Home Louisville Press Releases 2009 Elizabethtown Business Executives Indicted in Mail Fraud Scheme
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Elizabethtown Business Executives Indicted in Mail Fraud Scheme
Former President and Vice-President of Roller Bearing Industries

U.S. Attorney’s Office October 07, 2009
  • Western District of Kentucky (502) 582-5911

LOUISVILLE, KY—Michael Paul of Breckinridge County, Kentucky, and Daniel Conway of Richmond, Virginia, were on indicted on October 5, 2009, announced United States Attorney Candace G. Hill of the Western District of Kentucky. A federal grand jury in Louisville, Kentucky returned an Indictment charging both Paul and Conway with one count each of mail fraud and conspiracy to commit mail fraud. The Indictment alleges that Conway and Paul conspired to cause R.S. Material and G.R.D. Enterprises to fraudulently invoice R.B.I. for the purchase of “dirty bearings.” “Dirty bearings” is a term used to describe used railroad-car bearings that R.B.I. purchases to recondition. (R.B.I. is in the business of reconditioning used railroad car bears, i.e. “dirty” bearings.) During the course of reconditioning these bearings, however, a certain amount of the bearing components are beyond repair and R.B.I. must scrap those bearing components or send them back to the original manufacturer for reconditioning.

The Indictment further alleges that Conway, while working as the president of R.B.I., and Paul, while working as the vice-president and director of operations of R.B.I., caused railroad-car bearing components owned and controlled by R.B.I. to be shipped to R.S. and G.R.D. R.B.I. previously set aside these bearing components because they required repairs beyond the scope of those permitted to be performed by R.B.I. under the American Association of Railroads rules and regulations. Paul and Conway caused R.S. Material and G.R.D. Enterprises to perform reconditioning work on the bearing components taken from R.B.I. work which R.B.I. was prohibited from performing. They then caused these improperly-reconditioned bearing components to be shipped back to R.B.I. after the prohibited reconditioning work.

In addition, they caused R.B.I. to receive R.S. Material and G.R.D. Enterprises invoices and bills of lading describing the shipments as “dirty bearings.” These invoices fraudulently billed R.B.I. for the purchase of 11,516 “dirty bearings” in the amount of $1,280,121.50. These invoices caused R.B.I. to issue checks totaling $1,262,721.50 for the purchase of “dirty bearings.” In truth, and in fact, however, “dirty bearings” were not provided to R.B.I., but, rather, improperly-reconditioned bearing components were provided at grossly inflated prices.

The Indictment further alleges that G.R.D. Enterprises and R.S. Material were businesses owned and operated by friends and relatives of Paul, and during the course of the conspiracy, Paul personally received payments and benefits from R.S. Material and G.R.D. Enterprises. It was also part of the conspiracy that Paul and Conway concealed their association with G.R.D. Enterprises and R.S. Material from R.B.I.

Ultimately, Conway’s and Paul’s actions caused the bearing components improperly reconditioned by G.R.D. Enterprises and R.S. Materials to be placed in the inventory of R.B.I. and eventually sold to R.B.I. customers. The customers were not aware the purchased bearings contained improperly reconditioned components.

In the event of a conviction, the maximum potential penalties are 40 years’ imprisonment, a $500,000 fine, and supervised release for a period of three years.

The case is being prosecuted by Assistant United States Attorney Bryan R. Calhoun, and it was investigated by the Federal Bureau of Investigation and United States Postal Inspection Service.

Paul and Conway are scheduled to appear for arraignment before the United States Magistrate Judge on October 22, 2009, at 9:30 a.m., in Louisville, Kentucky.

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