From the U.S. Attorney’s Office in Baltimore:
Timothy C. Kany, Sr., age 49, of Bel Air, Maryland pleaded guilty to mail fraud arising from a scheme to embezzle over $370,000 from his employer.
The guilty plea 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 Kany’s guilty plea, 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 at 3600 O’Donnell Street in Baltimore. Kany was the manager of K-Line’s Baltimore office from 2000 to August 13, 2009, where he oversaw the office’s daily business and approved invoices submitted by K-Line’s vendors for payment.
In late 2000, Kany began embezzling funds from K-Line through a scheme in which he created two entities, Pawl’s Port Services and Bayview Ship Service, which existed in name only. Kany approved invoices which sought payment from K-Line for custom ship services purportedly provided by Pawl’s and Bayview. K-Line paid the fraudulent invoices and mailed checks to the companies at P.O. boxes in Bel Air and Abingdon, Maryland, which Kany controlled. Kany or another individual retrieved the checks and deposited them into bank accounts set up for the entities.
Between 2000 and 2009, Kany submitted over1,400 fraudulent Pawl’s Port and Bayview invoices to K-Line for payment, embezzling a total of $270,488.25 in K-Line corporate funds, which he used for his personal benefit.
Meanwhile, in 2003, a K-Line employee named Kriste Lynn Ferrell became Kany’s administrative assistant. Ferrell’s duties included submitting vendor invoices to K-Line’s corporate offices for payment. Ferrell discovered Kany’s embezzlement scheme and Kany offered to instruct Ferrell on how to set up a similar scheme for her own benefit. Ferrell created Chesapeake Cargo Services, an entity that existed in name only. From late 2003 or early 2004, through August 2009, Ferrell and Kany conspired to submit for payment fraudulent Chesapeake Cargo invoices, in place of legitimate invoices received from a vendor that provided actual services to K-Line. The fraudulent invoices submitted to K-Line for payment inflated the cost of the services provided by the legitimate company. Ferrell and Kany submitted approximately 620 false invoices to K-Line claiming $225,921.35 in services rendered. Once K-Line paid the inflated 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 the vendor and kept the difference for herself and Kany, which totaled $100,894.95. Ferrell used the embezzled funds to make personal purchases for herself and to make cash payments to Kany.
Kany faces a maximum sentence of 20 years in prison followed by three years of supervised release. U.S. District Judge Benson Everett Legg scheduled sentencing for February 4, 2011 at 2:00 p.m. As part of his plea agreement, Kany will be required to pay restitution of $371,383.21 the amount embezzled as a result of these schemes..
Kriste Lynn Ferrell, age 38, of Bel Air, Maryland pleaded guilty on October 29, 2010 to mail fraud conspiracy and is scheduled to be sentenced on March 17, 2011 at 11:00 a.m.
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 commended the FBI for its investigative work and thanked Assistant United States Attorney Sujit Raman, who is prosecuting the case.