A former Cortez Office Outpost employee, charged with embezzling $255,000 from the company, is expected to plead guilty later this month, according to the U.S. Attorney’s office.
Brian K. Shoults, 42, worked as a bookkeeper for Office Outpost in Cortez for three years. During that time he allegedly defrauded the company by depositing unauthorized payroll money into a personal account, according to an indictment handed down February 4 by a federal grand jury in Durango.
Jeff Dorschner, a spokesman for the U.S. Attorney’s office, said Wednesday that Shoults initially pleaded not guilty to charges of wire fraud and tax evasion, but has requested a change-of-plea hearing, scheduled for May 29 in a Denver federal courtroom.
“Through his attorney, he has reached an agreement and wants an opportunity to plead guilty,” Dorschner said.
A plea bargain with prosecutors apparently was reached, he said, but the details of the agreement will not be revealed until after a guilty plea is officially entered into the record.
Shoults was arrested Feb. 8 in Phoenix, Ariz., and charged with 123 counts of wire fraud and four counts of tax evasion for not reporting the stolen revenues to the IRS. He was released on a $50,000 unsecured bond.
The Cortez Police Department conducted the initial investigation. Then the U.S. Attorney’s office and the criminal division of the Internal Revenue Service took over the case.
“The (Office Outpost owner) brought the records to our attention, but once we saw it was going to be a huge violation of federal law, we handed it over to the IRS, “ said Cortez Police Chief Roy Lane.
Cortez officers and Lane accompanied federal agents to Phoenix, AZ. to arrest Shoults, who gave up without incident outside his residence.
“He was expecting it,” Lane said.
The federal indictment alleges that between April 8, 2008, and Aug, 25, 2011, Shoults obtained $255,000 “by means of materially false and fraudulent pretenses” from the bank accounts of Copy Shop Inc. doing business as Office Outpost.
As bookkeeper for Office Outpost, Shoults had access to the company bank account and was responsible for payroll accounting for the firm’s 15 employees. According to the indictment, “The defendant would prepare bi-weekly payroll and pay himself more than he should have received ... then ... transfer the inflated amount into his personal bank account.”
In an attempt to hide the fraudulent transactions, “the defendant would record these overpayments either generically as ‘Payroll Expenses’ or other business expenses and in some instances make no record of such payment.”
Trust in his employee was misplaced, a costly and unfortunate situation, said Office Outpost owner Ron Curtis.
“We were doing our due diligence, and the books showed the right numbers, but he hid it in a very complicated way,” Curtis said. “Basically, I lost my life savings and had to start all over.”
None of the allegedly stolen money was recovered at the time of the arrest, Dorschner reported.
“The indictment includes an asset forfeiture count, which would allow the government to seize and in some cases sell items to get victims their money back. This is all done by a judge during a sentencing hearing.”
The alleged fraudulent deposits started out in $400 to $1,500 range, but increased to between $3,000 and $4,000 amount over time, according to the charges. Records show two unauthorized payments in April, and one in May 2008 totaled $2,705. Then in August 2008 the illegal deposits increased in amount and frequency, occurring weekly and at times twice daily, until August, 25, 2011.
“The thefts start out small but once they have tested the waters and gotten away with it they generally go for more,” said Cortez Police Department detective Jim Kingery.
If convicted of wire fraud, Shoults faces not more than 20 years in federal prison and a fine of up to $250,000 per count. A conviction of tax evasion brings not more than five years in federal prison and a fine of $250,000 per count.