Albany

MyPayrollHR head pleads guilty to $100 million fraud

MYPayrollHR_2.jpg

Categories: News

ALBANY — The Saratoga County man who headed MyPayRollHR until its abrupt collapse last September pleaded guilty in federal court Wednesday to a years-long fraud that caused over $100 million in losses to banks, financing companies and businesses.

 Federal prosecutors said Michael T. Mann, 50, of Edinburg, pleaded guilty to charges that between 2013 and September 2019, he engaged in a fraudulent scheme to deceive banks and finance companies into loaning his companies tens of millions of dollars.

 Mann operated ValueWise Corp., based in Clifton Park, whose assets included MyPayrollHR.com, the payroll processing company that collapse of which led to the unravelling of the complicated scheme. Many employees of businesses that used the payroll service went unpaid in early September, and some had wages they’d already received clawed back.

“Because Mann could not repay the loans with legitimate business revenues, he expanded the fraud, by stealing and diverting millions of dollars that were entrusted to his payroll companies, and engaging in the daily kiting of millions of dollars among bank accounts he controlled,” according to an announcement from U.S. Attorney Grant C. Jaquith and Thomas F. Relford, the agent in charge of the FBI’s Albany field office.

Appearing before Senior U.S. District Court Judge Lawrence E. Kahn in Albany, Mann pleaded guilty to one count of conspiracy to commit wire fraud, one count of aggravated identity theft, nine counts of bank fraud, and one count of filing a false tax return.

Mann is scheduled to be sentenced on Dec. 10, at which time he is expected to be sentenced to two years in federal prison on the aggravated identity theft charge. He could still face up to 20 years in prison on the wire fraud conspiracy charge, and up to 30 years in prison on the bank fraud charge, based on factors to be determined by the judge.

Mann has agreed to pay $101,038,793 in restitution, to forfeit $14.5 million in assets already seized by the government, 30,000 common shares of Pioneer Bancorp already seized by the government, and a 2020 Jeep Gladiator, prosecutors said.

Michael Koenig of Albany, the attorney representing Mann, acknowledged Mann doesn’t have $101 million to pay restitution, but said he should be recognized for the assets he has forfeited, and said his goal has been to cooperate. He admitted the scheme to FBI investigators last September, within days after MyPayrollHR collapsed.

Mann’s scheme collapsed in early September, when one of his banks froze his accounts, setting off a chain reaction of events that left his payroll companies unable to make payrolls for hundreds of small business customers nationwide.

“Michael Mann’s fraud was staggering,” Jaquith said in a statement. “He caused more than $100 million in losses and wove a web of deception so complex that it eventually ensnared hundreds of small businesses and several thousand workers across the country. Today’s plea is the start of holding him accountable for the terrible harm he inflicted on his victims, as well as the banks and other companies that trusted him with their money and believed his sophisticated lies.”

“While many of the businesses were able to recover, others experienced irreparable hits on their reputations,” Relford said.

Prosecutors described a multi-layered scheme:

— Mann obtained tens of millions of dollars in loans from three financing companies, located in New York, Colorado and California. Mann falsely told the financing companies that Minnesota-based UnitedHealth Group Inc. and its subsidiary, OptumInsight Inc., owed his companies millions of dollars. Mann created fake invoices reflecting the fictitious debt.

— Mann fraudulently abtained lines of credit from several Capital Region banks, totalling $42 million by 2019. To get those lines of credit, he created fake invoices, disguised sources of funds, and reported fake consulting work and large corporations.

— At MyPayrollHR, Mann changed digital Automated Clearing House files to divert funds intended for customer payrolls into accounts he controlled at Pioneer Bank. Pioneer froze his accounts on Aug. 30, 2019, meaning money wasn’t transferred to an intermediate company that made the business payroll payments. That set in motion the swift series of events that led to Mann’s fall. He was arrested on Sept. 23, but has been free on bail.

Mann is the second person to plead guilty in the case. In February, former OptumInsight employee Luke E. Steiner, 32, of Minneapolis, pleaded guilty to conspiring with Mann to defraud two financing companies of millions of dollars.

In addition to the criminal charges, the situation has also generated numerous civil lawsuits over responsibility for the debacle.

Reach staff writer Stephen Williams at 518-395-3086,

[email protected]

or

@gazettesteve on Twitter.

Leave a Reply