Three Men Accused in Check-Kiting Scheme

A one-count information was filed against Timothy L. Kephart, Lee W. Stoneburner, and Mark D. Michael charging them with conspiracy to commit bank fraud, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.

The three men are accused of taking part in a check-kiting scheme wherein, at the end of the scheme, approximately $3.6 million in NSF checks were “kited” between the various business accounts of their company, Dart Trucking Company, at the Huntington Bank in Columbiana, Ohio.

Kephart, age 52, resides in Morrisdale, Pennsylvania; Stoneburner, age 43, resides in Canfield, Ohio; and Michael, age 53, resides in Clearfield, Pennsylvania.

The information charges that the Dart Trucking Company, dba Dart Services, Inc., dba Dart Transport, Inc., dba Dart Trucking Company, Inc., dba Dart Trans, Inc., (all referred to herein as the Dart Trucking Company), was a trucking and transportation company located in Columbiana, Ohio, with offices in Pennsylvania.

Kephart was the chief operating officer, Stoneburner was the president, and Michael was the chief financial officer, according to the information.

The information charges that from October 2007, through February 2010, Defendants Kephart, Stoneburner, Michael, and an unnamed employee not charged herein, conspired to kite checks in five Dart Trucking company accounts at the Huntington Bank in Columbiana, Ohio.

All of these accounts were set up as Controlled Disbursement Accounts (CDA’s). These CDA’s were supposed to be a means of organizing and controlling the payment of expenses related to operation of the business. CDA’s have a separate routing number for checks that are to clear the account. Due to the checks bearing a separate routing number, it automatically created another day of “float” time for a check item to clear an account because of the bank’s internal processing procedures.

Kephart, Stoneburner, and Michael deposited, in one of the CDA’s mentioned above, checks from other CDA’s which did not have sufficient cover the checks (“NSF checks”), thereby falsely inflating that account since the Huntington Bank extended immediate credit for deposited items. This balance remained available for use for the one-day float until another NSF check from another CDA was deposited into the CDA to “cover” that check, according to the information.

The information charges that Kephart, Stoneburner, and Michael caused these CDA’s to be temporarily and artificially inflated in amounts which increased over the course of the scheme as the check-kiting activity accelerated and magnified to the point where the check kiting had to be monitored daily to keep it going for as long as possible.

An information is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt. If convicted, the defendants’ sentence will be determined by the court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

The case is being prosecuted by Assistant U.S. Attorney Christian H. Stickan following investigation by the FBI, Youngstown Office.