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Federal Court Orders Kansas City Area Business Owner to Pay $4.3 Million in Restitution, Serve Prison Term for Fraud and Theft of Employee Benefit Plan
KANSAS CITY, KS – The U.S. District Court for the District of Kansas has sentenced Leavenworth, Kansas, business owner Brenda Wood to serve 50 months of imprisonment followed by an additional five years of supervised release, and to make more than $4.3 million in restitution for bank fraud and violations of the Employee Retirement Income Security Act. Wood previously pleaded guilty to two counts of bank fraud and one count of theft from an employee benefit plan.
The action comes after an investigation in which the U.S. Department of Labor's Employee Benefits Security Administration (EBSA), working with the U.S. Department of Labor's Office of the Inspector General (OIG), the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Federal Bureau of Investigation (FBI), found Wood committed the theft and bank fraud while owner and fiduciary for several companies.
Wood owned Professional Cleaning and Innovative Building Services Inc. (PCI), a commercial cleaning services company in Kansas City, Missouri, as well as four Bonner Springs, Kansas, businesses: Commercial Development and Management LLC (CDM), Action Real Estate Services LLC, G&W Investments LLC, and Riverview Crossings LLC. In November 2010, Wood established the PCI Building Services Inc. 401(k) plan for the retirement benefit of employees of PCI and CDM.
From approximately May 2011 through August 2012, Wood - majority owner of PCI and CDM - unlawfully embezzled and converted approximately $31,403 in deferred contributions from employee salaries to the 401(k) plan. The court-ordered restitution includes $69,000 in employee and matching employer contributions, as well as lost earnings due to the 401(k) plan, and approximately $4.3 million for fraudulent loans and identity theft.
Wood assured employees who confronted her about missing 401(k) contributions that Nationwide Life Insurance Company held their funds in escrow when, in fact, she had already used their contributions for her own benefit without their permission. Wood also falsely accused her company's accountant of embezzlement, and falsely claimed her former in-house counsel and human resources manager were responsible for the 401(k) plan. In addition, she made false statements to Farmers Bank and Trust of Great Bend, falsely claiming PCI had received a contract for cleaning services at an IRS facility in Kansas City, Missouri, when the company failed to make the final round of bids. Based on her statements, the bank extended a $350,000 line of credit on which Wood submitted draw requests, stating that she needed the funds to fulfill the IRS contract.
"Fraudulent transactions like these have a severe impact on companies and individuals," said Employee Benefits Security Administration Regional Director Jim Purcell, in Kansas City. "The actions can cause irreparable damage to the retirement savings of individuals and their future financial security."
Wood also created a check-kiting scheme to inflate her bank account balances artificially. She exchanged and cross-deposited more than 473 insufficient fund checks between her accounts at Capital Federal Savings Bank, Intrust Bank, and the Credit Union of Leavenworth County.
Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa.