News and Press Releases

News and Press Releases

Federal jury finds three guilty of
operating phony invoice scheme

FOR IMMEDIATE RELEASE
December 6, 2011


MINNEAPOLIS – Earlier today in federal court, a jury found three individuals guilty in
connection with the operation of a phony invoice scheme that defrauded an Eagan-based
company out of more than $600,000. Following a twelve-day trial, Clayton Craig Hogeland, age
41, of Aurora, Texas, was convicted of five counts of mail fraud, two counts of conspiracy to
commit mail fraud, two counts of conspiracy to commit money laundering, and three counts of
tax evasion. The jury also found Hogeland’s wife, Jennifer Rose Hogeland, age 38, guilty of
three counts of tax evasion, and co-defendant Jeffrey Cole Bennett, age 51, of Lakeland,
Tennessee, guilty of one count of mail fraud, one count of conspiracy to commit mail fraud, one
count of conspiracy to commit money laundering, and two counts of tax evasion. The three were
indicted on March 17, 2010.

After the verdict was rendered, United States District Court Judge Patrick J. Schiltz referred
to Clayton Hogeland as “audaciously dishonest,” and ordered him to be fitted with an electronic
home-monitoring device. In addition, Judge Schiltz characterized Bennett’s fraud as “jawdropping,”
and ordered him into custody pending sentencing.

Following today’s conviction, Kelly R. Jackson, Special Agent in Charge of the Internal
Revenue Service-Criminal Investigation Division’s St. Paul Field Office, said, “The law is clear
on the issue of taxable income and who is required to file and pay taxes. There is no gray area on
the subject. The role of the IRS becomes even more important in embezzlement and fraud cases
due to the complex financial transactions that can take time to unravel. We should not forget that
the ultimate victims in tax fraud cases are the honest taxpayers who diligently file tax returns
each year. This conviction sends a message that the IRS is working to make sure all taxpayers
file and pay their fair share of taxes.”

The evidence presented at trial proved that from January 2003 through April 2005, Clayton
Hogeland and Jeffrey Bennett conspired to defraud Advantage Transportation, a freight
transportation logistics provider headquartered in Eagan. Advantage contracts with customers
who have freight to be transported as well as with trucking companies willing to move that
freight. Clayton Hogeland was Advantage’s general manager, and in May of 2003, he hired his
friend, Bennett, to be the sales manager for the company’s Tennessee office, where he remained
employed through September of 2006.

To perpetrate the fraud, Bennett submitted false invoices to Advantage for nonexistent
goods and services from four shell companies he formed: Air Catering Solutions and Marketing,
Inc. (ACS Marketing), American Logistics Advisors, LTL Development.com, and
Transportation Marketing Concepts. Bennett formed three of those companies for the sole
purpose of conducting the fraud scheme. Payment of the invoices was then approved by Clayton
Hogeland, who, in addition, caused checks to be issued to the shell companies, knowing the
invoices were fraudulent. Between January of 2003 and April of 2005, those payments totaled
more than $390,000.

Bennett kept approximately $250,000 of that money for himself, while paying out about
$140,000 in kickbacks to Clayton Hogeland. To conceal those kickbacks, Bennett made the
payments via checks issued to Clayton Hogeland’s wife, Jennifer Hogeland, who endorsed and
deposited the checks into the couple’s joint bank account. In addition, Clayton Hogeland and
Bennett routed the proceeds of the phony invoice scheme through Bennett’s shell companies,
knowing the transfers were designed to conceal the fact that the money was obtained by fraud.

While employed by Advantage, Clayton Hogeland also orchestrated a second scheme to run
false “commission” payments through fictitious companies formed by two co-conspirators. That
scam occurred after Advantage began providing freight transportation services to an airline
company in 2003. Carl Frey was employed by the airline and was responsible for arranging
contracts with over-the-road shipping companies. At the direction of Hogeland, Frey formed a
company, Flite Time, which Hogeland falsely characterized as a consultant, to be paid
commissions from Advantage for freight assigned by the airline. As a result, between 2003 and
2005, Frey was paid more than $90,000 in false “commissions” from Advantage, and Clayton
Hogeland received $22,000 of that money in the form of kickbacks. All but two of the kickback
payments were made by checks issued to Jennifer Hogeland, who deposited the funds into the
couple’s joint bank account. The remaining two checks were issued in Clayton Hogeland’s own
name.

In 2005, Hogeland and Frey became concerned that Frey’s name was being associated with
Flite Time. Therefore, Hogeland recruited a second co-conspirator, William Gregory Braswell,
to form a company that would replace Flite Time. That company, Air Cargo Consultants, began
receiving the commission payments in 2005. Between 2005 and 2006, more than $180,000 in
false commissions were paid by Advantage to Air Cargo Consultants. Out of those funds,
Clayton Hogeland and the first co-conspirator each received $30,000. Again, payments were
made by checks issued to Jennifer Hogeland.

In addition, Clayton and Jennifer Hogeland failed to report to the Internal Revenue Service
or pay taxes on the money obtained through the two fraud schemes during tax years 2003
through 2005. However, after learning that the IRS was conducting a criminal tax investigation, the Hogelands sought to cover up their willful tax evasion by filing amended tax returns for tax
years 2003 and 2004.

Bennett also failed to report to the Internal Revenue Service (“IRS”) or pay taxes for on the
money he obtained through the fraud scheme during tax years 2004 and 2005. After learning the
IRS was conducting a criminal tax investigation, he, like the Hogelands, sought to cover up his
willful tax evasion by filing amended tax returns that included the fraud income.

For their crimes, the defendants face a potential maximum penalty of 20 years in prison on
each count of mail fraud, ten years on each count of conspiracy to commit money laundering,
five years on each count of conspiracy to commit mail fraud, and five years on each count of
conspiracy to commit tax evasion. Judge Schiltz will determine their sentences at a future
hearing, yet to be scheduled.

On May 6, 2010, Frey pleaded guilty to one count of tax evasion in relation to his role in
this fraud. In his plea agreement, Frey admitted he attempted to evade personal income taxes on
more than $50,000 in taxable income for tax year 2004 by using his company, Flite Time, to
conceal income he received from a Minnesota-based transportation company. On May 5, 2010,
Braswell also pleaded guilty to one count of tax evasion. In his plea agreement, Braswell also
admitted attempting to evade personal income taxes on more than $100,000 in 2005 by using his
company, Air Cargo Consultants, to conceal income he received from the same Minnesota-based
company.

This case was the result of an investigation by the U.S. Postal Inspection Service and the
IRS-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorneys Tim Rank
and Julie E. Allyn.

This law enforcement action is in part sponsored by the interagency Financial Fraud
Enforcement Task Force. The task force was established to wage an aggressive, coordinated and
proactive effort to investigate and prosecute financial crimes. It includes representatives from a
broad range of federal agencies, regulatory authorities, inspectors general, and state and local
law enforcement who, working together, bring to bear a powerful array of criminal and civil
enforcement resources. The task force is working to improve efforts across the federal executive
branch and, with state and local partners, investigate and prosecute significant financial crimes,
ensure just and effective punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover proceeds for victims of financial
crimes.

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