because she was an insider she was able to exploit her position to receive grants without a strong reputation. If people are straight up lying to you its very difficult to detect the fraud unless you bring in an auditor that has the power to get statements directly from the bank and interview suppliers, employees and subcontracters to verify payments are going to where they are claimed.
okay so lets look at how she could have gotten away with this for longer than 6 years, here are the primary issues:
1. the corporate structure. she formed an LLC whose address was a UPS store mailbox, but deposited the checks into her checking account.
2. she also did not file taxes on this income. while filing taxes on this income likely would have been a problem, so a pass through entity like an LLC would still be some sort of folly.
3. her lifestyle increased eventually, and this was the actual flag according to the quote in article. maybe the indictment is more particular.
4. she didn't stop
so, with 3. being the primary prong, the mere existence of a paper trail isn't really the issue. Statute of limitations can run out even if things are subpoenable, so you just have to run out the clock.
but even so, you can likely obfuscate this with domestic entities legally too.
for example. the LLC isn't inherently a problem, as an LLC can be owned by another artificial person, such as a trust or non-profit.
an LLC owned by a South Dakota Trust could have no information at both levels, so the application for the 4-H grant could go there and pass through to the South Dakota Trust. The Trust pays its taxes if it is a taxable transaction. The interest of the government would have stopped there. But if for some reason a subpoena was generated, you'd have to go further to reduce the intermediaries involved in paying you, or the information that the intermediaries have.
and of course, if the trust was a non-profit, then there wouldn't have been taxes to pay. an additional LLC can contract to the non-profit as long as the government doesn't think you are a director of the non-profit too. the LLC would be disclosed but this wouldn't be a flag on its own.
real question is I wonder how many people are doing this
Legitimate operations don't have to leak anything to the government or much to intermediaries either. I would expect anything I form to be indiscernible.
For civil liability reasons alone I would form everything the same way.
I idly wondered what the stolen amount to years sentenced ratio was for Madoff, and using $65 billion stolen to 150 years sentenced, he was put away at a level of $433M per year sentenced. So Mello is put away at about a level of $7M per year sentenced.
It seems pretty ridiculous to me that if she didn't flaunt expensive items they apparently never would have noticed a company didn't exist, didn't provide anything of value, didn't cause any positive or negative feedback..
So an embezzler who is motivated by hoarding, by lavishing on a family member or to redirect to another cause is apparently undetectable.
The sad thing is she could've built a totally legitimate child care business with that funding and still paid herself a healthy salary for it. It's too bad she didn't use the opportunity to just go legit.
Is it evil of me to say that 7.2m a year (109000000/15) is not really doing that bad?
Honestly, I think a pretty good pyramid scheme a la the Mikkelson Twins would be to start up a wholly imaginary "MIL-SPEC SCAMMER SCHOOL" that tells you all about people like this lady, and offers a course on HOW TO NOT DO SUCH BAD THINGS, while winking with every muscle in your body.
Or, even better, advise you on how to be a big time MIL-SPEC guru who can lead SIGMA or whatever other nonsense the management of the day is huffing. This advise is your key to landing BIG WORK in the Defense Industry! Everyone knows it's all nonsense, but we can teach you how to turn that nonsense into passive income.
Of course such a fabulous class would cost beaucoup buxxx....
Ah, this sounds heartbreaking. I'll leave it to those salesmen with mental sickness.
Consider that defense contractors do essentially the same thing but on a much larger scale without the critical outrage factor of short-changing women and children. If they had instead made subsystems for F-35's that wore out regularly, no one would complain. In this respect, they were stupid for having identifiable victims.
69 comments
[ 3.6 ms ] story [ 136 ms ] thread> "Mello played on the trust she had developed over the years with her supervisors and co-workers to secure the necessary approvals," court documents said. "After receiving the necessary approvals, the paperwork was then passed on to (Defense Finance and Accounting Service) for payment."
IIRC in the federal prison system, prisoners must serve at least .85 of their sentence, so at least 12.75 years.
In Illinois, for instance, until cash bail was removed, a bulk of all prison sentences were actually served in county jails awaiting trial and sentencing. This is a problem since jails generally cannot, by law, offer rehabilitative services since they are dealing with unconvicted persons. And then when convicts get to prison they have too little time left to start any rehabilitation programs before release.
Now that most suspects are not held prior to trial in Illinois, the bulk of any sentence will actually be served in the much better conditions and options of prisons.
You think $19,500,000 in one year would be enough, but I guess not. Criminals are stupid.
They do feel paranoid constantly. This is why it's a 'sin' that puts you in 'hell'. And why if you 'repent' (change your ways) and atone, you will find that 'heaven' (peace) is right at hand.
Once you take the supernatural out of religion, it actually makes a lot of sense. Be decent, attend to the present, minimize your selfishness. These are a prescription for a life well-lived and without unnecessary stress.
The ones that are caught that is. How many get away with their crimes by keeping a low profile.
They weren't paranoid or even all that careful because they believed they were the smartest person in the company. They thought they knew everything inside and out and therefore could cover their tracks well enough that the not-smart people around them would never figure it out.
