Aurora Man Charged with Defrauding His Beachwood Employer and Investment Clients of $366,000
|U.S. Attorney’s Office July 03, 2013|
A 10-count information was filed charging an Aurora, Ohio man with defrauding his Beachwood-based employer and its investment clients out of about $366,000, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, and Stephen D. Anthony, Special Agent in Charge of the Cleveland Office of the Federal Bureau of Investigation.
Andrew J. Franz, age 41, was charged with three counts of mail fraud, one count of securities fraud, one count of investment adviser fraud, and five counts of income tax evasion.
“This defendant betrayed the trust of his employer and his clients,” Dettelbach said. “He lined his pockets with the money that people worked a lifetime to save.”
Anthony said, “Andrew Franz enriched himself with hundreds of thousands of ill-gotten dollars by creating and carrying out various fraudulent schemes. The FBI will continue to work with our law enforcement partners to bring to justice those that steal the hard-earned money of others.”
The first three counts of the information charge that Franz, through his employment and association with the Ruby Corporation (Ruby), a Beachwood investment company, defrauded Ruby and at least 10 of its clients by misappropriating more than $366,000 in customer funds for his own personal use and benefit.
Franz submitted quarterly fee requests to mutual fund and annuity companies for payment of investment advisory fees for Ruby’s clients’ investment accounts. Franz then caused these companies to issue checks by mail to Ruby, which checks Franz intercepted and deposited into bank accounts he maintained and controlled and which funds he used for his own personal use and benefit, according to the information.
Franz submitted some fee requests that were for amounts not due and payable to Ruby and some fee requests that were for amounts greater than were due and payable to Ruby. Franz also caused mutual fund and annuity companies to send some of these fraudulently obtained fee payments through the mail to his own residence, according to the information.
On some occasions, Franz deposited the funds obtained by his fraudulent fee requests into the accounts of Ruby in an attempt to conceal his fraudulent activity. Franz also contacted a mutual fund company by telephone and, misrepresenting himself as the owner of a trust, caused the mutual fund company to mail payments to Franz’s personal residence. Franz then deposited these checks into bank accounts he maintained and controlled, according to the information.
The information specifically lists three checks, drawn on the accounts of various clients of Ruby, that the Integrity Life Insurance Company sent to Franz’s personal residence between July 20, 2010 and September 7, 2010, as payment for false and fraudulent fee requests that Franz submitted.
Count four charges Franz with securities fraud in using and employing manipulative and deceptive devices and contrivances in connection with the purchase and sale of securities by employing devices, schemes, and artifices to defraud and by engaging in practices which operated as a fraud on investors.
Count five charges Franz with investment adviser fraud in aiding and abetting an investment adviser, namely, Ruby Corporation, in employing a scheme to defraud a client or prospective client and engaging in a practice that operated as a fraud and deceit upon a client, through the use of the mail and instrumentalities of interstate commerce.
Counts six through eight charge that Franz committed income tax evasion for calendar years 2007, 2008, 2009 by filing false and fraudulent tax returns. Counts nine and 10 charge Franz with income tax evasion for calendar years 2010 and 2011 by failing to make an income tax return as required by law and by conducting his business affairs and personal expenditures in a manner designed to conceal his receipt and disposition of income and assets from the Internal Revenue Service. The total amount of additional tax due and owing by Franz for the tax evasion charged in counts six through 10 is $245,352, according to the information.
An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
If convicted, the defendant’s 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 and Trial Attorney Scott M. Watson, following investigation by agents of the FBI-Cleveland Office and IRS-Criminal Investigations-Cleveland Office, with assistance of the United States Securities and Exchange Commission, Chicago, Illinois.