(STL.News) – Michael T. Mann, age 50, of Saratoga County, New York, pled guilty today to orchestrating a years-long fraud that caused more than $100 million in losses to banks, financing companies, and other businesses.
Mann operated ValueWise Corporation, based in Clifton Park, New York, as well as subsidiary companies including MyPayrollHR.com LLC. In pleading guilty, he admitted that from 2013 to September 2019, he engaged in a fraudulent scheme to deceive banks and financing companies into loaning his companies tens of millions of dollars. Because Mann could not repay the loans with legitimate business revenues, he expanded the fraud, by stealing and diverting millions of dollars that were entrusted to his payroll companies, and engaging in the daily kiting of millions of dollars among bank accounts he controlled.
Mann’s scheme collapsed in early September 2019, when one of his banks froze his accounts, setting off a chain of events that left his payroll companies unable to make payroll for hundreds of small business customers nationwide.
United States Attorney Grant C. Jaquith stated: “Michael Mann’s fraud was staggering. He caused more than $100 million in losses and wove a web of deception so complex that it eventually ensnared hundreds of small businesses and several thousand workers across the country. Today’s plea is the start of holding him accountable for the terrible harm he inflicted on these victims, as well as the banks and other companies that trusted him with their money and believed his sophisticated lies.”
FBI Special Agent in Charge Thomas F. Relford stated: “Michael Mann’s deception directly impacted thousands of people across the country. Helping himself to those funds left the businesses who trusted him with their payroll unable to pay their employees who survive on timely paychecks. While many of the businesses were able to recover, others experienced irreparable hits to their reputations. Today’s admission of guilt is a small step forward in their process to rebuild. The FBI will continue to work with our law enforcement partners to aggressively pursue and charge those who willingly defraud our citizens and banking institutions.”
Mann pled guilty to one count of conspiracy to commit wire fraud, one count of aggravated identity theft, nine counts of bank fraud, and one count of filing a false tax return.
Mann’s scheme had multiple layers, including:
- Mann obtained tens of millions of dollars in loans from three financing companies, located in New York, Colorado and California, respectively, by falsifying his companies’ revenues and receivables. Mann falsely told the financing companies that Minnesota-based UnitedHealth Group Incorporated (“UHG”) and its subsidiary OptumInsight Inc. (“Optum”), owed millions of dollars to his companies. Mann created fake invoices reflecting the fictitious debt and assigned them to the financing companies as collateral for the loans
- Mann fraudulently obtained a line of credit (“LOC”) from several Capital Region banks, which had grown to $42 million by 2019. To obtain the LOC, Mann created companies whose sole purpose was to further the fraud by generating fake invoices, disguising sources of funds, and artificially inflating his assets; falsely represented to the banks that his fake businesses had revenues and receivables based on consulting work for Optum/UHG and other well-known companies, including 3M, Best Buy and T-Mobile; hid the tens of millions of dollars in loans he was receiving from the financing companies, and that he was using the LOC to pay down these loans; and provided false financial statements, and individual and corporate tax returns, to his outside auditor, which in turn made inaccurate reports to the banks
- Mann misappropriated payroll monies, entrusted to MyPayrollHR and another company, by changing the instructions for digital Automated Clearing House (“ACH”) files that were supposed to transmit payroll from MyPayrollHR’s customers (employers) to the employees of the customers. Although his companies’ contracts with Cachet Financial Services specified that ACH transfers would route payroll funds from the employers’ accounts to a designated Cachet trust account and then directly to the customers’ employees, Mann changed the instructions inside digital ACH files provided to Cachet, in order to divert payroll funds from MyPayrollHR’s customers into accounts he controlled at Pioneer Bank. When Pioneer Bank froze Mann’s corporate accounts on or about August 30, 2019, it froze the payroll funds in those accounts, and caused several thousand people across the country to not receive a payroll payment. Cachet, as the guarantor of the payroll funds, paid about $7.2 million to the employees of MyPayrollHR’s customers