Texas Man Sentenced For Operating Phony Invoice Scheme

MINNEAPOLIS-- Earlier today in federal court, a 43-year-old Texas man was sentenced in connection with the operation of a phony invoice scheme that defrauded an Eagan-based company out of more than $600,000. United States District Court Judge Patrick J. Schiltz sentenced Clayton Craig Hogeland, of Aurora, Texas, to 200 months in prison on five counts of mail fraud, two counts of conspiracy to commit mail fraud, two counts of conspiracy to commit money laundering, and three counts of tax evasion. Hogeland was indicted, along with two others, on March 17, 2010, and was convicted on December 6, 2011.

Judge Schiltz also found that Hogeland had obstructed justice by faking a life-threatening medical condition, which caused multiple delays to both his trial and sentencing hearing. Hogeland cited this condition in a motion seeking a reduction in his sentence. Judge Schiltz concluded that Hogeland faked this illness by ingesting high levels of potassium, and found that Hogeland’s conduct justified a substantial upward variance in his sentence. Judge Schiltz said that Hogeland’s actions reflected “an unfathomable dishonesty and audacious selfishness.”

The evidence presented at trial proved that from January 2003 through April 2005, Hogeland conspired with others, including Jeffrey Cole Bennett, to defraud Advantage Transportation, a freight transportation logistics provider headquartered in Eagan. Advantage contracts with customers who have freight to be transported as well as with trucking companies willing to move that freight. 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. Bennett was also charged in the fraud case.

Following today’s sentencing, Kelly R. Jackson, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation’s St. Paul Field Office, said, “The IRS enforces the nation’s tax and money laundering laws, but also takes particular interest in cases where someone, for their own personal benefit, has taken what belonged to others. Today’s sentencing of Mr. Hogeland shows how seriously the courts take federal tax and money laundering crimes.”

Craig I. Goldberg, Acting Postal Inspector in Charge of the Denver Division, which also covers the Twin Cities, added, “Postal inspectors will continue to protect the integrity of the U.S. Postal Service and aggressively investigate those cases where the U.S. mails are used to defraud individuals or businesses of money and property.”

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 also 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 Clayton Hogeland. To conceal those kickbacks, Bennett made the payments via checks issued to Clayton Hogeland’s wife, Jennifer Hogeland, 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 other co-conspirators. That scam occurred after Advantage began providing freight transportation services to an airline company in 2003. Carl Frey, one of the co-conspirators, was employed by the airline and was responsible for arranging contracts with over-the-road shipping companies. At the direction of Hogeland, Frey formed a company, Flite Time, which 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, Hogeland and Frey became concerned that Frey’s name was being associated with
Flite Time. Therefore, 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 Frey received $30,000 each. Again, payments were made by checks issued to Jennifer Hogeland.

In addition, Clayton and Jennifer Hogeland failed to report to the Internal Revenue Service or pay taxes on the money obtained through the two fraud schemes during tax years 2003 through 2005. However, 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.

For his part, Bennett also failed to report or pay to the Internal Revenue Service (“IRS”) taxes on the money he obtained through the fraud scheme during tax years 2004 and 2005. After learning that 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.

On November 13, 2012, Bennett was sentenced to 95 months in federal prison for his role in the scheme. In February 2012, Braswell and Frey were sentenced, each to three years of probation. On January 10, 2013, Jennifer Hogeland was sentenced to 15 months in prison on three counts of conspiracy to commit tax evasion.

This case was the result of an investigation by the U.S. Postal Inspection Service and the IRS-Criminal Investigation. 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, investigates and prosecutes significant financial crimes, ensures just and effective punishment for those who perpetrate financial crimes, combats discrimination in the lending and financial markets, and recovers proceeds for victims of financial crimes.