Managing Partner And Principal Of Accounting Firm Charged With Aiding And Abetting Union Embezzlement Scheme And Making False Filings With The U.S. Department Of Labor
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor (“DOL”) Office of Inspector General, announced today the arrests of SALVATORE ARMAO, the founder and managing partner of an accounting firm (the “Firm”), and KAREN AUER, a principal at the Firm, for aiding and abetting the embezzlement of over $100,000 from a labor union (the “Union”) and its employee welfare benefit plan (the “Plan”), and for making false filings with DOL to conceal the embezzlement scheme. AUER was also charged with making false statements to a DOL agent during the investigation of the embezzlement scheme. Both defendants surrendered this morning in Manhattan and are expected be presented today before U.S. Magistrate Judge Sarah Netburn.
U.S. Attorney Geoffrey S. Berman said: “Salvatore Armao and Karen Auer are professional accountants who allegedly facilitated and concealed a long-running union embezzlement scheme by knowingly submitting false filings with the Department of Labor and the Internal Revenue Service. Accountants and auditors like Armao and Auer are supposed to serve as safeguards against labor fraud, not facilitate it.”
DOL-OIG Special Agent-in-Charge Michael C. Mikulka said: “The Office of Inspector General is responsible for identifying and reducing labor racketeering and corruption in employee benefit plans, labor-management relations, and internal union affairs. We will continue to work with our law enforcement partners to investigate these types of allegations.”
According to the allegations in the Complaint:
From at least in or about 2010 through in or about 2014, the president of the Union, who also served as a trustee of the Plan (the “President-Trustee”), repeatedly used Union funds to pay for his personal expenses, including payments for spa treatments, a gym membership, a second car, medical charges, unrelated union dues for an actors’ union, purchases from retail establishments, payments to personal credit cards, and ATM cash withdrawals. The President-Trustee used his Union credit card to pay for personal expenses and then “reimbursed” the Union with funds transferred from the Plan. In total, the President-Trustee embezzled over $100,000 from the Union over approximately three years.
During the period of the embezzlement, the Firm served as the accountant and auditor for the Union and the Plan. To facilitate and conceal the President-Trustee’s embezzlement, ARMAO and AUER falsely classified as “loans” the personal expenses for which the President-Trustee paid using Union and Plan funds in accounting records and on DOL filings for the Union. ARMAO falsely classified the President-Trustee’s personal expenses as loans for at least five years, while AUER did so for at least one year. ARMAO and AUER also provided false information on DOL filings for the Plan, concealing from DOL the President-Trustee’s prohibited transfers of tens of thousands of dollars from the Plan to the Union which, in turn, facilitated and concealed the President-Trustee’s use of Union funds to pay his personal expenses. ARMAO repeatedly caused these false filings to be made to DOL despite being a Certified Fraud Examiner.
During the DOL’s investigation of the embezzlement scheme, ARMAO and AUER were interviewed by DOL. ARMAO admitted that he was aware of the President-Trustee’s use of Union assets to pay for personal expenses based upon his review of records that showed that the President-Trustee used Union funds to pay for his family vacations and his wife’s car payments, and then used the Plan to reimburse the Union. During her interview, AUER lied about a false response on a DOL form that AUER and ARMAO caused to be filed with the DOL.
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SALVATORE ARMAO, 64, of Howard Beach, New York, and KAREN AUER, 47, of Bethpage, New York, are each charged with one count of aiding and abetting embezzlement from a labor organization, one count of conspiracy to make false statements in employee benefit plan records and reports, and one count of making false statements in employee benefit plan records and reports. AUER is also charged with making false statements to a federal agent. Each of the four counts carries a maximum sentence of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman thanked the DOL’s Office of Inspector General, Employee Benefits Security Administration, Office of Chief Accountant, and Office of Labor-Management Standards for their outstanding work on this investigation. Mr. Berman also expressed gratitude to the Federal Bureau of Investigation and the Department of Justice’s Labor-Management Racketeering Unit of the Organized Crime and Gang Section for their assistance. Mr. Berman added that the investigation is continuing.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Michael D. Neff is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.