Oh My Fraud

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Caleb: Hey, Greg, if I asked you, do you think I'm like Bernie Madoff? How would you take that? What would your first thought be? Well, my first thought is I'd be confused because I don't think you're anything like Bernie Madoff. Like at all. Because you're younger, you're poorer, you're more attractive, you're less incarcerated than Bernie Madoff. And just to be clear, when I say poorer and younger, I mean poorer than [00:00:30] he was back when he was rich and younger than he was back when he was alive. But I guess then then after doing like my quick compare and contrast between you two, I'd start to wonder if you're asking me if I think you've got what it takes to run a successful Ponzi scheme. Are you thinking about starting a Ponzi scheme?

Greg: If you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm. Download [00:01:00] the app, take a short quiz, and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.

Caleb: This is Oh My Fraud, a true crime podcast where it's almost never the husband. It's almost always the accountant. I'm Caleb Newquist and I'm Greg Kyte. Greg, how are you doing? Uh, well, my generalized anxiety disorder aside, I'm actually doing. [00:01:30] I'm doing okay. Oh, okay. Good, good. Taking anything for that? Oh, yeah. Boost. Barone. Yeah, a couple, a couple of those every day. I'm not familiar with that one. It's supposed to keep things level. Level? Nice. Yeah. Even. Steven. Yeah. All right. I mean, that's what. That's what my nurse practitioner tells me. Uh, well. Good, good. But just in case it's helpful, would you like me to read a listener review to lift your spirits even [00:02:00] further? Well, that that's the thing that just you asking. That kind of triggered my anxiety because. Because, listen, I don't know if it's going to be a good. Is it a good review or a bad review? It's a good it's a good one though. Then? Yes. Then. Absolutely. Yes. Now, uh, next episode, I think we got a one star lined up. Okay. All right. Good. I'll, I'll I'll take three boost on that day. Yeah, yeah. Be prepared. Okay. Here goes. Insurance fraud investigator writes. This is a fantastic podcast for anyone in the anti [00:02:30] fraud sector. I work as a fraud investigator for a disability insurance company and discovered the podcast when I was researching PCP fraud. The PCP episodes provided a great high level overview of pandemic fraud, and I shared them with my entire team.

Caleb: Oh, the host also do a great job of keeping things lighthearted, and this makes it less dry than other anti fraud podcasts. Keep up the great work! What a great review! Thanks, insurance Fraud Investigator. Our episodes, [00:03:00] if you're wondering, are episodes 34 and 13. So if you missed either of them, go and check them out and share them with your entire team. Because yes, this is not a dry anti fraud podcast. This is the Anti Temperance Anti Fraud podcast because I actually have the world's largest bourbon on the rocks that I'm enjoying right this moment. Um. Helps helps the buspirone go down. [00:03:30] It is an anti temperance anti fraud podcast I believe. Yeah yeah okay Greg for this episode I am wondering have you got any good stories of betrayal. Like have you ever been betrayed or do you just have any favorite tales of betrayal? Well, one of my favorite tales of betrayal is actually comes from the movie frozen, [00:04:00] where Hans, I thought he was the greatest, and then he ends up being an asshole dick at the end. Yeah, Dick. Huge betrayal. But, um, from my from my own life, I was I was. Well, you got to. Maybe you need to tell me if this was betrayal, but because I felt betrayed by this. So. So this was. This was me. Well, okay. Just my first job as an accountant.

Caleb: I was at a mid sized local firm, and I. And I hated it. It was not I mean, I didn't hate [00:04:30] I, I, I loved the work, I hated the job, if that makes any sense. Like I enjoyed what I was doing, but I, I couldn't stand the bullshit like surrounding it like, and you know, I hate tracking time. Tracking time. And I felt like I was because I was brand new and because there was these, you know, because I was expected to learn QuickBooks, which I'd never opened in my life before, and ultra tax, which I'd never opened in my life before I was, I had to learn those programs so A I wasn't [00:05:00] fast be I was spending a lot of time just learning shit instead of doing shit. And and so to try to get my billable hours requirements, I would end up working way past my 40 hours a week. And I was just going, I, I felt like I was donating time to the for profit company that I worked. So, so I just, I just it wasn't landing right for me. And this was the first job I had after a a career transition. Anyways, out of teaching in public education, which I didn't enjoy. So [00:05:30] I'm like going, I'll be damned if I get out of one job I don't like right into another job that I don't like. And so so I like to say that I worked for that firm for exactly 2003 hours because because like in most states, for licensure as a CPA in the state of Utah, I needed one year of experience working under the direct supervision of a CPA, which they they defined as 2000 hours.

