Federal Grand Jury Returns Two Indictments Charging Disbarred Memphis Attorney with a total of Sixty-Seven Felony Violations
Memphis, TN – D. Michael Dunavant, United States Attorney for the Western District of Tennessee, announced today that a federal grand jury has returned two indictments charging disbarred Memphis attorney Keith L. Dobbs, 39, with a total of sixty-seven federal felony violations. In addition, one indictment seeks the forfeiture of at least $406,533.00 in criminal proceeds.
According to the two indictments, Dobbs misappropriated funds from 26 victims who received veteran’s benefits and nine Social Security recipients. Dobbs acted as a fiduciary for these victims because they were unable to manage their benefits due to physical or mental disabilities. The indictments were the result of a joint investigation conducted by the Office of Inspector General for the Department of Veterans Affairs and the Office of Inspector General for the Social Security Administration.
The VA Indictment
The first indictment, which was filed under seal earlier this year, charges Dobbs with 26 counts of mail fraud in violation of Title 18, United States Code, § 1341. This statute makes it a crime to utilize the U.S. Mail to execute a scheme to defraud people of money or property. Each violation of the statute is punishable by up to 20 years imprisonment, a fine of up to $250,000, and a term of supervised release of no more than three years. Supervised release is a period of time in which a defendant is subject to supervision by the U.S. Probation Office following his or her release from prison. Dobbs is charged in 22 counts of the indictment with violating Title 38, United States Code, § 6101. This statute makes it a crime for someone serving as a fiduciary to embezzle benefits a veteran receives from the Department of Veterans Affairs. Each violation of this statute is punishable by up to five years imprisonment, a fine of up to $250,000, and a term of supervised release of no more than three years.
According to the mail fraud indictment, Dobbs served as a paid fiduciary for several veterans who received benefits from the Department of Veterans Affairs ("the VA"). The indictment identifies 28 veterans for whom Dobbs served as the fiduciary. The VA manages programs that provide military veterans with pensions and disability benefits. When a veteran cannot manage his or her benefits due to "injury, disease, or infirmities of advanced age," the VA will appoint a "fiduciary" who is charged with managing the veteran’s benefits. An appointed fiduciary owes the VA and the beneficiary "the duties of good faith and candor." Under the regulations governing the VA’s fiduciary program, the fiduciary must use the VA benefits for the veteran’s care and protect the benefits from loss or diversion. The program’s regulations specifically provide that a fiduciary may not commingle the veteran’s funds with "the fiduciary’s own funds or the funds of any other beneficiary for whom the fiduciary has funds under management." The regulations require a fiduciary to file an annual accounting with the VA, and the accounting must include "copies of financial institution documents reflecting receipts, expenditures, and beginning and ending balances."
According to the mail fraud indictment, Dobbs used funds embezzled from the veterans’ accounts to pay his personal obligations, such as credit card bills and rent, and to purchase items, such as a BMW automobile. The indictment also notes that Dobbs would transfer money from the veterans’ accounts into accounts he controlled and use the transferred funds for his own benefit, and transfer funds from one veteran’s account to another veteran’s account to cover shortfalls. As part of the fraud scheme, Dobbs would alter bank statements to "disguise the true nature of certain transactions he conducted using the beneficiaries’ funds in their fiduciary accounts," and create documents such as "Certificate[s] as to Securities" and "Certificate[s] of Balance on Deposit and Authorization to Disclose Financial Records," that contained false statements. The indictment lists 26 separate mailings of false and altered documents to the VA’s Louisville Fiduciary Hub between June 3, 2014 and January 8, 2016.
The indictment also charges Dobbs with embezzling and misappropriating funds coming into his control as a VA fiduciary on 22 separate occasions between April 18, 2014 and July 13, 2015.
The Social Security Indictment
A second indictment recently returned by the federal grand jury charges Dobbs with 19 counts of converting the monthly Social Security benefit payments of nine benefit recipients in violation of Title 18, United States Code, § 408(a)(5). This statute makes it a crime for a person who is receiving Social Security benefits on behalf of another person to convert those benefits to their own use. As set forth in the indictment, Dobbs had access to the beneficiaries’ funds because he served as their representative payee. A violation of this statute is punishable by up to five years imprisonment, a fine of up to $250,000, and a term of supervised release of no more than three years.
The indictment explains the particulars of the Social Security Administration’s "representative payee" program. If the Commissioner of the Social Security Administration concludes that the interest of a beneficiary would be served by paying the
beneficiary’s Social Security benefits to another person, the commissioner may certify payment of the benefits to a third person. The commissioner will make such a certification when he or she determines that a benefit recipient is "legally incompetent or mentally incapable of managing benefit payments" or "physically incapable of managing or directing the management of his or her benefit payments." The Social Security Administration refers to the third person to whom the beneficiary’s Social Security benefits are paid as a representative payee.
A representative payee must use the benefits for "the use and benefit" of the beneficiary, and keep the beneficiary’s funds separate from the representative payee’s funds. Benefit payments will be considered to have been used for the "use and benefit of the beneficiary if they are used for the beneficiary’s "current maintenance."" By regulation, the term "current maintenance" includes "costs incurred to obtain food, clothing, shelter, medical care, and personal comfort items" for the beneficiary. A person applying to serve as a representative payee must participate in a face-to-face interview with a representative from the Social Security Administration and must affirm that he or she will "use all payments made to me/my organization as the representative payee for the [beneficiary’s] current needs or (if not currently needed) then for the [beneficiary’s] future needs."
Dobbs applied to the Social Security Administration to be the representative payee for nine beneficiaries, and was appointed representative payee for each of the nine victims. According to the indictment, Dobbs converted the nine victims’ Social Security benefits to his own use by drawing checks on their accounts made payable to him; transferring funds from their accounts into an account that he controlled; and by using the funds in the victims’ accounts to make purchases and pay bills. The conversions charged in the indictment all involved monthly benefit payments and took place between August 9, 2015 and December 9, 2015.
U.S. Attorney D. Michael Dunavant said: "This offender used his fiduciary positions of trust to victimize vulnerable and disabled veterans for his own selfish gain and unjust enrichment. Such fraudulent schemes are particularly harmful and offensive, and must be exposed. We thank the VA OIG and the SSA OIG for their outstanding investigative work, and we look forward to achieving justice for the victims in this disturbing case."
Kim R. Lampkins, Special Agent in Charge of the VA Office of Inspector General’s Mid- Atlantic Field Office said, "The VA OIG is committed to pursuing those who have done harm to our deserving veterans and bringing those individuals to justice. VA OIG will pursue fraud, waste, and abuse that negatively affects our nation’s heroes."
Rodregas Owens, Special Agent-in-Charge of the Social Security Administration, Office of the Inspector General, Atlanta Field Division, said, "We are committed to pursuing those who violate the public trust by misusing funds while serving as representative payees for vulnerable Social Security beneficiaries. We will continue to uphold the integrity of Social Security’s programs, which are a lifeline for so many Americans and their families. I would like thank United States Attorney Michael Dunavant and his office for their support, and the Veterans Affairs, Office of the Inspector General for its partnership, in bringing this individual to justice."
This case was investigated by the U.S. Department of Veterans Affairs Office of Inspector General and the U.S. Social Security Administration Office of Inspector General.
Assistant U.S. Attorney Joe Murphy is prosecuting this case on behalf of the government.