Former Lexington Attorney Sentenced to 20 Years for Fraud Offenses, Obstruction of Justice, and Conspiracy to Distribute Controlled Substances
LEXINGTON, KY—A former Lexington attorney was sentenced today to 20 years in prison for wire fraud, mail fraud, tax fraud, obstruction of justice, and distribution of synthetic marijuana.
U.S. Senior District Court Judge Joseph M. Hood sentenced 35-year-old Seth J. Johnston and ordered him to serve three years of supervised release following the completion of his prison sentence. Under federal law, Johnston must serve at least 85 percent of his prison sentence. Restitution will be determined at a later date. Johnston pleaded guilty to the charges in October of 2013.
“Mr. Johnston relentlessly pursued a course of criminal conduct that is breathtaking in both its scope and audacity,” said Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky. “He seemingly missed no opportunity to defraud those with whom he dealt; often abusing his status as an attorney to do so. The sentence imposed today is just punishment for reprehensible conduct that victimized so many who placed their trust in Mr. Johnston.”
In a related hearing held on September 4th and 5th, 2014, Judge Hood found that Johnston engaged in multiple fraud schemes, resulting in a total loss amount of over $4 million dollars, to more than 250 victims, and that his crimes involved the abuse of a position of trust. In addition, Judge Hood found that Johnston had violated a prior order of the court and had engaged in obstructive conduct, including instructing others in the commission of criminal activity.
Johnston previously admitted that he was responsible for collecting money for plaintiffs in a civil lawsuit, as part of a settlement regarding the diet drug Fen-Phen. Johnston diverted $14,963.15 of the collected money for his personal use. Angela Ford, the Lexington attorney representing the plaintiffs in the lawsuit, 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.
In addition, Johnston admitted to defrauding Ford when she 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 bank documents regarding the status of her money.
Johnston also admitted 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 diverted approximately $1.1 million dollars that should have gone to the residual heirs of the Estate. Johnston further 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 also acknowledged that in 2013, he instructed witnesses, under subpoena to provide records to the grand jury regarding the fraud offenses, 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.
Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, FBI; Christopher Henry, Special Agent in Charge, IRS; James V. Allen, Acting Special Agent in Charge, DEA, and Ronnie Bastin, Chief of the Lexington Division of Police, jointly announced the sentence.
The investigation was conducted by the FBI, IRS, DEA and Lexington Police. Assistant U.S. Attorneys Erin M. Roth and Robert Duncan Jr., prosecuted the case on behalf of the federal government.