Maybe she was buying jewelry as a store of value, for the potential one day in the future when she'll get out of jail penniless.
These days the Range Rover aims hard at the high luxury SUV market, one stop down from ultra-luxury SUVs like Bentley and Rolls.
What kind of luxury do you get for an additional $200k? I can't imagine anything in a car that I'd want to spend that much money on. I keep thinking it might be nice to get an electric or plug in hybrid at some point, but even then I wouldn't want to spend more than $40-$50k.
Sounds like you have either imagination or money problem. Or both, lol.
Now, a bicycle...? Maybe :p
Food for thought.
It has some flaws in the system -- it essentially creates a new government minted currency and the banks would need an incentive to be party to this transaction. It solves the problem of lost government funds, and helps create a paper trail that anyone can audit to detect embattlement faster. It might impact the government's ability to fund some classified operations. You can't exactly say "I am {First Name}, {Last Name} and I am cashing my paycheck for working at the CIA" to the entire world.
This would have no impact whatsoever on the fraud in this article.
The person claimed they were spending money on approved purchases and provided documentation to support it. The government then gave her the money.
Adding crypto would change nothing, other than making it more convoluted.
How would you have recognized this fraud even if every number and piece of paperwork landed in your lap? The person created a real-looking business and leveraged her connections to get real-looking approvals for grant programs. If it wasn't immediately obvious to the people reviewing the grant paperwork who understand the system, what makes you think you or anyone else would be able to spot it?
The fraud investigation requires a lot of resources, investigation, and access to personal banking records. That's how they discovered what the money was spent on.
> Public funds should not be distributed in cash or with checks like in the 19th century. The technology to make stealing our taxes impossible exists, but interestingly politicians of all people have been fighting against recognizing and properly regulating it.
What are you talking about? There is no technology that makes fraud like this impossible. The means of transferring money is not the part of the story that enabled the fraud. Investigators had no problem identifying where the money went. The article spells out exact dollar amounts spent on everything from jewelry to property.
[0] https://www.npr.org/2019/03/25/706715377/man-pleads-guilty-t...
>Although Pharaon had been a wanted fugitive by the F.B.I since 1991 for massive fraud in the financial collapse of BCCI Bank; Pharaon was awarded a total of $120 million in contracts by the United States military in 2008.
After Kerviel(the SocGen trader who lost 5 billion in 08) most IBs basically "shadowbanned" the Middle Office(risk/compliance/reconciliation) to trading desk lateral, precisely because a middle office guy can hide a lot of risk quite easily.
> I’ve had my own checks I write to myself go flagged for far less money.
because they were aberrations.
while the person with consistent large checks is not.
1. the corporate structure. she formed an LLC whose address was a UPS store mailbox, but deposited the checks into her checking account.
2. she also did not file taxes on this income. while filing taxes on this income likely would have been a problem, so a pass through entity like an LLC would still be some sort of folly.
3. her lifestyle increased eventually, and this was the actual flag according to the quote in article. maybe the indictment is more particular.
4. she didn't stop
so, with 3. being the primary prong, the mere existence of a paper trail isn't really the issue. Statute of limitations can run out even if things are subpoenable, so you just have to run out the clock.
but even so, you can likely obfuscate this with domestic entities legally too.
for example. the LLC isn't inherently a problem, as an LLC can be owned by another artificial person, such as a trust or non-profit.
an LLC owned by a South Dakota Trust could have no information at both levels, so the application for the 4-H grant could go there and pass through to the South Dakota Trust. The Trust pays its taxes if it is a taxable transaction. The interest of the government would have stopped there. But if for some reason a subpoena was generated, you'd have to go further to reduce the intermediaries involved in paying you, or the information that the intermediaries have.
and of course, if the trust was a non-profit, then there wouldn't have been taxes to pay. an additional LLC can contract to the non-profit as long as the government doesn't think you are a director of the non-profit too. the LLC would be disclosed but this wouldn't be a flag on its own.
real question is I wonder how many people are doing this
For civil liability reasons alone I would form everything the same way.
So an embezzler who is motivated by hoarding, by lavishing on a family member or to redirect to another cause is apparently undetectable.
Net-zero is often a great outcome.
Many cases of net-negative outcomes despite huge spending and effort.
facepalm
Always the dumb ones
Honestly, I think a pretty good pyramid scheme a la the Mikkelson Twins would be to start up a wholly imaginary "MIL-SPEC SCAMMER SCHOOL" that tells you all about people like this lady, and offers a course on HOW TO NOT DO SUCH BAD THINGS, while winking with every muscle in your body.
Or, even better, advise you on how to be a big time MIL-SPEC guru who can lead SIGMA or whatever other nonsense the management of the day is huffing. This advise is your key to landing BIG WORK in the Defense Industry! Everyone knows it's all nonsense, but we can teach you how to turn that nonsense into passive income.
Of course such a fabulous class would cost beaucoup buxxx....
Ah, this sounds heartbreaking. I'll leave it to those salesmen with mental sickness.