Caleb: So so [00:06:00] I got I got hired away because I didn't like working at the firm, but I did enjoy this one engagement I was on. So I, I got I got hired away by this client that I was working for and, and so, so so I'm working there for a while and still don't have my license yet, but I'm close. And while I was at the company that I got hired away from the firm by, I decided to switch CPA firms because because the problem was I, I had changed [00:06:30] from being like the lowest guy on the totem pole in the firm to. And now all of a sudden, I was a client. I was their client. Exactly. And but but they were still treating me like I was the lowest guy on the totem pole at the firm, which which wouldn't work for me because part of a big mistake. Yeah, well, well, it wasn't just that. It wasn't just me being a dick or, like, having something to prove or be like, you got to treat me like I. I need to be treated. The problem was, is my whole pitch to get hired by [00:07:00] this client was, I will save you so much money on, you know, from what you're paying to this CPA firm.

Caleb: But obviously the firm didn't want to lose revenue, so they kept doing everything that they were always doing, even when I worked for them. And I'm like, oh no, no, no, no, we have to reduce this bill. And and they they just wouldn't, they wouldn't take direction from me. And so I chose to go with the new firm and start a brand new relationship. Now, like I said, I wasn't licensed yet and there was [00:07:30] somebody at my job who was like going, do you think we should maybe wait to make this change until after? Because they knew about the 2000 hours till after the other firm signs off on your hours. Right. And I remember having this conversation and being like going, no, they would never they would never do that. They're totally professional. They get it that people make business decisions and all this stuff. It's not like it's not even a problem at all. So I switched firms and then the managing partner of the other firm refused to sign off on my [00:08:00] hours. He he wouldn't do it. And he and he brought up all this just total bullshit where it was like he was like I was part of the committee that drafted that. And what they meant by 2000 hours was 2000 billable hours.

Caleb: And I'm like going, no, no, they did not, because no one in our firm has a 2000 billable hour requirement in a year. Right. So absolutely not. That's how they define it as year plus that means I would. Work 40 hours a week, 50 weeks [00:08:30] a year. That was entirely billable. And that's no, no, no, no one works like that. So. So yeah. So I felt betrayed by him. And and part of it was the fact that I was so confident that he wouldn't go that way with me, and then he did. But this is why this is the thing. Pulled the rug out from under you. He kind of pulled the rug, but but I bet you the funny thing is, as I've thought about this, this story is I bet you he felt betrayed by me. Yeah. I'm [00:09:00] sure. Where? It's like this guy, you know, we gave him a job for a year, and we mistreated him for that entire year. And we continued to mistreat him after he left our company. How dare he take our business, right? And we we we refused to listen to his needs as our customer. How, how how in the world would he possibly do something? As who does he think he is? Low down and treacherous is take this business away from us. So yeah. And I still have to drive past that building every day [00:09:30] when I come to work.

Blake: So. So you think about this every day.

Caleb: Oh no not no, not not every day. But but it is funny. There's still some bad feelings that come up when I see their big billboard on one of the main streets in town.

Blake: Yeah, yeah, I can imagine. All right. Yeah, that's that's that's totally betrayal.

Caleb: Okay, good, good. All right. Qualifies.

Blake: Yeah, I think it qualifies.

Caleb: And the reason why we're even bringing up betrayal at all is because today's case [00:10:00] is just rife with betrayal.

Blake: Our story begins in Lebanon, Missouri. Our story begins in Lebanon, Missouri.

Caleb: Nice. Nice. Good. Good one. Good one.

Blake: Anyway, Lebanon is about an hour drive north northeast of Springfield, which is in south central Missouri. Population around 15,000. It's [00:10:30] right in the heart of the Ozarks, Greg. Okay, so that's where we're at. That's where. And again. For the record, this is a bad geography show, so feel.

