CHARLESTON – U.S. Attorney Booth Goodwin announced that Williamson, W.Va. based employee leasing firm, Aracoma Contracting, LLC (“Aracoma”), pleaded guilty Wednesday to a federal charge in connection with a structuring scheme involving more than $2 million in cash withdrawals from the company’s bank accounts once held at a Mingo County bank. Top Aracoma executive, Jerome Edward Russell, 50, of Williamson, W.Va., pleaded guilty, on behalf of the company, to conspiracy to structure currency transactions. “Structuring” involves the breaking down of cash transactions in amounts of $10,000 or less for the purpose of avoiding a financial institution’s reporting requirements to the Internal Revenue Service (IRS).
Russell and fellow Aracoma executive, Frelin R. Workman, 58, of Belfry, KY, previously pleaded guilty to their involvement in an honest services mail fraud scheme to defraud BrickStreet Mutual Insurance (BrickStreet) of insurance premiums and tax evasion. Russell and Workman were each previously sentenced in October to 2 ½ years in prison for their roles in the scheme.
Acting on behalf of Aracoma, Russell and Workman formed a longstanding relationship with the Bank of Mingo, and, particularly, one of its employees at the bank’s Williamson branch. From January 2009 through April 2012, Aracoma, through its representatives including Russell and Workman, structured at least $2.2 million out of Bank of Mingo. Russell and Workman also enlisted the assistance of a number of individuals who agreed to appear at the Williamson branch of Bank of Mingo and cash cashier’s checks. The cash from the bank withdrawals was later brought back to Aracoma’s office to be used to pay cash payroll.
During the scheme, Aracoma sent advance forms to the Williamson branch of Bank of Mingo prior to the structured cash withdrawals, so the bank could prepare the cash ahead of time. Bank of Mingo would then prepare cashier’s checks in the names of the identified individual or individuals and pre-count the requested cash. When an individual or individuals from Aracoma appeared at a Bank of Mingo teller window, a bank representative presented them with the cashier’s check in the individual’s name. The check was immediately endorsed and the individual was given the pre-counted cash.
Despite numerous occasions when multiple individuals appeared at the same teller window at the Williamson branch of Bank of Mingo to endorse cashier’s checks that exceeded $10,000 on Aracoma’s line of credit, Bank of Mingo routinely failed to file a currency transaction report, as required by law.
An investigation determined that the cash structured out of Bank of Mingo by Aracoma was used to pay the company’s payroll in cash, therefore avoiding the payment of employment taxes and also to make bribe payments to a former BrickStreet field auditor, Arville Sargent.
Sargent, 52, of Chapmanville, previously pleaded guilty in March to honest services mail fraud and tax evasion. As a field auditor, Sargent purposely allowed four “employee leasing” companies, including Aracoma, to falsify documents drastically understating their actual payroll. In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreeet, Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including a Yamaha Rhino all-terrain vehicle.
Sargent was previously sentenced in October to six years in federal prison.
Aracoma Contracting, LLC faces a maximum fine of up to $500,000 fine and a five-year term of probation at a sentencing hearing scheduled for January 15, 2014.
The FBI, the IRS, the West Virginia State Police and the West Virginia Insurance Commission conducted the investigations. This investigation was also handled in coordination with the United States Attorney’s Office for the Western District of Virginia and the IRS’s local Abingdon, Virginia Resident Agency. Assistant United States Attorney Thomas Ryan is in charge of the prosecutions.