Two Bel Air Men Facing Federal Indictment for $13 Million Scheme to Defraud Their Employer, Including Money Laundering and Tax Evasion
Indictment Seeks the Forfeiture of $13 Million, a BMW, a Recreational Vehicle, and a Residence in Bel Air Allegedly Derived from Proceeds of the Alleged Embezzlement Scheme
Baltimore, Maryland – A federal grand jury has returned an indictment charging Eugene Andrew DiNoto, age 50, and Elliott Dennis Kleinman, age 67, both of Bel Air, Maryland, for the federal charges of conspiracy to commit wire fraud, wire fraud, mail fraud, money laundering, illegal monetary transactions and tax evasion, related to a $13 million scheme to defraud their employer. The indictment was returned on September 1, 2021, and unsealed today upon the arrest of the defendants. Elliott Kleiman has an initial appearance scheduled today at 3:45 pm, in U.S. District Court in Baltimore before U.S. Magistrate Judge Copperthite. Eugene DiNoto’s initial appearance in the Middle District of Florida where he was arrested has not yet been scheduled.
The indictment was announced by Acting United States Attorney for the District of Maryland Jonathan F. Lenzner; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Acting Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
According to the 22-count indictment, Company A was a global business headquartered in New York that formulated and produced oils and extracts used in the food industry. Its affiliate, Company B, produced flavoring ingredients and seasonings for the food industry. Company A and Company B (the “Companies”) had manufacturing facilities in Belcamp and Abingdon, Maryland. To ship their products, the companies used large plastic, metal, or fiber drums, which they purchased from vendors located in various states. Kleinman was employed as the facility manager for the Companies until approximately 2012, when DiNoto took over his position, remaining in that position until approximately January 2020. As facility managers, Kleinman and DiNoto arranged and negotiated the prepurchase, transportation and storage of the drums needed to ship the Companies’ products from Business A and its affiliate, Business B, (the “drum vendors”), located in Carlstadt, New Jersey, then reviewed and authorized the payment of drum invoices submitted by drum suppliers doing business with the Companies. Once approved, the drum invoices were sent to the accounting department at the Companies’ headquarters to pay. Kleinman continued to maintain a relationship with the drum vendors after leaving his employment with the Companies.
The indictment alleges that from January 2015 until about January 2020, Kleinman and DiNoto, devised and executed a scheme to defraud the Companies, without the Companies’ knowledge or consent, by making a secret arrangement with the drum vendors to receive kickbacks for intentionally overlooking inflated charges that the drum vendors included on invoices submitted to the Companies. Specifically, the defendants approved the drum vendors’ false and inflated purchase invoices and submitted those fraudulent invoices to the Companies for payment. In exchange, the drum vendors paid the defendants approximately 50 percent of the inflated invoice amounts, which DiNoto and Kleinman split approximately 75/25, respectively.
For example, the indictment alleges that when asked by Company representatives to review the accuracy of the drum vendor invoices, DiNoto intentionally ignored false and inflated charges for tens of thousands of drums that the vendors never sent to the Companies, certified the accuracy of the invoices, and authorized their payment, submitting them to the Companies’ accounting department in New York for payment.
To conceal the nature and purpose of the payments from the drum vendors, DiNoto and Kleinman had the drum vendors issue checks payable to businesses that they established, with the notation “drums” written on the front. DiNoto registered the tradename “Sandpiper Enterprises” in the state of Maryland and opened and maintained a commercial bank account in that name. The address of record for Sandpiper Enterprises was DiNoto’s residence. Kleinman was the owner and sole shareholder of EDK Management Ltd. (EDK). EDK’s business address was the same as Kleinman’s residence. Kleinman opened two commercial bank accounts for EDK, one in the name “EDK Management Ltd” and the other in the name “EDK Management Ltd t/a Main Street Cigars. Main Street Cigars was a retail store located in Bel Air, Maryland.
As detailed in the indictment, the drum vendors sent checks to the defendants’ residences using a commercial interstate mail carrier. The indictment alleges that DiNoto then deposited the checks into the Sandpiper bank account, then transferred all or part of the funds into personal bank accounts, eventually withdrawing the funds as cash or spending them on personal expenses. Kleinman allegedly deposited the drum vendor checks into EDK’s business account, where it was withdrawn as cash, spent on personal expenses, or transferred to the EDK/Main Street Cigars account.
For example, the indictment alleges that on February 19, 2019, Kleinman transferred $7,500, which were proceeds from mail fraud, from the EDK commercial bank account to the EDK/Main Street Cigars account, in order to disguise the nature, source, ownership, and control of the illegal proceeds. In addition, the indictment alleges that DiNoto illegally transferred $26,000 derived from wire fraud from the Sandpiper account to other accounts he controlled.
Finally, the indictment alleges that for the 2017 through 2019 tax years the defendants underreported their taxable income on their Individual Income Tax Return, Form 1040, resulting in thousands of dollars in taxes due and owing. For example, for tax year 2017 DiNoto and Kleinman allegedly reported that their taxable income for the year was $3,153 and $58,365, respectively. According to the indictment, in fact, DiNoto’s taxable income in 2017 was $1,214,557, with tax owing of approximately $430,395, and Kleinman’s taxable income was $421,829, with tax owing of approximately $106,623.
If the defendants are convicted, the indictment seeks the forfeiture of a money judgment in the amount of $13,000,000; a 2016 BMW 6 Series coupe; a recreational vehicle; a bank account; and Kleinman’s residence, as property involved in the offenses of conviction or traceable to the criminal activity.
If convicted, the defendants face a maximum sentence of 20 years in federal prison for conspiracy to commit wire fraud; a maximum sentence of 20 years in federal prison or each of five counts of wire fraud; a maximum of 20 years in federal prison for each of six counts of mail fraud; and a maximum of five years in federal prison for each of three counts charging each defendant with tax evasion. Kleinman faces a maximum of 20 years in federal prison for money laundering. DiNoto also faces a maximum of 10 years in federal prison for each of three counts of engaging in an illegal monetary transaction. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
Acting United States Attorney Jonathan F. Lenzner commended the FBI and IRS – CI for their work in the investigation. Mr. Lenzner thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the federal case.
For more information on the Maryland U.S. Attorney’s Office, its priorities, and resources available to help the community, please visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.
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