Lexington Attorney Pleads Guilty to Mail Fraud, Wire Fraud, Distribution of Controlled Substances, Obstruction of Justice, and Tax Fraud Charges
|U.S. Attorney’s Office October 31, 2013|
LEXINGTON—A Lexington attorney admitted his involvement in a drug ring and several fraud schemes, where he illegally diverted in excess of a million dollars.
On Wednesday, Seth Johnston, 34, pleaded guilty to two counts of mail fraud and one count each of wire fraud, conspiracy to obstruct of justice, conspiracy to distribute a controlled substance analogue (synthetic marijuana), and tax fraud.
Johnston admitted he was responsible for collecting money for plaintiffs in a civil lawsuit, as part of a settlement regarding the diet drug Fen-Phen. However, Johnston diverted $14,963.15 of the collected money for his own personal use. Angela Ford, the Lexington attorney representing the plaintiffs in the lawsuit, had hired the law firm where Johnston worked to garnish assets of the defendants in that lawsuit, William Gallion, Shirley Cunningham and Melbourne Mills, Jr. This fraud scheme started in 2008 and continued through 2010.
Court records state that Ford had hired Johnston to establish multiple corporate bank accounts to hold $3.5 million of Ford’s money. Johnston acknowledged that he diverted a significant amount of Ford’s money for his own personal gain, some of which he used to purchase property for other clients. To cover up this scheme, Johnston provided Ford with fraudulent documentation regarding the status of her money.
Johnston also admited that in 2010, he perpetrated a scheme to defraud the residual heirs of an estate for which he provided representation. According to court records, he hid assets and diverted money for his own personal use.
In addition, Johnston admitted that, as part of a drug conspiracy, he provided approximately $100,000 to others to purchase synthetic marijuana to be distributed in Lexington.
Johnston acknowledged that in 2013, he instructed witnesses, who had been subpoenaed to testify at the grand jury regarding the fraud case, to destroy documents so that certain evidence would not be available. Johnston further admitted that, in 2011, he under reported his taxable income to the IRS. Specifically, Johnston reported an income of $26,372 when, in fact, his income was $208,950.
The U.S. Attorney’s Office for the Eastern District of Kentucky; Robert L. Corso, Special Agent in Charge, DEA; Perrye Turner, Special Agent in Charge, FBI; and Christopher Henry, Special Agent in Charge, IRS, jointly announced the plea today.
The investigation was conducted by the DEA, FBI, and IRS. Assistant U.S. Attorneys Erin Roth, Robert Duncan, Jr. and Elisabeth Sigler prosecuted the case on behalf of the U.S. attorney’s office.
Johnston is scheduled to be sentenced on March 3, 2014. The tax fraud charge carries a maximum of five years in prison. The remaining offenses each carry a maximum penalty of 20 years’ imprisonment. However, any sentence imposed by the court would come after consideration of the U.S. Sentencing Guidelines and the federal statutes.