President And Chief Financial Officer Of Charlotte Area Payroll Services Company Sentenced To Prison In Connection With $2 Million Fraud Against Clients
Conspirators Used Clients’ Money to Cover their Exorbitant Salaries; Chairman of the Board Is also Facing Charges for His Role in the Conspiracy
CHARLOTTE, N.C. –The President and Chief Financial Officer (CFO) of a Charlotte-based payroll services company were sentenced to prison today by Chief U.S. District Judge Frank D. Whitney, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina. Jerry Wayne Overcash, 67, of Charlotte, and John Bernard Thigpen, 60, of Rock Hill, S.C., were sentenced to 46 months and 21 months in prison, respectively, for stealing over $2 million from client companies and using the money to fund exorbitant salaries. In addition to the prison term, they were each ordered to serve two years of supervised release and to jointly pay $1.3 million as restitution to the victim client companies. The Court will enter a final restitution amount in 90 days, to allow any additional eligible victims to submit their claims.
The company’s co-founder and Chairman of the Board, Frank Alton Moody, II, 56, of Arden, N.C., was indicted in March 2016 for his role in the fraudulent scheme.
U.S. Attorney Rose is joined in making today’s announcement by Thomas L. Noyes, Inspector in Charge of the Charlotte Division of the U.S. Postal Inspection Service (USPIS) and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI).
“Overcash and Thigpen were integral members of an elaborate financial scheme that ripped off their clients’ money and defrauded the federal government. A prison sentence is the only punishment befitting of these two professional scam artists,” said U.S. Attorney Rose.
“The fraud scheme executed by the conspirators is an egregious story of countless lies and endless greed. They ignored their fiduciary responsibilities to their clients and left many of them holding the bag, while they stuffed their pockets. They were entrusted as professionals and to represent their client’s interests with respect to the Internal Revenue Service, and they abused this trust by ignoring their responsibilities and engaging in theft. IRS Criminal Investigation with our law enforcement partners remain committed to pursuing individuals like Overcash and Thigpen, and seeing that they face justice,” said Special Agent in Charge Holloman.
“The U.S. Postal Inspection Service is committed to investigating and bringing to justice those who prey on innocent victims for their selfish gain. We value the collaboration with our law enforcement partners to protect the American Public,” said Inspector in Charge Noyes.
According to documents filed in court and today’s sentencing hearings, Thigpen, a Certified Public Accountant, was hired in December 2010 to serve as the CFO of CenterCede Services Inc. (CenterCede), a payroll services company with clients in Charlotte and elsewhere. CenterCede was established in August 2010 by Overcash and Moody, to assume the business operations of another payroll services company the two men previously owned and operated, “The Resource Solutions Group” (TRSG). TRSG had been shut down by IRS in August 2010, for failing to pay more than $9 million in federal payroll taxes TRSG collected from its clients.
Court documents show that from November 2010 to November 2011, CenterCede purportedly provided payroll preparation and processing services to its clients. As such, CenterCede collected funds from its clients to pay the client companies’ federal tax obligations, gross payroll for the clients’ employees, worker’s compensation, and unemployment insurance, among other moneys, as well as fees due to CenterCede. According to court records, throughout the relevant time period, Thigpen, with oversight from Overcash and Moody, supervised the preparation of tax returns on behalf of client companies. Contrary to their representations to clients, the conspirators did not pay the clients’ federal taxes in appropriate amounts and by the applicable deadlines. Instead, according to court records, Moody, Overcash and Thigpen diverted the funds to pay their own exorbitant salaries and to cover growing liabilities, including the tax liabilities of other CenterCede clients. To keep the scheme afloat, the conspirators paid only those obligations necessary to keep their ongoing cash flow crisis a secret from clients.
As reflected in court documents, the conspirators favored what they called “priority” clients and attempted to keep those priority clients from learning about monthly cash shortfalls by frequently paying those clients’ obligations ahead of other non-priority clients. “Priority” clients generally had large payrolls with deposits necessary to fund CenterCede’s short-term cash needs and to keep the scheme afloat. Court records show that when clients inquired about failures to pay their obligations, the three conspirators took steps to conceal the fraud by providing false excuses and misleading explanations. Court records show that in the second and third quarters of 2011, Thigpen, Overcash and Moody defrauded CenterCede’s payroll clients of more than $2 million dollars. At the same time that the conspirators failed to pay the tax obligations of CenterCede’s clients, Overcash and allegedly Moody each continued to draw a $240,000 annual salary from CenterCede.
In announcing today’s sentences, Judge Whitney said that the Court wanted to “send a message to others entrusted with third parties’ money, and anyone who is a fiduciary of other people’s money.” Judge Whitney noted that Thigpen “learned his lesson the hard way.” Judge Whitney also said that Overcash “committed a serious crime that victimized a lot of businesses and individuals, and the Internal Revenue Service” and that Overcash’s conduct resulted in “a lot of people being severely hurt.”
Thigpen and Overcash previously pleaded guilty to wire fraud charges. Moody is currently charged with one count of conspiracy and one count of wire fraud and has been released on bond. The conspiracy charge carries a maximum of 5 years in prison and a $250,000 fine. The wire fraud charge carries a maximum of 20 years in prison and a $250,000 fine. All charges against Moody are allegations and he is presumed innocent unless and until proven guilty beyond reasonable doubt in a court of law.
The investigation for the case is being handled by USPIS and IRS-CI. Assistant U.S. Attorneys Corey F. Ellis and Taylor Phillips of the U.S. Attorney’s Office, in Charlotte are in charge of the prosecution.