Company Executive And Consultant Sentenced In Manhattan Federal Court For Scheme To Embezzle Millions From International Insurance Company
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JAMES J. SHEA and EUGENE FALLON were sentenced in Manhattan federal court to 18 and three months in prison, respectively, for their participation in a scheme to embezzle approximately $2.6 million from a large international insurance company. In perpetrating the scheme, SHEA, an executive at the company, forged the signature of the company’s Chief Financial Officer to authorize numerous payments to consulting companies that FALLON controlled for purported work that was never performed. FALLON then returned more than two-thirds of the proceeds of the fraud to SHEA, who used the money to purchase a multimillion-dollar house and luxury automobiles, and FALLON kept the remainder. On November 13, 2015, SHEA pled guilty to one count of wire fraud before U.S. District Judge Paul A. Engelmayer. FALLON pled guilty to one count of wire fraud before Judge Engelmayer on November 18, 2015. Judge Engelmayer sentenced SHEA on March 31, 2016, and sentenced FALLON earlier today.
U.S. Attorney Preet Bharara said: “Not satisfied with the income they earned as senior executives in their respective companies, James Shea and Eugene Fallon broke the law for even more money. They embezzled $2.6 million from Shea’s company by claiming the money was for consulting work by Fallon, when in fact it was shared between the two to fund the purchase of lavish homes and luxury cars.”
According to the Complaint, Indictment, other documents filed in the case, and statements made in open court:
From January 2012 through December 2013, SHEA and FALLON engaged in a scheme to embezzle approximately $2.6 million from SHEA’s employer, the North American subsidiary of an international insurance company (“Company-1”). SHEA, who rose to the title of Executive Vice President at Company-1, was responsible for the integration of the information technology systems of subsidiaries of Company-1. In that capacity, SHEA oversaw the use of third-party consultants, one of whom was FALLON, who worked in that capacity at Company-1 from 2010 through 2013. According to Company-1’s policies and practices, the CFO of Company-1 could personally authorize and approve any third-party vendor contracts up to $1.5 million.
In 2012, SHEA forged the signature of Company-1’s CFO on contracts between Company-1 and two consulting companies controlled by FALLON (the “Consulting Companies”). According to the contracts that outlined the sham engagement between Company-1 and the Consulting Companies, the Consulting Companies were primarily tasked with providing Company-1 with assistance in integrating the technology systems of Company-1. For a total of 17 months of work, the agreements required Company-1 to pay one of the Consulting Companies approximately $1.5 million and the other approximately $1.1 million. In fact, the Consulting Companies did no work for Company-1.
Beginning in August 2012, and continuing through February 2013, FALLON submitted fraudulent invoices on behalf of the Consulting Companies to Company-1 for consulting work that was not performed. On behalf of Company-1, SHEA then authorized approximately 16 payments for the invoices in the amount of approximately $2.6 million to bank accounts that were controlled by FALLON. Of the approximately $2.6 million that SHEA and FALLON embezzled, more than $1.8 million was routed back to SHEA, while FALLON kept the remainder. SHEA used the majority of his fraudulent proceeds to purchase a multimillion-dollar house and two luxury cars.
* * *
SHEA, 49, of Paramus, New Jersey, was sentenced to 18 months in prison, to be followed by three years of supervised release, and a $100 special assessment. FALLON, 52, of Nanuet, New York, was sentenced to three months in prison, to be followed by three years of supervised release, and a $100 special assessment.
Mr. Bharara praised the work of the Federal Bureau of Investigation.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Daniel S. Goldman and Michael Ferrara are in charge of the prosecution, and Edward Diskant is in charge of the forfeiture aspects of the case.