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ACCOUNTANT PLEADS GUILTY TO BANK FRAUD, TAX EVASION
August 19, 2004
| United States Attorney's Office Southern District of Ohio 221 East Fourth Street - Suite 400 Cincinnati, OH 45202 Tel: 513.684.2115 Fax: 513.684.6710 |
FOR IMMEDIATE RELEASE
| CINCINNATI
- John E. Duggan II, the owner of Duggan Financial, Inc.,
in Cincinnati, pled guilty in United States District Court
here today to bank fraud and tax evasion. Gregory G. Lockhart, United States Attorney for the Southern District of Ohio, Tod Hildebrand, Acting Special Agent in Charge, Federal Bureau of Investigation; and Cromwell A. Handy, Special Agent in Charge, Internal Revenue Service Criminal Investigation, announced the plea entered today before U.S. District Judge Sandra S. Beckwith. According to a statement of facts filed with the plea agreement, Duggan fraudulently diverted money from Miami Savings Bank of Miamitown, Ohio, First National Bank of Germantown, Ohio, and United Bank of Parkersburg, West Virginia between May 1998 and February 2003. Duggan had an arrangement with these banks whereby they would provide financing for equipment which would be leased through his company, Duggan Financial, located in Cincinnati, Ohio. Duggan Financial leased equipment to area businesses and made a profit on the rate spread. For example, Duggan Financial borrowed money from the banks at 8 per cent to purchase equipment and leased it to its customers at 10 per cent. In an attempt to save his failing business, Duggan began to illegally divert money from the banks using the following methods: - Soliciting early payoffs from lessees but not forwarding the payoffs to the bank. Duggan continued to make monthly payments on the leases to deceive the banks. - Presenting lease agreements that were funded by banks and then cancelled without the banks' knowledge. Duggan kept the funds instead of returning the money to the bank. - Collecting monthly lease payments from lessees but never forwarding them to the banks. - Submitting the same lease agreement to two separate banks which resulted in the lease being funded twice. Bank officials eventually confronted Duggan, and he admitted his fraudulent scheme. Duggan has entered into at least one civil agreement to pay back the money he owes to the banks. Duggan diverted the proceeds of the bank fraud for his own personal gain by writing checks on Duggan Financial's account to himself and his wife. Duggan recorded the payments to himself and his wife as "advances" or "loans" on Duggan Financial's books. However, Duggan never intended to repay them in full, as evidenced by the fact that he failed to disclose the existence of the so-called "advances" or "loans" on any of Duggan Financial's tax returns and financial statements. Instead, he mis-classified them as "accounts receivable" or "lease contracts receivable," to avoid drawing attention to them. As a Certified Public Accountant, Duggan knew these payments, had they been legitimate advances or loans, should have been classified as "loans to shareholder" and disclosed on Duggan Financial's tax returns and financial statements. Duggan and his wife deposited the checks they received from Duggan Financial into their personal bank accounts and used the proceeds to fund their lavish lifestyle. The total amount of the checks deposited greatly exceeded the income Duggan reported as wages from Duggan Financial on his individual tax returns for the years 1999 and 2000. In addition, Duggan paid personal living expenses from the account of Duggan Financial but did not claim them as income on his individual tax returns. For criminal tax purposes, Duggan willfully evaded individual federal income taxes in the amount of $74,397 for the years 1999 and 2000. The maximum penalty for bank fraud is 30 years in prison, five years of supervised release, a fine of $1 million, a mandatory $100 special assessment, and restitution. Probation is not authorized for bank fraud. The maximum penalty for income tax evasion is 5 years in prison, 3 years of supervised release, a $250,000 fine, 3 years of supervised release, a mandatory $100 special assessment, restitution, and the costs of prosecution. Duggan is free on his own recognizance pending sentencing. Judge Beckwith will set a date for sentencing. For additional comment contact Fred Alverson, Public Affairs Officer at 614.469.5715. The Internet address for the homepage for the United States Attorney's Office for the Southern District of Ohio is www.usdoj.gov/usao/ohs. |