Texas Man Pleads Guilty to Stealing $930,000 from St. Joseph Employer
KANSAS CITY, MO—Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Weatherford, Texas man has pleaded guilty in federal court to a mail fraud scheme in which he embezzled more than $930,000 from Herzog Contracting Corporation in St. Joseph, Mo.
Daniel Reif, 48, of Weatherford, Texas, pleaded guilty before U.S. District Judge Beth Phillips on Thursday, Jan. 22, 2015, to one count of mail fraud and one count of filing a false income tax return.
By pleading guilty, Reif admitted that he engaged in a scheme to defraud Herzog from January 2006 through Aug. 26, 2011. The government’s evidence establishes the amount embezzled by Reif totaled at least $931,256.
Herzog, which constructs railroads, highways, bridges, and airports, has a regional office in Irving, Texas. Reif began working for Herzog in the Irving office in August 2005. Reif was the manager of signals for Herzog and responsible for procuring materials and services from vendors in order to fulfill the needs of existing jobs; he was also responsible for oversight of the installation and performance of those services and materials. Reif was authorized to approve payments to vendors under his supervision and responsibility.
Reif founded his own company, Railway Signal Solutions, LLC (RSS), in February 2005. Reif began ordering project materials and services from supply vendors through RSS, then re-selling those products and services to Herzog at inflated prices. The RSS invoices made it appear as though the materials and services were being provided directly by RSS, an ostensibly independent supply vendor.
Reif, on behalf of RSS, paid the original, true vendors with a personal credit card or cashier’s check. Reif then, through RSS, invoiced Herzog for a higher price. The difference between the true price and Reif’s inflated price varied from 10 percent to over 100 percent. After RSS invoiced Herzog, Reif actually authorized payment of the inflated invoices himself.
Over the course of Reif’s scheme, RSS invoiced Herzog a total amount of at least $3,883,306, and Herzog paid RSS a total of at least $3,657,896.
Today’s plea agreement cites one instance of a $292,241 check from Herzog made payable to RSS that was mailed on March 10, 2010. The check was sent as payment for two invoices, one of which was sent by RSS to Herzog for a signal material package in the amount of $246,856. Reif, through his company RSS, had paid $152,686 for this same part, thus marking up the part by $94,170 and defrauding Herzog that same amount.
Reif also admitted that he filed a false federal income tax return on April 19, 2009, for the year 2008. According to the plea agreement, Reif claimed $990,159 in business expenses, although $498,301 of his business expenses had already been reimbursed by Herzog, his employer. The return materially understated his taxable income, resulting in a tax loss to the government of $192,230.
Under the terms of the plea agreement, Reig will be sentenced to 36 to 38 months in federal prison without parole and must pay restitution in an amount to be determined by the court. Reif must forfeit to the government $105,000 seized from his TD Ameritrade account and a 2010 Tige boat and trailer; Reif also must make a $225,000 payment on or before the date of sentencing. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Assistant U.S. Attorney Kathleen D. Mahoney. It was investigated by the FBI and IRS-Criminal Investigation.