A 69-year-old facility manager has been sentenced to 42 months in federal prison following a guilty plea for a kickback scheme that defrauded his employer of over $20 million.
According to a Department of Justice press release, Elliott Dennis Kleinman and fellow facility manager Eugene DiNoto used their management positions to launch a fraudulent billing scheme at their workplace, dubbed "Company 1" in the DOJ release.
Company 1, a family-owned global business in New York with manufacturing facilities in Maryland, uses drums to store and transport its products. According to the release, Kleinman and DiNoto were responsible for managing the purchase and storage of drums for the Maryland facilities and held the authority to review drum invoices and approve payments to vendors. These positions of power enabled the pair to operate the billing scheme, resulting in them receiving illegal kickbacks from drum vendors that did business with their company.
The scheme involves two drum suppliers called Tunnel, Barrel & Drum Co., Inc. (TBD) and Hartford Fibre Drum, Inc. When TBD became a supplier to Kleinman and DiNoto's company, the two made an arrangement with the owner and president, Anthony P. Urcioli, Sr. Their agreement stated that Kleinman and DiNoto's company would continue to buy drums from TBD if Urcioli fraudulently invoiced Company 1 for more drums than TBD sold.
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If Urcioli complied, Kleinman and DiNoto said they would evenly split the extra money for the false drum deliveries with TBD. DiNoto and Kleinman would split their share 75/25.
Urcioli later informed DiNoto about his other company, Hartford Fibre Drum. Once Hartford was proven legitimate, DiNoto and Urcioli agreed to include it in the kickback scheme.
For about eight years, DiNoto told Urcioli how many extra drums to charge but not deliver. Once Urcioli created the fake invoices, DiNoto approved them and sent them to his company headquarters for payment. Urcioli also prepared a purchase order ticket outlining the fraudulent orders and kickback calculations.
Urcioli then sent the purchase order tickets and kickback share amounts in an envelope to Kleinman's and DiNoto's residences. The checks also created the illusion that the payments were to drum wholesalers and could be deductible as a cost of goods sold.
According to the DOJ, Urcioli falsely invoiced Company 1 about $20.3 million dollars from 2012 to 2020, with Kleinman collecting over $2.3 million in kickbacks. Kleinman deposited the checks into the business account of a company he formed, where they were withdrawn as cash or transferred to another bank account.
The release mentioned that, between 2017 and 2019, Kleinman's income tax returns filed with the IRS did not report his kickback share of about $1 million as personal or business income.
In addition to his prison sentence, Kleinman must pay over $19 million in restitution and forfeit about $2 million. DiNoto and Urcioli had previously pleaded guilty to their roles.