Caleb: Free to make sure that we started it by making you think we were in a different Lebanon than we're even talking about, right? Yep.

Blake: This tale concerns a certified public accountant by the name of Douglas Richardson. Now, it's my hunch that there are lots of Douglas Richardson's out there.

Caleb: Right? So if you tried to, like, find this one on LinkedIn, yes. [00:11:00] You'd be buried. Yes.

Blake: There'd be a lot of results. Yeah, in your search. But still, there's probably not that many Doug Richardson's that are also CPAs.

Caleb: I think that's a fair assumption.

Blake: Still, there may be some Doug Richardson's who are CPAs. So just to clear the air, for the record, this is Douglas A Richardson, CPA, again of Lebanon, Missouri. And I even have a CPA license number. Greg, really [00:11:30] I do I don't know if I need to read it aloud.

Caleb: Do it, do it. 018894i have a Social Security number. It's 5811241. I also have his first pet's name. It was Sparky. Sparky and the road that he grew up on was called Clementine Street.

Blake: Oh, lovely.

Caleb: So so now this is a this just turned into a podcast about identity theft.

Blake: Yes. And all of.

Caleb: That. All of that was fake. [00:12:00] I made all of that up.

Blake: Right.

Caleb: But but that's really but that really is a CPA license number.

Blake: That is the CPA license number. That's nice that I found perfect. Now having said that, we don't know a lot about Doug Richardson, but we do know that he became a CPA in 1996. Okay. And that he started his own firm, Douglas A Richardson CPA, LLC, in 2009.

Caleb: It feels so much like you're reading like his baseball card right now. Is [00:12:30] it returned?

Blake: How many tax returns completed in 2010?

Caleb: Right, exactly.

Blake: But I have to say, Greg, if he became a CPA in 96, started his own firm in oh nine. Uh huh. That seems about right, doesn't it? Like 13 years of grinding it out and then he hangs out a shingle? Yeah, that's probably a pretty common story in the in the accounting world. Yeah.

Caleb: For sure. For sure. Absolutely. Absolutely it is. Yeah. You have enough experience to know exactly what you're doing. And then you go and [00:13:00] then you're like, you're jaded.

Blake: Just enough that you're like, I know how.

Caleb: To do it better than.

Blake: That guy.

Caleb: 13 years of doing the math of figuring out your salary versus your your hourly rate and the number of hours you build that year, and going, I think I'm leaving money on the table. Yeah.

Blake: All right. We also know that from December 2013 to June 2016, Douglas A Richardson served as the treasurer and chief Financial officer of Smart Prong Technologies, an Oklahoma company that [00:13:30] developed and manufactured devices for charging cell phones.

Caleb: Okay, so you had a little side gig.

Blake: Yes, yes. His duties for Smart Prong included general accounting, general financial consulting, handling all the smart prongs, bank accounts, payroll, accounts payable, tax accounting, filing tax returns, acting as treasurer and cash management officer, and also included managing investor funds. So that kind of sounds like a I mean, you're right, it might be [00:14:00] a side gig, but yeah, a fractional CFO situation, right?

Caleb: Yeah it does although. Well, but also that description is very robust. I can't think of a whole lot of things that are under the accounting umbrella that you didn't mention that he did. Yeah. So like if the fractional is like, you know, five over five then that would be the fraction. I mean, it's a lot. He's doing a lot.

Blake: That would be a 100%.

Caleb: That would be for CFO. [00:14:30] That would be 100%. Your fraction is 100% as a percent.

Blake: Look at Greg, everybody. Greg can still do the math. Everybody.

Caleb: Oh my God. Yeah. Yeah I'm great at converting fractions to decimals. It's really a gift.

Blake: As part of his employment, Smart Prong paid Richardson $2,000 a month.

Caleb: Okay, so that's where it's like this is fractional because that's ridiculously small amount of money to pay.

Blake: It seems like it, doesn't it? I thought so too. Yeah. And [00:15:00] he had electronic access to several of the company's bank accounts as well as signatory authority over them.

Caleb: In December 2015, the Enforcement Section of the Missouri Securities Division of the office of the Secretary of State. Holy shit. That's the longest name for any organization that that that we've ever read on this podcast.

