Baltimore, Maryland – Stephen Reid, age 50, of Frederick, Maryland, pleaded guilty today to conspiracy to commit mail and wire fraud relating to the failure to provide contracted-for services to clients of Reid’s company, RMS Direct, Inc., resulting in losses of over $628,500.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Postal Inspector in Charge Gary R. Barksdale of the U.S. Postal Inspection Service - Washington Division.
“In addition to defrauding postal customers, this scheme jeopardized the reputation of the U.S. Postal Service with its customers,” said Gary Barksdale, Inspector in Charge, Washington Division, U.S. Postal Inspection Service. Mr. Barksdale continued, “Through investigations such as this, postal inspectors will continue to protect postal customers and ensure thePostalService retains its reputation as the most trusted government agency.”
According to his plea agreement, Reid was the vice president and part-owner of RMS Direct, Inc., a mail preparation service located in Frederick, Maryland, with over 200 clients and revenues of over $5 million per year. Under the supervision of Reid and his co-conspirator, RMS entered into contracts to prepare and submit to the U.S. Postal Service (USPS), large-volume mailings, typically made up of pamphlets, brochures, books, and other printed materials.
RMS clients were primarily non-profit corporations that relied upon the mailings sent through RMS to raise funds, and the timing of the mailings was essential to their fundraising efforts. RMS assembled the mailings, applied the postage and addresses, and organized the pieces of mail for submission to the USPS. RMS submitted the mailings to a full-time USPS Acceptance Clerk that was assigned to its office. As proof that the mailings went out, RMS then emailed its clients either of two USPS documents – a postage statement signed and certified by the USPS Acceptance Clerk or a Mailing Transaction Receipt printed from an online USPS database. Both documents included information as to the dates, times, number of pieces of mail and postage paid. Once the RMS client received a statement, it would remit payment to RMS.
Reid admitted that the conspiracy began in 2005, when he and his co-conspirator falsified postage statements to misrepresent to RMS clients that mailings were being sent out in a timely fashion when, in fact, the mailings were late. Beginning in 2009, Reid and his co-conspirator selected certain mailings or portions of mailings that would not be submitted at all to USPS for delivery. Reid and his co-conspirator made sure that the documentation sent to the RMS client was falsified to indicate that the full mailing had been submitted, thereby causing the client to overpay RMS for postage and services.
To accomplish the fraud, Reid, his co-conspirator, and RMS employees operating at their direction, generated false postage statements, forged the signature of the USPS Acceptance Clerk and created a false impression of the special USPS date stamp used on the postage statement. In 2006, RMS employees made an unauthorized copy of the USPS Acceptance Clerk’s key to the filing cabinet where the official date stamp was kept. From that time until 2010, Reid, his co-conspirator, and RMS employees operating at their direction used the copied key to gain access to the date stamp when the USPS Acceptance Clerk was not present in order to falsify postage statements. Beginning in 2010, when the computer-generated Mailing Transaction Receipt was adopted by the USPS to certify mailings, Reid and his co-conspirator falsified those as well, using a document that had been created, which, when printed, looked identical to the USPS Mailing Transaction Receipt. Reid and his co-conspirator directed RMS employees to use this document to create false Mailing Transaction Receipts, which were then sent to RMS clients as proof of the timely and complete submission of their mailings.
Reid and his co-conspirator took other measures to conceal the fraud and prolong the victimization of RMS clients. For example, RMS clients often included pieces of mail known as “seeds,” in the mailings they provided to RMS. These “seeds” were sent to particular individuals or addresses so that the client could track the timing and appearance of the mailing. Reid’s co-conspirator directed RMS employees to make sure to deliver the “seeds” from the mailings that were going out late or were not otherwise submitted to the USPS, in order to conceal the fraud.
As a result of the scheme, at least 19 victims lost a total of $628,581.48.
Reid faces a maximum sentence of 20 years in prison and a fine of $250,000. As part of his plea agreement, Reid will be required to forfeit $628,581.48. U.S. District Judge Catherine C. Blake scheduled sentencing for July 12, 2013 at 9:00 a.m.
United States Attorney Rod J. Rosenstein praised the U.S. Postal Inspection Service for its work in the investigation. Mr. Rosenstein thanked Special Assistant U.S. Attorney Sean C. Marlaire, who is prosecuting the case.