Three Charged with Defrauding West Chester Company of Millions
PHILADELPHIA—Douglas S. Rae, 58, of Bethlehem, PA, was charged today by indictment* with participating in several schemes to defraud his former employer, a company based in West Chester, PA, of millions of dollars. Rae is charged with seven counts of mail fraud, 25 counts of wire fraud and conspiracy to commit wire fraud, and three counts of money laundering, announced United States Attorney Zane David Memeger.
In related matters, also charged today by information were John R. Hodde, 53, of Aubrey, TX, and Michael H. Keppler, 55, of Ridgewood, NJ. Hodde and Keppler are separately charged with two counts of wire fraud and conspiracy to commit wire fraud for their alleged participation, along with Rae, in schemes to defraud Rae’s former employer.
According to the indictment, between 2006 and 2013, Rae devised a scheme to defraud his employer by submitting invoices from two companies he controlled for goods and services that were never delivered. Rae controlled the bank accounts for the two companies, Lighting Equipment Sales and Service, Inc. (“LESS”), and Lighting Products International, Inc. (“LPI”). He caused the victim company to pay over $900,000 for bogus LESS and LPI invoices, and he took the proceeds for his own personal use.
The indictment and Hodde information further allege that from 2007 through 2013, Rae and Hodde devised a scheme to defraud Rae’s employer by submitting bogus invoices from Hodde’s employer, Barbizon Capitol, Inc. (“Barbizon”). One of the ways the men carried out this scheme, according to the indictment and Hodde information, began with Hodde allowing Rae to use Hodde’s corporate credit card account, which Rae used to for personal expenditures such as home appliances, airline tickets for him and his wife to visit their vacation home, personal electronics, and dental services. The indictment and Hodde information allege that Rae and Hodde then worked together to create bogus invoices from Barbizon to Rae’s employer for purported product sales, when in fact Barbizon did not supply any of the product. Rae and Hodde created the bogus invoices in amounts to reimburse Barbizon for all of Rae’s personal expenditures on the Barbizon credit card account, plus an approximately 10% mark-up, which Barbizon kept. In this manner, Rae and Hodde caused the victim company to pay over $560,000 for bogus invoices submitted to it from Barbizon. The other way Rae and Hodde allegedly carried out their scheme involved Rae submitting bogus invoices from LESS and LPI to Barbizon, and then at Rae’s direction, Hodde generated corresponding bogus invoices from Barbizon to Rae’s employer, along with an approximate 10% mark-up for Barbizon to keep. The indictment and Hodde information allege that neither LESS, LPI, nor Barbizon supplied any of the product for which the victim company was invoiced. In this manner, according to the charging documents, Rae and Hodde caused the victim company to pay over $200,000 for the bogus invoices. Barbizon retained approximately 10% of those proceeds, and the remainder were forwarded to LESS and LPI and deposited into bank accounts controlled by Rae.
The indictment and Keppler information further allege that between 2010 and 2012, Rae and Keppler devised a scheme to defraud Rae’s employer by submitting bogus invoices from Keppler’s company, Keppler Engineers, LLC (“Keppler Engineers”). Rae directed Keppler to generate invoices from Keppler Engineers to Rae’s employer that contained particular item descriptions, descriptions of services, and specific prices, and Keppler did as directed. Rae and Keppler caused those invoices to be submitted to the victim company for payment. The victim company paid Keppler Engineers for the invoices, and then Keppler Engineers paid all but approximately 10% of the proceeds to LPI, which Rae deposited into bank accounts he controlled. Neither Keppler Engineers nor LPI provided the products or services to the victim company. According to the charging documents, Rae and Keppler caused the victim company to pay over $170,000 for the bogus invoices from Keppler Engineers.
Rae is further charged with conducting three separate financial transactions of over $10,000 each in criminally derived proceeds.
If convicted, Rae faces up to 20 years of imprisonment on each count of mail fraud, wire fraud, and conspiracy to commit wire fraud, and up to ten years of imprisonment on each count of money laundering. He also faces up to three years of supervised release, full restitution, an $8,750,000 fine, a $3,500 special assessment, and criminal forfeiture. Hodde and Keppler, if convicted, each face up to 20 years of imprisonment on each count of wire fraud and conspiracy to commit wire fraud, full restitution, three years of supervised release, a $500,000 fine, and a $200 special assessment.
The case was investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Nancy E. Potts.
An Indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.