News

Former Merchantile Vice President Sentenced in Fraud Scheme


Used His Position to Secretly Funnel Over $900,000 in Bank Funds 
to a Company Owned by Him

FOR IMMEDIATE RELEASE
June 27, 2010

Baltimore, Maryland - U.S. District Judge J. Frederick Motz sentenced Thomas W. Small, age 53, of York, Pennsylvania, today to one year and one day in prison followed by five years of supervised release for mail fraud related to a scheme to defraud his former employer, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Motz also ordered that Small pay restitution of $913,000.

According to the plea agreement, from March 1997 until August 2003, Small was a vice president and later senior vice president in charge of information technology for the Investment Management Division of Mercantile-Safe Deposit Bank & Trust Company (Mercantile), headquartered in Baltimore. He approved purchases of computer hardware and software on behalf of Mercantile and hired outside contractors to install computer hardware systems and develop software. Small also operated a small computer and technology consulting business out of his home, known as Computer & Data Consultants, Inc. (C&DC).

Between September 2000 and December 2002, Small obtained approximately $600,000 in Mercantile funds by means of a self-dealing scheme. Small told two outside contractors who were performing work at Mercantile that he wanted to purchase computer hardware, software, repair services and other items for Mercantile from C&DC, which was not an approved Mercantile vendor. Small did not disclose to the contractors that he owned C&DC. Small advised the contractors that since their companies were already approved Mercantile vendors, he wanted to route Mercantile’s payments to C&DC through their companies. Small told the two contractors that C&DC would supply the purchased items to Small directly at Mercantile, so the companies would not be required to process the goods and services that C&DC was supplying to Mercantile. In return for processing the invoices from C&DC and the subsequent payments from Mercantile, Small told the two contractors they could apply a mark-up of between 8% to 30% for themselves on the C&DC invoices. Because the invoices received from Mercantile came from the two contractors and the two contractors received the payments on the invoices, Small was able to hide the fact that the bulk of the funds were actually being transmitted to a business he owned.

In addition, on three occasions between July and December 2001, Small directed the two contractors to process several invoices totaling $15,050 from Individual # 1, whom he represented he had hired to provide data processing services and software development services to Mercantile. Once again, Small told the contractors that they could apply a mark-up to the invoices in return for transmitting them to Mercantile and processing the resulting payments from Mercantile.

Finally, in June 2002, Small advised one of the contractors that $400,000 was available in “soft dollar” credits in an account with an investment bank that handled securities trades for Mercantile. The money was supposed to be used for research services and software development that would benefit Mercantile’s investment customers. Small told the contractor that he wanted to develop a web portal system whereby Mercantile customers could access information about their accounts on a real-time basis. Small falsely told the contractor owner that he wanted to use Individual # 1 as the software developer, but because of time pressures on the project Small wanted to work around the normal process for getting them approved as a Mercantile vendor. In return for the contractor’s agreement to invoice the investment bank which was holding the “soft dollars”, Small told the contractor that it could apply a mark-up on the cost of Individual # 1's services and receive $85,000, or about 21% of the proposed project cost. Once again, Small did not tell the contractor that Individual # 1 was a close relative of his, nor that she had no software development skills. The contractor agreed to submit to the investment bank an invoice totaling $400,000 for the project whose terms were specified by Small. In return, the investment bank paid the contractor the $400,000, of which the contractor kept $85,000 and then paid the remaining $315,000 to Small’s relative. The relative kept $2,000 and then wrote a check for $313,000 payable to C&DC. Within six weeks, Small used over $80,000 of the C&DC funds to purchase a car, pay off credit cards, pay for home remodeling and landscaping expenses and pay on a personal line of credit. Small spent the remainder of the money over the course of 2003 and 2004. None of the services described in the invoice were provided to Mercantile, which subsequently repaid the investment bank for the $400,000 that had been improperly disbursed as a result of Small’s actions.

As a result of the above schemes, Small caused Mercantile and the investment bank to pay over $930,000 to C&DC and his relative.

United States Attorney Rod J. Rosenstein praised the Federal Bureau of Investigation, U.S. Postal Inspection Service and the Federal Deposit Insurance Corporation - Office of Inspector General for their investigative work. Mr. Rosenstein thanked Assistant U.S. Attorney Jefferson M. Gray, who prosecuted the case.

 

Return to Top

USAO Homepage
Maryland Exile
Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Stop Fraud.gov

Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.

Don't Lose Yourself in a Gang

Talk to your kids about gangs and how to avoid them.

Maryland Human Trafficking Task Force
Stay Connected with Twitter
|

Return to Top

USAO Homepage
Maryland Exile
Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Stop Fraud.gov

Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.

Don't Lose Yourself in a Gang

Talk to your kids about gangs and how to avoid them.

Maryland Human Trafficking Task Force
Stay Connected with Twitter
|

Return to Top

USAO Homepage
Maryland Exile
Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Stop Fraud.gov

Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.

Don't Lose Yourself in a Gang

Talk to your kids about gangs and how to avoid them.

Maryland Human Trafficking Task Force
Stay Connected with Twitter
|

Return to Top

USAO Homepage
Maryland Exile
Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Stop Fraud.gov

Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.

Don't Lose Yourself in a Gang

Talk to your kids about gangs and how to avoid them.

Maryland Human Trafficking Task Force
Stay Connected with Twitter
|

Return to Top

USAO Homepage
Maryland Exile
Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Stop Fraud.gov

Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.

Don't Lose Yourself in a Gang

Talk to your kids about gangs and how to avoid them.

Maryland Human Trafficking Task Force
Stay Connected with Twitter