Tennessee man sentenced for Operating Phony Invoice scheme
FOR IMMEDIATE RELEASE
November 13, 2012
MINNEAPOLIS—Today in federal court, a 52-year-old Tennessee man was sentenced for operating a phony invoice scheme that defrauded an Eagan-based company out of nearly $400,000. United States District Judge Patrick J. Schiltz sentenced Jeffrey Cole Bennett of Lakeland, Tennessee, to 95 months in federal prison on 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. Judge Schiltz also ordered Bennett to pay $393,183.37 in restitution. Bennett, who was indicted on March 17, 2010, was convicted along with two co-defendants on December 6, 2011, following a twelve-day jury trial.
The evidence presented at trial proved that from January 2003 through April 2005, Bennett conspired with co-defendant Clayton Hogeland, age 42, of Aurora, Texas, to defraud Advantage Transportation, a freight transportation logistics provider headquartered in Eagan. 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 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 Hogeland. To conceal those kickbacks, Bennett made the payments via checks issued to Hogeland’s wife and co-defendant, Jennifer Hogeland, age 39, 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 fraud scheme began after Advantage started 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 Clayton Hogeland, Frey formed a company, Flite Time, which Clayton 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, Clayton Hogeland and Frey became concerned that Frey’s name was being associated with Flite Time. Therefore, Clayton 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 (“IRS”) or pay taxes on the money obtained through the two fraud schemes during tax years 2003 through 2005. In 2008, 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 IRS or pay taxes for 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. In order to evade payment of his taxes, however, Bennett created fraudulent documents to support false deductions, including documents falsely showing payments to a person Bennett knew to be deceased.
For their crimes, the Hogelands 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 future hearings, yet to be scheduled.
On February 28, 2012, Judge Schiltz sentenced Frey to three years of probation and ordered him to pay $102,500 in restitution. 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 February 10, 2012, Judge Schiltz also sentenced Braswell to three years of probation and ordered him to pay $190,500 in restitution. On May 5, 2010, Braswell 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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