Blake: I can't think of one that even comes close.

Caleb: To be honest. Yeah. It's and and you can't even use like an [00:15:30] acronym for it because if you it's basically hail Satan spelled backwards is what it is.

Blake: So the the is I guess it would be the OTM. No, there's too many letters. I can't fucking do it. Yeah. There's no it's the.

Caleb: I try I tried it, it's the desmatosuchus. So it doesn't, it doesn't roll off the tongue at all. Um, but regardless, the enforcement section of the Missouri Securities Division of the office of the Secretary [00:16:00] of State opened an investigation into Doug Richardson based on, among other things, anonymous information, that Richardson was receiving investment funds from investors around the country and in the Lebanon, Missouri area. Then in March 2016. So about three months later, the enforcement section of the Missouri Securities Division of the office of the Secretary of State requested information from Douglas A Richardson, CPA, [00:16:30] asking for, among other things, a list of investors in Douglas A Richardson, CPA, the firm, and Douglas A Richardson, the man and any entity in which Richardson was affiliated and or associated. So a couple days later, Richardson responded to inquire about their inquiry. And he also provided which is which is awesome. He provided [00:17:00] a he did provide a list of smart prong investors because that's what they wanted. They wanted a list of investors of any company with which he was affiliated or associated. So that makes sense. And he also said that he had solicited friends and family to invest in Smart Prong, which I feel like that's very weird, because that would imply that he has enough family and friends from around the country and in the Lebanon, Missouri area to attract the attention [00:17:30] of the enforcement section of the Missouri Securities Division of the office of the Secretary of State, which that's a lot of friends. That's got to be a that's got to be a lot of friends and family. That's I don't have.

Blake: That many friends.

Caleb: I don't think. No, I mean, I guess in the South, you think that they just have these sprawling, you know, family reunions. So maybe if all of his cousins and, uh, invest, it just seems like it seems like a weird justification [00:18:00] is that he's just been talking to friends and family, so. But but also, he's trying to defend himself. Probably doesn't know how serious this is going to get. So then two months later, May 2016, the enforcement section of the Missouri Securities Division of the office of the Secretary of State sent a request for information to Smart Prong Technologies, this time not to Doug, but to Smart Prong Technologies and the the enforcement section. I'm not going to say the whole name. I thought it would [00:18:30] be funny and now I'm just tired of it. I can't it's a tough bit. I'm it's a there's a lot of commitment to that, to just continuing that throughout the entire I can't do it. Caleb. Uh, so the the enforcement section, that's what I'm going to call them, the enforcement section, they, they, they specifically requested a list of smart prongs investors, and they wanted an explanation of the company's relationship with Richardson, and they wanted [00:19:00] the names and addresses of the financial institutions where the investors monies were being deposited.

Blake: Um, so if I may just stop you for a second there, please. They requested that list of investors from Douglas A Richardson, CPA of Lebanon, Missouri. They did. Then they requested that same list from Smart Prong Technology of Oklahoma. And something tells me that they pass that off to an intern to [00:19:30] cross-reference to see who's got what. Don't you think.

Caleb: That makes perfect sense to me? Yeah. That they'd they'd want to know. And and there was also we came across a cease and desist order from the enforcement section, and that's.

Blake: That's where a lot of this is coming from. And it's in the show notes if you if you care to peruse. Yeah.

Caleb: And the nice thing about it, because it was, it was made public. And the nice thing is in that season desist order, they really go [00:20:00] step by step through what happened and, and how how they went through discovering what happened with with good old Doug. Boy of Lebanon, Missouri. So in that cease and desist letter, it doesn't state it explicitly, but it is interesting that they noted that as of June 2016, which is just a month after they they they asked Smart Prong for their information. [00:20:30] So just a month after that, Doug Richardson was no longer the CFO of Smart Prong, and it would make total sense that he's no longer the CFO of Smart Prong, because Smart Prong is going, what the hell is going on? Dougie. Doug, why is the enforcement section of the Missouri Securities Division of the office of the Secretary of State? Why are they beating down our door? What the hell did you do? And they showed him the door. And that that [00:21:00] it's. It's fun to presume that that's the reason why. Yeah, that would anyway.

