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Justice News

Department of Justice
U.S. Attorney’s Office
Western District of Missouri

FOR IMMEDIATE RELEASE
Friday, April 13, 2018

Former CFO Sentenced for Embezzling $6.5 Million from KC Company

KANSAS CITY, Mo. – The former chief financial officer of a Kansas City, Mo., company was sentenced in federal court today for embezzling more than $6.5 million from his employer.

Douglas Lee Ferrell, 34, of Kansas City, Mo., was sentenced by U.S. District Judge Brian C. Wimes to five years in federal prison without parole. The court also ordered Ferrell to pay $1,940,462 in restitution to his victims, which is the remaining loss amount after Ferrell’s partial repayment of restitution.

On Aug. 3, 2017, Ferrell pleaded guilty to wire fraud and money laundering.

Ferrell, hired as a family friend of his employer, began working for Scarbrough International at its headquarters in Kansas City, Mo., in 2005 as an account representative and became the company’s chief financial officer in 2012. Scarbrough International is a privately owned, U.S. Customs Broker and international freight forwarder.

Ferrell admitted that he embezzled approximately $6,523,742 from the company for his own use and enjoyment. Over a nearly eight-year period, from Sept. 1, 2006, to June 10, 2014, Ferrell engaged in a scheme to embezzle company funds by making unauthorized personal charges to the company’s credit card and PayPal accounts, and then using company funds to pay those charges.

Ferrell also made a number of financial transactions of funds that he knew were the proceeds of fraud, including a $650,000 wire transfer (that contained at least $475,625 in fraud proceeds) to Cayman National Bank in the Cayman Islands to purchase a beach house. Ferrell wired a total of more than $2,250,000 to purchase that property. Ferrell also used embezzled funds to ship furnishings from the United States for the property and for additional construction and improvements to the property, including over $77,000 in payments to a Cayman Islands tile company. After the improvements, paid for with additional embezzled funds, the property was valued at over $2.6 million.

According to court documents, Ferrell concealed his embezzlement through the years of controlling the company’s financial affairs and finding ways to blame others for the company’s financial woes. For example, Ferrell would scour the expenses of other employees, calling them out for their wastes of company funds, while he embezzled substantially greater sums. Ferrell also was involved in recommending persons to lay off while the company was going through the financial crisis in 2010, even though during 2010, Ferrell stole roughly $600,000. While not all of the 11 layoffs resulted from Ferrell’s fraud, a meaningful number did.

Ferrell’s fraud only stopped when American Express cancelled the company’s credit card on Friday, June 6, 2014. The following Monday, June 9, Ferrell told the Scarbroughs that he was leaving the company because he was pursuing the deal of a lifetime. That same week, American Express contacted the company and explained that the company’s American Express card was cancelled due to Ferrell’s charges. At that point, the company reviewed records and disclosed the fraud. Shortly thereafter, the Scarbroughs confronted Ferrell by phone about his embezzlement. On June 12, 2014, Ferrell met with the Scarbroughs and their attorneys, confessed to his fraud, and outlined a plan to liquidate assets to repay what he embezzled.

This case was prosecuted by Assistant U.S. Attorney Brian P. Casey. It was investigated by IRS-Criminal Investigation and the Kansas City, Mo., Police Department.
 

Topic(s): 
Financial Fraud
Tax
Updated April 13, 2018