Friday, June 07, 2013CLEVELAND, Ohio -- A federal judge has found two executives of a Columbiana County trucking company guilty on two counts related to a $3.6 million check-kiting scheme that authorities say occurred between October 27, 2007 and February 2010.
U.S. District Judge for the Northern District of Ohio Dan Polster found Timothy Kephart, age 54, of Morrisdale, Pa., CEO of Dart Trucking Co., and its chief financial officer, Mark Michael, 55, of Clearfield, Pa., guilty on one count of conspiracy to commit bank fraud and one count of bank fraud related to the scheme.
According to a press release issued by the U.S. Department of Justice, Kephart and Michael were charged with kiting checks "in conspiracy with Lee Stoneburner, the president of Dart Trucking, from October 2007 until February 2010, from various accounts of Dart Trucking at Huntington Bank, in Columbiana, Ohio."
The three were charged in August 2011, records show.
Stoneburner, of Columbiana, pleaded guilty to conspiring to commit bank fraud and is awaiting sentencing. Sentencing for Michael and Kephart is set for September 4, 2013.
In July 2004, Stoneburner and his father, Jerry, acquired Dart Trucking Co., a 48-state carrier with offices in New Hampshire, West Virginia, Illinois, and Ohio. According to a Business Journal story published in 2005, Kephart, then the president of Kephart Trucking in Bigler, Pa., signed a management agreement with Dart to manage its day-to-day operations.
The government said that the scheme involved check kiting in five different Dart Trucking accounts held at Huntington Bank in Columbiana. All of the accounts were controlled disbursement accounts, or CDAs, which were supposed to be a means of organizing and controlling payment of expenses related to operation of the business.
Kephart, Stoneburner and Michael deposited checks into one of the CDAs from another CDA that did not contain sufficient funds to cover the amount of the checks. Thus the account was falsely inflated, since Huntington Bank extended immediate credit for deposited items.
The defendants would use the inflated account to pay expenses, bills and salaries, the government said.
Since each CDA account had different routing numbers, it would take at least one day for the checks to clear because of the bank's internal operations.
Also, since each CDA carried a different routing number, the balance would remain available for use for the one-day "float" period until another check with non-sufficient funds could be written from another CDA, and deposited to cover the previously deposited bad checks.
The scheme reached such levels that it had to be monitored daily to keep it going for as long as possible, the government said.
SOURCE: U.S. District Attorney, Cleveland.
Published by The Business Journal, Youngstown, Ohio.
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