Payroll CEO Arrested in Alleged $70 Million Bank Fraud Scheme
The head of a cloud-based New York payroll processing company who allegedly commanded a wire fraud scheme to steal millions from banks and employees at unsuspecting small businesses was arrested and charged on Monday, September 23, the United States Attorney for the Northern District of New York said.
According to the complaint, Michael Mann, the chief executive of MyPayrollHR, fraudulently obtained at least $70 million in loans from banks and other financial institutions and diverted the money to fake companies he created and used in the fraud. The scheme is said to date back to 2010 or 2011.
MyPayrollHR processed payroll and tax payments for approximately 1,000 small-business clients located across the country. Last week, reports surfaced that Mann had diverted some $35 million in payroll funds from 250,000 employees at 5,000 companies into its own pocket. MyPayrollHR’s business partner, Cachet Financial Services, which deposits payroll money into workers’ personal accounts on MyPayrollHR’s direction, claims it is a victim of fraud and that Mann or one of his minions moved workers’ money into a bank account controlled by the company.
Employers that use third-party payroll companies rely on the providers to process payments to employees’ bank accounts. For the past 12 years, until last week, MyPayrollHR had posted a file to Cachet’s with instructions where to deposit its clients’ employees wages along with the corresponding amounts. Now, with the charges against Mann, the source of the payroll funds is unclear. In the swindle’s wake, many employees whose companies used MyPayrollHR were left without paychecks and some were saddled with overdrawn accounts. One of MyPayrollHR’s clients, Alan Shafran, owner of Shafran Realty Group, said his company’s 15 employees received their paychecks as usual and then their money disappeared from their bank accounts, an NBC news report said. Shafran ultimately paid his employees himself, the report said.
If Mann is convicted of the federal government’s charges, he could be sentenced to up to 30 years in prison, a maximum $1 million fine, and up to five years of post-release supervision. Last week, the Federal Bureau of Investigation (FBI) raided Mann’s home but he was not on the premises and no arrests were made at the time. The FBI has set up a webpage for businesses that lost money in the alleged fraud.