Blake: That maybe would have been an interesting conversation to witness, right.

Caleb: Yeah. Absolutely. Absolutely. His his exit interview. Yeah. Yeah. It's like hey, we we received very few letters from the enforcement section of the Missouri Securities Division of the office of the Secretary of State before you became our CFO. And now that's all we get. And anyway, all of the investor money that was [00:21:30] coming into smart prong technology was either wired or deposited into a smart prong central bank account. And when the enforcement section subpoenaed the bank for information, several things were discovered, including the fact that Dougie Richardson was the sole signatory on the account because apparently his hero is Rita Crundwell or something. Um, they also found out [00:22:00] that from September 26th, 2014 to April 6th, 2016, the account received almost $9 million in deposits from Smart Prong investors, and they came in from both wire transfers and from actual physical checks. And then from September 3rd of 2014 to February 2nd of 2016, Richardson wrote checks to himself for a total of $253,500, [00:22:30] which seems fishy. And it was. But they did even backpedal and say that maybe about $36,000 of that could have been like actual legit payments for services that Doug rendered to Smart Prong Technologies for these services. And then from February 25th, 2014 to April 8th, 2016, Richardson wired a total [00:23:00] of $2,818,500 to five other bank accounts that were controlled by Doug Richardson. Uh oh. So the subpoenaed bank records further revealed that Richardson made payments to numerous people and businesses. And these people and businesses were not smart prong investors. But then later, Richardson received large sums of money from those exact same people [00:23:30] and businesses that he sent a bunch of money to. That does not sound like standard procedure for a CFO or for any company that has investor funds.

Blake: In early July 2016, the Enforcement Section of the Missouri Securities Division of the office of the Secretary of State asked Richardson about these payments to Non-smart. Prong investors non smart prong investors. [00:24:00]

Caleb: Right. The the stupid prong investors.

Blake: The stupid prong investors. He explained that he had quote, many personal loans with different people.

Caleb: Okay. I don't understand how that's an answer to the question. Yeah. It's not it's not an answer. It's not right.

Blake: Not no, no.

Caleb: I mean, it sounds like what he's saying is. Oh, yeah, I had to pay off some loans with that money. Is this not sound like he's, like, giving giving himself up? Yeah. [00:24:30] Kind of. Yeah. Kind of. It's a.

Blake: Weird. It's a weird response.

Caleb: It's a weird. It's a weird response. It's kind of like, hey, where's all that money? And you go, you know, had a long shopping list, huh? Did you did you just say that out? Right? Okay.

Blake: Richardson went on to explain that his construction business failed back in 2008 and left him $3 million in debt. Again [00:25:00] unsure of the relevance at this time, but all will become clearer, I suppose. Richardson said, quote, he may have paid some of those people back using funds received from other people.

Caleb: Again.

Blake: And it sounds.

Caleb: Like he's just giving himself up, going, oh yeah, I owe right that money. Yeah. Oh, where did that go? Oh, I stole it. That sounds like what he's saying to me.

Blake: Well, this next part will maybe help. Okay, clear it up. [00:25:30] He then asks the enforcement section of the Missouri Securities Division of the Office of Secretary of State if they thought he was, quote, like Bernie Madoff. So now I don't know about you, Greg. I don't know about you.

Caleb: He's a genius.

Blake: But if you are talking with an investigator, not just from the enforcement section of the Missouri Securities Division of the Office of Secretary of State, but any investigator [00:26:00] at all who is asking you questions and your answers to their questions eventually lead you to asking them if they think you are like Bernie Madoff. I don't. You may have made a mistake somewhere along the line.

Caleb: Yeah, I think so. Listen, I if I'm a if I'm an investigator, it's going to it's it, it's going to set off some red flags. If the person I'm investigating asks me to compare them to one of the biggest fraudsters [00:26:30] of our lifetime. And also, if I'm eating at a restaurant, I don't want the chef to come out to the table and ask me if I think he's like Jeffrey Dahmer. Those are two things that I that I'd prefer to not to have happen, right, right.

