Friday, November 10, 2006

Controller Pleads Guilty to Embezzling $2.5 Million

Richard E. Davis entered a guilty plea to embezzling approximately $2.5 million over eight years from his employer, Packaging Corporation of America (PCA), where he was the controller and chief accountant at a plant in Richmond, Virginia.  The bulk of the embezzlement occurred by inflating invoices payable to a janitorial company owned by his wife, as described in a press release (here) issued by the U.S. Attorney's Office for the Eastern District of Virginia:

Between 1997 and 2005, Davis caused over 100 PCA checks to be generated and mailed via United States Postal Service to Building Services Inc. (BSI), a janitorial service operated by Davis and owned by his wife, which provided janitorial services to PCA. During this same time period, Davis caused inflated and phantom billings to be made by PCA to BSI. Investigation revealed that in 2005 alone, Davis approved expenditures for PCA janitorial services at the Richmond plant amounting to approximately $8,000 per employee, while other PCA plants outside of Richmond spent an average of $257 per employee for janitorial services. During the eight year period of the scheme, Davis misappropriated over $2.1 million of PCA funds to BSI.

In addition, Davis had approximately $200,000 diverted from the company to pay for work on his house, and another $100,000 was used to purchase gift cards from Sam's Club, some of which were given as gifts.  Davis' job included reviewing and approving all vendor invoices, and apparently no one was looking over his shoulder.  Yet another lesson in how the financial choke-point at a company (or plant in this case) can abuse his authority with no one paying any attention to wildly disparate amounts being spent -- unless the Richmond plant was really that dirty. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/11/executive_plead.html

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