Three Maryland Men Indicted for Alleged Pension Plan Fraud
|U.S. Attorney’s Office December 15, 2011|
ALEXANDRIA, VA—Three Maryland men have been indicted for engaging in a scheme to steal nearly $10 million from Vienna-based Southern Management Corporation’s employee pension plan.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement.
Robert Fulton Rood IV, 44, of Potomac, Md., Nikolaos M. Hepler, 31, of Gaithersburg, Md., and Lloyd M. Mallory, Jr., 49, of Silver Spring, Md., were charged in a 16-count indictment of conspiracy to commit wire fraud, wire fraud and theft from an employee benefit plan. If convicted, each defendant faces a maximum penalty of 20 years on the conspiracy and each wire fraud count and five years in prison on each theft count.
According to the indictment, Rood conceived and led a scheme to defraud Southern Management Corporation Retirement Trust (“SMCRT”), a pension plan established by SMC for its employees. As of December 31, 2010, the plan’s assets were over $30 million, and prior to April 2006 SMCRT generally managed its own investments, which included short term (one year), high interest loans to real estate developers.
The indictment alleges that in April 2006, Rood persuaded SMC’s President and CEO to let Rood locate borrowers, negotiate loans to them, prepare the loan agreements, promissory notes and trust deeds and present loan application packages to the SMCRT loan committee, which would decide whether to purchase the proposed loans. If the committee decided to do so, it would wire the money to purchase the loan to a settlement company designated by Rood. Rood would use the money from SMCRT to fund the loan and would obtain from the borrower an executed loan agreement, promissory note and trust deed, which he would assign to SMCRT. In most cases, the borrowers were not aware of SMCRT’s involvement in the process.
Rood allegedly represented to both SMCRT and the borrowers that he would set up escrow accounts for the payment of interest to SMCRT and for construction payments to the borrowers. Instead, the indictment alleges that the moneys from all the loans were co-mingled into Rood’s principal bank account. When the project was finished and sold, the borrower was to pay back the amount borrowed to SMCRT.
From April 2006 to around October 2007, Rood allegedly sold to SMCRT approximately 32 mortgage loans that he had originated, of which 24 went into default after they were funded by SMCRT. According to the indictment, one loan, referred to as the “K Street” loan, never closed because the title company was unable to clear title to the property, and Rood is accused of simply keeping the money that SMCRT paid him to purchase the loan. Two other loans referenced in the indictment—the “Eastern Shore” and “Accom” loans—involved SMCRT loans that the borrowers refinanced with different lenders and sent their payoffs to Rood, who allegedly kept the payoff monies. In each case, Rood, assisted by Nikolaos M. Hepler, his employee, is accused of misrepresenting to SMCRT that the loans were in place and performing satisfactorily, including Rood’s making of the monthly interest payments to SMCRT on the nonexistent loans.
The indictment states that SMCRT requested an independent review of Rood’s accounts, and in February 2008, Rood engaged Mallory to perform a review of the loans, loans, disbursements and escrows. The accountant allegedly issued a report which falsely showed the status of the loans and the funds held by Rood.
This case was investigated by FBI’s Washington Field Office. Assistant United States Attorneys Michael E. Rich and Uzo Asonye are prosecuting the case on behalf of the United States.
Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on https://pcl.uscourts.gov.