Williamsburg Man Pleads Guilty to Wire Fraud and Money Laundering Charges
NORFOLK, Va. – Stephen Kohout, 56, of Williamsburg, Virginia, pleaded guilty yesterday to wire fraud and concealment money laundering.
Dana J. Boente, United States Attorney for the Eastern District of Virginia made the announcement after the plea was accepted by U. S. District Judge Robert G. Doumar.
Kohout was charged in a criminal indictment returned on March 11, 2014, with thirteen counts of wire fraud and eight counts of concealment money laundering. Kohout faces a maximum penalty of 20 years in prison on the wire fraud charge and a $250,000 fine, and a maximum penalty of 20 years in prison on the money laundering charge and a fine of $500,000 when he is sentenced on July 10, 2014, in Norfolk.
According to a statement of facts filed with his plea agreement, Kohout was given power of attorney by his parents, R. K. and J.K., on July 15, 2003. The power of attorney provided Kohout with full authority to act on behalf of both of his parents with respect to their property, assets and income. In 2006, Kohout began handling the financial affairs of his parents, whose assets were in excess of $1 million and were held in bank and investment accounts to which Kohout had gained full access and control. By 2007, his parents had lost the medical capacity to make financial decisions and Kohout assumed full control over their assets. R. K. died in July, 2011 and his entire estate was left to his wife J.K., who currently resides at a nursing home in Tyrone, Pennsylvania.
In 2007, Kohout, in connection with day trading activities, formed two business entities, ITM Traders, LLC and Nychi, Inc., and opened bank accounts for each of the companies. Thereafter he transferred $55,000 from his parents’ bank account into his account with ITM Traders, LLC. Subsequent to that transfer, he continued to transfer various funds between the ITM Traders, LLC account and the Nychi, Inc. account, all in an effort to support his trading activities.
Kohout did not return any gains made from these trades to his parents’ accounts. Instead, from 2008 through July 2011, Kohout wired approximately $465,000 from his parents’ investment account to his parents’ bank trust accounts. He then misappropriated money from the bank trust accounts in the amount of $386,000 by writing 86 checks, all but one of which were transferred to an account in Kohout’s name.
Kohout spent the misappropriated money on his personal living expenses, repayment of personal loans, credit card bills and dining, entertainment and retail expenditures. In addition to the disbursements Kohout made for his day trading and personal expenses, from 2007 through 2011, Kohout made various disbursements from his parents’ accounts in the form of gifts, loans to his siblings and for the medical care and living expenses of his parents.
Around December 2012, the nursing home caring for J.K. threatened eviction proceedings against her due to her account being in financial arrears. In January 2013, Kohout filed for bankruptcy and despite admitting that he acted contrary to his fiduciary duty and misappropriated his parents’ assets, he did not reveal the full extent of his misappropriation. Kohout’s sister was appointed emergency guardian of their parents’ estate by a Pennsylvania court. J.K. continues to reside at the nursing home where her care is being paid for in whole or in part by the Commonwealth of Pennsylvania Department of Public Welfare. The funds in the parents’ investment accounts had been liquidated and the balance in J.K.’s bank account is approximately $2,000.
This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service. Assistant U. S. Attorney Brian Samuels is prosecuting the case on behalf of the United States.A copy of this press release may be found on the website of the U.S. Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.