Another chapter in the Tragedy of Fraud

Prison.  Bankruptcy.  Publicity. Civil litigation.

Such are the wages of fraud.

It is such a tragedy.  Such a waste.

The mayor of a neighboring city provides the next example of the devastation from fraud.

I’ve discussed this case in my other blog, Attestation Update, over the last year from the perspective of an auditor. See my update for developments this week:  Guilty plea in corruption trial mentioned a year ago.

Here is my short version of the government’s accusation, based on reports in the local paper, mostly this article from the Daily Bulletin.

The mayor used a cutout to communicate demands for money to a local business to help the business get a conditional use permit.  A CUP is essentially a permit to use a building in a certain way – sort of like a business license.

The payment was disguised as a consulting contract from the restaurant/bar to the cutout’s consulting business. The actual flow of cash was from the shaken-down business to the cutout’s consulting business and then to a construction company the mayor owned. From outward appearances those contracts and the bribery payments would appear to be legitimate business deals.

The immediate tragedies:

• Felony conviction – The former mayor has signed a plea agreement admitting to one felony. As soon as the judge ratifies the agreement, this man will be a felon.
• Prison – The plea agreement suggests a prison term of 18-24 months. What will the judge decide? We will have to wait. The point is the mayor is headed to jail.
• Bankruptcy – According to the newspaper article, this person’s business is bankrupt. He lost his income source.
• Publicity – You can read all about him in the local newspapers. Those articles will likely be around for decades.
• Legal fees – The former mayor retained a private attorney.  I have no idea what costs have been incurred, but would make a very wild guess it is in the range of $25,000 to $75,000. Could you take that hit to your savings accounts?
• Future litigation – The shaken down business is suing the city. I’ve not read any filings on the case, but would obviously guess that the former mayor will be named in all the litigation.

Full disclosure:  I am a casual acquaintance of the new, current mayor of the city. Haven’t seen or talked to him in years, but the rules of blogging and ethics call for me to mention that so you may filter my comments as you wish.