Former KC Woman Indicted for Fraud Scheme to Steal Victim's Lottery Winnings

 

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a former Kansas City, Mo., woman has been indicted by a federal grand jury for a fraud scheme in which she stole $480,000 in lottery winnings from her victim as part of a scheme that resulted in a total loss of more than $640,000.

Freya Pearson, 41, of Georgia, formerly of Kansas City, was charged in a nine-count indictment returned under seal by a federal grand jury in Kansas City, Mo., on Tuesday, Oct. 28, 2014. The indictment was unsealed and made public today upon Pearson’s initial court appearance.

The federal indictment alleges that Pearson convinced her 60-year-old victim to transfer $480,000 into the bank account of an organization called Recidivism at Work (RAW), a nonprofit entity Pearson had recently established. This victim, the indictment says, had won $2 million in the Missouri Lottery in 2008 and, after purchasing two houses, established an annuity to provide approximately $30,000 per year for the rest of her life.

Pearson allegedly instructed the victim to withdraw her lottery winnings from the annuity account. The victim made three wire transfers in April, May and June 2010 to deposit the funds into Pearson’s RAW checking account. Whether the money was an investment or a business loan, the indictment says, Pearson materially omitted to disclose to the victim that she would use the money to gamble and for her own personal expenses. Pearson allegedly used the $480,000 to gamble, travel, buy cars, clothes, and furniture, and pay rent while she lived in the St. Louis, Mo., metropolitan area. According to the indictment, no identifiable money was used for the nonprofit entity, nor for any business purpose.

When she met the victim in 2010, according to the indictment, Pearson was unemployed and her only income came from child support and Social Security benefits for one of her children. In March 2010, Pearson began to receive federal housing benefits for a residence in Kansas City, Mo. The Section 8 program assists low-income families with housing by paying most or all the beneficiary’s rent. She received a total of $76,837 in federal housing benefits over four years. In 2011, Pearson also began receiving welfare and/or food stamp benefits.

According to the indictment, Pearson filed for Chapter 7 bankruptcy protection on Dec. 2, 2010, but did not disclose the RAW bank accounts, which had total balances of $56,506. Pearson received a discharge of her debts on March 15, 2011.

Pearson allegedly made random payments totaling $38,170 to the victim, using the victim’s own money, before stopping entirely in August 2011. Pearson filed no tax return for tax year 2010, the indictment alleges, and thus did not pay income taxes of $122,000 that would have been due on the $441,830 of taxable income Pearson received as a result of defrauding her victim.

Pearson allegedly defrauded the victim of a total of $441,830. Pearson allegedly evaded $122,000 in federal income tax. Pearson allegedly defrauded the Weston Housing Authority of $76,837 in housing benefits. According to the indictment, Pearson thus caused a total loss of at least $640,667.

The federal indictment charges Pearson with three counts of wire fraud, four counts of money laundering, one count of tax evasion and one count of making false statements to the Department of Housing and Urban Development (related to her application for federal housing benefits).

The indictment also contains a forfeiture allegation, which would require Pearson to forfeit to the government any property derived from the proceeds of the alleged offenses, including a money judgment of $441,830.

Dickinson cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Kathleen D. Mahoney. It was investigated by the Kansas City, Mo., Police Department, IRS-Criminal Investigation and the Dept. of Housing and Urban Development, Office of Inspector General.