Two executives at a company that owned and dispensed automated teller machines have been sent to jail for defrauding the Domestic Bank of Cranston, Rhode Island of about $4.8 million.
According to the FBI, New England Cash Dispensing Systems (NECDS) Joseph Sarlo, the chief executive and John DeMilo, 44, general manager were as sentenced to 42 and 22 months respectively in prison, plus four years probation each for their role in a scheme that the FBI said began in 2000 and resulted in millions of dollars of lost cash for the bank.
According to the FBI, Sarlo's directed NECDS personnel, including DeMilo, Mirza Baig, and Gary Vestuti (who are already in jail for their roles), implemented a scheme to defraud Domestic Bank out of cash that it supplied for use in NECDS's ATM network.
While ATMs in the NECDS network bore the logo of Domestic Bank, NECDS was responsible for contracting with merchants and placing the ATMs in their establishments. Ultimately, there were three funding sources for ATMs within the NECDS network: Domestic Bank provided the cash for specified ATMs in the network, NECDS supplied cash for other ATMs in the network, and certain merchants supplied cash for other ATMs. Over the course of time, the number of ATMs in the network that were funded by Domestic Bank increased, while the number of ATMs funded by NECDS decreased, the FBI stated.
The FBI said that as part of the scheme, NECDS personnel ordered excess cash from Domestic Bank and used it to refill ATMs that would otherwise have been refilled with NECDS's funds. The co-conspirators also engaged in a cover-up to prevent the bank from recognizing that money was missing by "floating" Domestic Bank's money. Specifically, the co-conspirators would order extra money for an ATM that was funded by Domestic Bank knowing that the extra cash would be used to fill another ATM that previously had been shorted cash. This was done regularly over several years and resulted in Domestic Bank receiving false information through the periodic replenishment process indicating that its cash was appropriately accounted for, the FBI said.
Domestic Bank ultimately lost approximately $4.8 million in funds that it had supplied to NECDS. Baig, who is now serving a 51-month sentence, has admitted that he took approximately $2 million of the misappropriated cash. A portion of the stolen cash was used by NECDS to pay business expenses. The defendants have been ordered to pay $4,805,540 in restitution. In addition, Baig has been ordered to forfeit an interest in his house of up to $1.2 million, as well as two vehicles.
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This story, "Banking execs won't find prison nearly as easy to scam as their ATM racket" was originally published by Network World.