CLIFTON PARK, N.Y. — The abrupt closure of a Clifton Park-based payroll company last month quickly drew the attention of the FBI and the U.S. Attorney and has now drawn a lawsuit from a financial institution in California seeking millions in restitution.
MyPayRollHR was a seemingly nondescript payroll company doing business out of an office park in Clifton Park off Route 146 until it suddenly closed its doors on Sept. 5 to its clients and its employees.
Since that time the owner, Michael Mann, 49, of Northville, has reached out with his attorney and met with the U.S. attorneys and the FBI to discuss the situation. He has also had a U.S. Justice Department criminal complaint lodged against him describing an alleged scheme of check kiting, appeared before a magistrate judge in U.S. District Court in Albany, relinquished his U.S. Passport, and had a lawsuit lodged against him by the financial company with which he was doing business.
The U.S. attorney’s criminal complaint alleges that Mann committed bank fraud between Aug. 1 and Aug. 30.
In an affidavit given by the FBI before U.S. Magistrate Judge Daniel J. Stewart and attached to the complaint, it is alleged that Mann and two companies he owns defrauded Pioneer Bank and Bank of America. Both are insured by the Federal Deposit Insurance Corporation. Mann is said to have deposited large sums of funds in one bank to show payment on a loan and quickly writing checks on that deposit which were destined for the other bank for the same reason.
Mann, through his companies MyPayRollHR and its parent company ValueWise, would line up small business clients, receive the funds for the businesses’ payrolls, and deposit the appropriate amounts for the payrolls with Cachet Financial Services, a firm in Pasadena, Calif. Cachet Financial would then make the deposits into the employees’ bank accounts.
Mann needed the California company because it held the appropriate licenses and permits to make the digital deposits to individuals’ bank accounts.
The U.S. attorney’s complaint states that on or about Sept. 5 MyPayRollHR failed to route the employers’ payroll payments to Cachet as scheduled. The complaint also states that around the same time Bank of America and Pioneer Bank froze Mann’s companies’ accounts.
“BOA (Bank of America) has reported that it froze the accounts because Mann was “kiting” millions of dollars in checks between his accounts at BOA and Pioneer from August 1, 2019 through August 30, 2019,” the complaint states.
On Sept. 10 Mann and his attorney appeared at the U.S. Attorney’s Office in Albany where he was interviewed by members of that agency as well as the FBI. The complaint states Mann confessed to the fraud scheme at the meeting.
“Mann stated that he wished to accept responsibility for his conduct and confess to a fraudulent scheme that he had been running for years,” the complaint states.
The affidavit included in the complaint states that Mann described creating companies in addition to MyPayrollHR, which was a legitimate firm, solely for the purpose of obtaining loans and lines of credit from the banks. He estimated that he fraudulently obtained approximately $70 million which has not been paid back. During the interview he is said to have also admitted to kiting checks between the two banks.
The complaint states that Mann said he routed his clients’ payrolls through Pioneer to temporarily reduce the amount of money he owed the bank. When the bank froze the account it inadvertently stopped the movement of the funds to Cachet.
In a separate legal filing in U.S. District Court on Sept. 23 attorneys for Cachet Financial Services claim Mann and his companies are alleged to have manipulated Cachet’s digital capabilities to “cause over $26 million to be routed to MyPayrollHR and the Mann Entities”.
The company’s filing states that it is Cachet’s belief that Mann manipulated the company’s computerized inner workings to make it appear there was a $19 million transfer made within Cachet from a Mann company account to a Cachet settlement account when none was made. At the same time Cachet alleges an identical amount was transferred from Cachet’s settlement account to various Mann companies.
The Cachet suit goes on to allege that on a second occasion Mann and MyPayRollHR manipulated Cachet’s internal digital working to “steal” more than $7 million from its own clients’ by rerouting the money from a Cachet account destined to employees to bank accounts controlled by Mann and his companies.
Upon learning of the alleged digital accounting thefts, Cachet tried to get the funds back digitally causing employees of MyPayRollHR’s clients to see money deposited in, then disappear from, their bank accounts. Upon realizing what was happening to the employees Cachet made them whole financially at a cost to Cachet of $7 million.
“A representative of Cachet called and spoke with Mann on September 4, 2019,” the filing states. “Mann said he would call Cachet back in a few minutes but never did and then disappeared. MyPayRollHR has since advised its clients that it has ceased operations.”
Cachet has demanded a jury trial. It is seeking a minimum of $26 million on six causes of action plus interest, putative damages as pronounced by the court, reasonable attorneys’ fees, and all expenses incurred by the company to get the money back.
Mann’s attorney, Michael Koenig, said his client is cooperating with authorities. He noted that Mann voluntarily reached out and met with them prior to the criminal complaint being filed. Koenig added that Mann did not make a plea during his appearance in Magistrate Court.
“Michael has been cooperating with the authorities, and will continue to do so in order to provide a complete and accurate set of facts and circumstances surrounding the allegations,” Koenig said.
Mann is free on $200,000 bond. If he’s found guilty of violating Title 18 of the U.S. Code Section 1344, bank fraud, he faces a maximum of $1 million fine and/or a maximum prison sentence of 30 years.