From the U.S. Attorney’s Office in Baltimore:
A federal grand jury indicted Timothy C. Kany, Sr., age 49, and Kriste Lynn Ferrell, age 38, both of Bel Air, Maryland late yesterday for mail fraud and conspiring to commit mail fraud arising from an alleged scheme to embezzle $496,409 from their employer. Kany is scheduled to have an initial appearance in U.S. District Court in Baltimore today at 11:30 a.m. Ferrell is expected to have an initial appearance early next week.
The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.
According to the five count indictment, K-Line America was the American subsidiary of a multinational corporation specializing in international ocean cargo transportation. K-Line was headquartered in Richmond, Virginia, and had an office on 3600 O’Donnell Street in Baltimore. Kany was the manager of K-Line’s Baltimore office, where he oversaw the office’s daily business and approved invoices submitted by K-Line’s vendors for payment. Ferrell also worked for K-Line and, after moving to the Baltimore area in 2003, served as Kany’s administrative assistant, submitting vendor invoices received in K-Line’s Baltimore office to the corporate headquarters for payment.
The indictment alleges that from 2000 to August 2009, Kany embezzled money from K-Line under a scheme in which he created two entities, Pawl’s Port Services and Bayview Ship Service. Kany approved invoices for payment bearing the names of the entities and mailing addresses to two P.O. boxes in Bel Air and Abingdon, Maryland. These invoices claimed payment from K-Line for alleged custom ship services. The invoices are alleged to be fraudulent because Pawl’s Port and Bayview existed in name only and had provided no such services. K-Line headquarters paid the allegedly fraudulent invoices and mailed checks to the companies at the P.O. boxes. Kany or another individual retrieved the checks and deposited them into bank accounts set up for the entities.
As a result of this alleged fraud scheme, between 2000 and 2006, Kany is alleged to have submitted or caused to be submitted: over 1,300 fraudulent Pawl’s Port invoices; and between 2006 and 2009, over 1,000 fraudulent Bayview invoices, to K-Line for payment, resulting in a total of $270,488.25 in embezzled K-Line corporate funds.
Additionally, according to the indictment, beginning in late 2003 or early 2004, through August 2009, Ferrell and Kany conspired to submit approximately 620 false invoices to K-Line in the name of Chesapeake Cargo Services, another entity that allegedly existed in name only, claiming $225,921.35 in services rendered. To accomplish the scheme, Kany contacted at least one shipping company that provided legitimate services to K-Line and notified that company (Company A) that it would receive payment for services through Chesapeake Cargo. When Ferrell received a legitimate Company A invoice at K-Line’s Baltimore office, she submitted to K-Line’s headquarters an inflated, fraudulent Chesapeake Cargo invoice in its place. These fraudulent Chesapeake Cargo invoices, many of which Kany personally signed and approved, requested payment for allegedly having performed the services Company A provided to K-Line. Once K-Line paid the fraudulent Chesapeake Cargo invoice and mailed a check to a post office box under Ferrell’s control, Ferrell deposited the embezzled K-Line funds into Chesapeake Cargo’s bank account, paid Company A for the legitimate services it rendered to K-Line and kept the difference for herself and Kany. Ferrell allegedly used the Chesapeake Cargo bank account to make personal purchases for herself and to make payments on a credit card in Kany’s name.
The indictment seeks forfeiture of $496,409.60, the total amount of embezzled funds.
Both defendants face a maximum sentence of 20 years in prison for conspiracy to commit mail fraud. Kany also faces a maximum sentence of 20 years in prison on each of four counts of mail fraud.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein thanked Assistant United States Attorney Sujit Raman, who is prosecuting the case.