Kentucky Businessman Sentenced In Manhattan Federal Court To 12 Years In Prison For $53 Million Tax Scheme And Massive Fraud That Involved The Bribery Of Bank Officials
Preet Bharara, the United States Attorney for the Southern District of New York, and Acting Assistant Attorney General Caroline D. Ciraolo, of the Department of Justice’s Tax Division, announced that WILBUR ANTHONY HUFF, a Kentucky businessman, was sentenced today to 12 years in prison and over $108 million in restitution for committing various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (“IRS”), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators and an investment bank. HUFF pled guilty in December 2014 before U.S. District Judge Naomi Reice Buchwald, who imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Anthony Huff and his co-conspirators stole millions of dollars from taxpayers and engaged in extensive frauds, all in the pursuit of additional property, luxury cars, and the like. His crimes have earned him 12 years in prison. I would like to thank our law enforcement partners for their assistance on this case.”
Acting Assistant Attorney General Caroline D. Ciraolo said: “The department is committed to vigorously pursuing and prosecuting those individuals who violate the employment tax laws of the United States,” said Acting Assistant Attorney General Ciraolo. “Today’s significant prison sentence sends a loud and clear message to those engaged in such criminal conduct, including owners and operators of Professional Employer Organizations like Mr. Huff, who steal employment taxes collected from their business clients to line their own pockets, instead of paying over those funds to the IRS.”
According to the Information, plea agreement, sentencing submissions, and statements made during court proceedings:
HUFF was a businessman who controlled numerous entities located throughout the United States (“HUFF-Controlled Entities”). HUFF controlled the companies and their finances, using them to orchestrate a $53 million fraud on the IRS and other schemes, spanning four states, involving tax violations, bank bribery, fraud on bank regulators, and the fraudulent purchase of an insurance company. As part of his crimes, HUFF concealed his control of the HUFF-Controlled Entities by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors, or officers. HUFF also maintained a corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci, Sr., the president and chief executive officer, and Matthew L. Morris, the senior vice president.
From 2008 to 2010, HUFF controlled O2HR, a professional employer organization (“PEO”) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (“Providence P&C”) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, HUFF stole the money that his client companies had paid O2HR for those purposes. Among other things, HUFF diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses. The expenses included mortgages on HUFF’s homes, rent payments for his children’s apartments, staff and equipment for HUFF’s farm, designer clothing, jewelry, and luxury cars.
Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company
From 2007 through 2010, HUFF engaged in a massive multifaceted conspiracy, in which he schemed to (i) bribe executives of Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly traded company, and (iii) fraudulently purchase an Oklahoma insurance company. As described in more detail below, HUFF paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci in exchange for their favorable treatment at Park Avenue Bank.
As part of the corrupt relationship between HUFF and the bank executives, HUFF, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital by orchestrating a series of fraudulent transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million, and engaged in a series of further fraudulent actions to conceal from bank regulators the true source of the funds.
HUFF further conspired with Morris, Antonucci, and others to defraud Oklahoma insurance regulators and others by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt.
Bribery of Park Avenue Bank Executives
From 2007 to 2009, HUFF paid Morris and Antonucci at least $400,000 in exchange for which they: (i) provided HUFF with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of HUFF’s businesses $1.75 million if HUFF failed to pay the investor back himself; (ii) allowed the HUFF-Controlled Entities to accrue $9 million in overdrafts; (iii) facilitated intra-bank transfers in furtherance of HUFF’s frauds; and (iv) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the HUFF-Controlled Entities.
Fraud on Bank Regulators and a Publicly Traded Company
From 2008 to 2009, HUFF, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the Bank from engaging in certain types of banking transactions, and that would subject the Bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the Bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the Bank’s pre-existing capital. HUFF, Morris, and Antonucci funneled the $6.5 million from the Bank through accounts controlled by HUFF to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the Bank’s capitalization problem, so the Bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the Bank in a better posture to receive $11 million from the Troubled Asset Relief Program. To conceal their unlawful financial maneuvering, HUFF created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. HUFF, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises, Inc., a publicly traded temporary staffing company, in order to pay Park Avenue Bank back for monies used in connection with the $6.5 million transaction.
Fraud on Insurance Regulators and the Investment Firm
From July 2008 to November 2009, HUFF, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C (the Oklahoma insurance company that was owed $5 million by O2HR), and (ii) defraud the Investment firm into providing a $30 million loan to finance the purchase. Specifically, HUFF and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from the Investment Firm, which used Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, HUFF, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and HUFF, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank – not the Investment Firm – was funding the purchase of Providence P&C.
After deceiving Oklahoma regulators into approving the sale of Providence P&C, HUFF took $4 million of the company’s assets, which he used to continue the scheme to defraud O2HR’s clients. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after HUFF, Morris, and Antonucci had pilfered its remaining assets.
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In addition to the prison sentence, HUFF, 53, of Caneyville and Louisville, Kentucky, was sentenced to 3 years of supervised release, and ordered to forfeit $10.8 million to the United States and pay a total of more than $108 million in restitution to victims of his crimes, including, among others, the Federal Deposit Insurance Corporation (“FDIC”) and the IRS.
In imposing today’s sentence, Judge Buchwald said Huff’s crimes were “truly staggering” and “eye popping.” Judge Buchwald described Huff’s conduct, which was preceded by a federal conviction and failure to pay millions in civil judgments, as “a living example” of “chutzpah,” which she defined as “shameless audacity and unmitigated gall.”
Matthew L. Morris and Allen Reichman pled guilty for their roles in the above-described offenses on October 17, 2013, and February 20, 2015, respectively. Reichman is scheduled to be sentenced before Judge Buchwald on July 15, 2015. Morris is scheduled to be sentenced before Judge Buchwald on August 19, 2015.
Charles Antonucci pled guilty on October 8, 2010, to his role in the crimes described above and is scheduled to be sentenced on August 20, 2015, also before Judge Buchwald.
Mr. Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, IRS Criminal Investigation, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the United States Attorney’s Office for the Southern District of Florida for their assistance.
Today’s announcement is part of efforts underway by 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’s 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.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani and Special Assistant U.S. Attorney Tino Lisella of the Tax Division are in charge of the criminal case.