Three Operators of ATM Servicing Business Sentenced to Prison Terms Between 20 and 51 Months for $1.7 Million Fraud Scheme
|U.S. Attorney’s Office July 21, 2014|
CHICAGO—Three Chicago men are facing federal prison sentences ranging from 20 to 51 months for their roles in a seven-year fraud scheme that caused client banks of their ATM servicing business to lose more than $1.7 million. The last of the three defendants was sentenced today while the other two were sentenced last month.
The defendants, JAMES CARLSON, JOSEPH CABELLO, and THOMAS O’MALLEY, owned and operated ATS Uptime, Inc., from approximately 1999 through 2013, with offices in Chicago and Oswego. ATS had about a dozen clients and serviced approximately 800 ATMs, which included replenishing cash, collecting deposits, and maintain the banking machines.
Carlson, 46, was the president of ATS and beginning in the summer of 2010 was primarily responsible for the company’s vault, and loading cash into and repairing ATMs, including some he owned personally. As the fraud scheme was collapsing, Carlson voluntarily reported it to the FBI in September 2013 and cooperated extensively with the investigation, including recording conversations with Cabello and O’Malley. Carlson was sentenced today to 20 months in prison, beginning Sept. 19, and ordered to pay $658,572 in restitution.
“You cannot steal millions of dollars and not pay a substantial price,” U.S. District Judge Ronald Guzman said today in noting Carlson’s cooperation but rejecting his request for probation.
O’Malley, 42, was the chief financial officer, office manager, bookkeeper, and at times, responsible for the vault in Chicago. He was sentenced last month to 33 months in prison, beginning July 30, and ordered to pay $1,758,572 in restitution.
Cabello, 41, who personally owned some of the ATMs serviced by ATS, ran the Oswego office and was responsible for servicing ATMs. He was sentenced last month to 51 months in prison and ordered to pay $1,758,572 in restitution.
All three men pleaded guilty to one count of wire fraud after they were charged in September 2013.
According to court records, in 2005, Carlson discovered that approximately $200,000 of funds belonging to clients was missing. Around the same time, O’Malley said that he needed to use clients’ funds from the vault to pay for some of ATS’ moving expenses, and Carlson instructed Cabello and O’Malley to return the client funds and was assured they would be returned. In October 2010, shortly after Carlson began working in ATS’ Chicago vault, Carlson learned that ATS was missing approximately $1.1 million and did not have enough money to repay all of its clients. Prior to that time, Cabello and O’Malley had access to the cash in ATS’ Chicago vault.
O’Malley admitted that he stole at least $200,000 of clients’ funds for business purposes and his own personal use. Cabello admitted that he used clients’ funds for his own ATMs, and did not keep track of the amount he took or the amount he repaid.
Between 2007 and 2012, O’Malley and Cabello, and after October 2010, Carlson, used funds belonging to certain clients, which were stored in the vault, to fill ATMs that belonged to other clients, and to repay money owed to other clients, without authorization from the owners of those funds to use their money in that manner. As part of the fraud scheme, the defendants e-mailed account balance statements to their clients, falsely representing the amount of cash that ATS actually had on hand for them, both because of their thefts and commingling of client funds. They also deceived bank auditors into believing that ATS was properly handling client funds by moving the cash they had available from one owner to another.
The sentences were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Jacqueline Stern.