World Health Alternatives CEO Sentenced to More Than 10 Years in Prison for $41 Million Fraud Scheme

PITTSBURGH—A resident of Armstrong County, Pennsylvania, has been sentenced in federal court to 130 months’ imprisonment, to be followed by three years of supervised release, on his conviction of wire fraud, securities fraud, willful certification of false statements to SEC, failure to pay over payroll taxes, and income tax evasion, United States Attorney David J. Hickton announced today.

United States District Judge Joy Flowers Conti imposed the sentence on Richard E. McDonald, 38, of 642 Schenley Road in Leechburg, Pennsylvania.

According to information presented to the court, in 2003, Richard E. McDonald became the president, principal financial officer, principal accounting officer and chairman of the Board of Directors of World Health Alternatives Inc. (WHA). In or around June of 2004, McDonald also became the chief executive of WHA, a position he maintained until his resignation on or about August 15, 2005.

Between in or around February 2003 and August 15, 2005, McDonald defrauded WHA and its investors in several ways. He transferred funds from WHA to his personal bank account and other accounts under his control. McDonald also manipulated the financial records and statements of WHA by understating the amount of unpaid payroll taxes of WHA and its subsidiaries and by overstating the amount of loans purportedly made by him to WHA. In addition, McDonald stole money from WHA by directing purchasers of newly issued shares to transfer the funds for the shares to accounts under McDonald’s control. McDonald stole approximately $6 million and then spent the money on himself.

In his capacity as CEO of WHA, McDonald falsely represented to the SEC, WHA shareholders, and prospective purchasers of WHA stock, the actual number of outstanding WHA shares by understating, in WHA’s financial statements, the actual number of outstanding WHA shares. The fraudulent understatements of the number of outstanding WHA shares falsely overstated WHA’s earnings per share, and thereby inflated the apparent market value of WHA stock.

As a result of McDonald’s fraudulent conduct, WHA shareholders lost $41 million.

McDonald also pled guilty to a charge of personal tax evasion for failing to report the funds he had fraudulently obtained from WHA and its shareholders. Finally, he pled guilty to a charge that he, in his capacity as CEO of WHA, failed to pay over to the IRS the payroll taxes which WHA had withheld from its employees.

Assistant United States Attorney Shaun E. Sweeney prosecuted this case on behalf of the government.

U.S. Attorney Hickton commended the Internal Revenue Service, United States Postal Inspection Service and the Federal Bureau of Investigation for the investigation leading to the successful prosecution of McDonald.