Blake: Later that same month, July 2016, the attorney working for Smart Prong Technologies informed the enforcement section of the Missouri Securities Division of the office of the Secretary of State that the wires from the central bank account to one of Richardson's bank [00:27:00] accounts was not authorized.

Caleb: Oh, say it's not so. Of course it.

Blake: Wasn't.

Caleb: Oh, you mean the the $2,818,500 weren't what.

Blake: They probably just appreciated. They probably just appreciated that he verified that by this point. Right?

Caleb: I'm sure I'm sure it's like, hey, we need you to tell us that you didn't tell him to do this. Yeah. So, yeah, that that makes sense. Yep.

Blake: In September, the [00:27:30] enforcement section of the Missouri Securities Division of the office of the Secretary of State received a letter from another attorney who had been retained by Smart Prong Technologies to initiate civil proceedings against Richardson, alleging that an investigation had found that Richardson had embezzled at least $4.5 million.

Caleb: So, yeah, so it was way beyond the 2.8 that we talked about before.

Blake: Yeah. Smart. Prong sued Richardson on October 31st, 2016.

Caleb: So fast [00:28:00] forward to August of 2018 and Douglas A Richardson, CPA of Lebanon, Missouri, had even more problems because that month, a federal grand jury indictment out of the Western District of Missouri charged Richardson with not one, not two, but six counts of wire fraud and an additional four charges of money laundering. The indictment alleged how Richardson swindled Smart Prong Technologies, three [00:28:30] of Richardson's clients and other victims out of money through materially false and fraudulent pretenses, representations and promises. The details of the fraud were not complicated. The indictment reads. As a further part of his scheme, and in order to conceal his personal use of smart prong funds, Richardson regularly transferred smaller amounts of money received from other individuals from his personal and business bank accounts [00:29:00] into smart prong bank accounts. And that's weird. That's weird. That's weird. I can think of three reasons why it's weird. First of all, who the hell are these individuals that that he's receiving this money from? And B, if this is actually Doug's money, why would he be putting that into Smart Prongs account and see if this is Smart prongs money? Why the hell was it ever in Doug's account to begin with? And [00:29:30] part of me this is this is part of it that's coming to me, Caleb, is.

Caleb: You know how he said he had all these loans and stuff, and he had this failed construction company with 3 million of debt that's hanging around his neck. Yep. I wonder if this whole thing of him taking these small amount of money, small amounts of money, and putting them back into the smart prong account is just kind of a if it's just showing that that old rationalization trope that we've seen so many times [00:30:00] of people who are stealing money from a company, telling themselves, I'm not stealing this money, I'm just borrowing it to get myself out of this bad. I'm going to pay it all back. And so he, like, just had a good month at his CPA firm and was like, oh, I think I can, I think I can put 100, a couple hundred bucks back in to, to the account. I mean, if I do.

Blake: That every month, if I do that every month, I'll pay this loan back in about 125 years.

Caleb: Right, right, right. And yeah, in 125,000 [00:30:30] years. And so yeah. So again, speculation. But also I mean, we've seen it before so that yeah, that that could be what's happening there. Um, then the indictment continues by saying the defendant utilized his position as a CPA for individual clients to solicit loans from such clients for specific purposes and to induce such clients to invest monies into various entities and ventures. The defendant made representations [00:31:00] to such clients that he then well knew were false, in that he stated to them that their loan and investment monies would be used for certain purposes, when he knew all that time that he would use at least part of the monies for other purposes. So he told his clients one thing and did something else. That's all they were saying in that whole that whole hoity toity, uh, verbiage in the indictment.

Blake: Yeah, [00:31:30] they use a lot of words in these indictments to just they do things like, uh oh, he lied.

Caleb: Right. Exactly. And and clearly this is not looking good for good old Dougie boy. No, no, no. And just just to finish that paragraph from the indictment, it goes on to say the defendant then used the monies obtained from such clients and others, known and unknown to the grand jury for his personal benefit and to pay other individuals unrelated to the purposes, entities and ventures advertised [00:32:00] by the defendant, including prior investors and others who previously loaned the defendant monies. So that's a pretty textbook Ponzi scheme the way they said it right there. Yeah, I.

Blake: Would say so. I mean, you know, the critical piece being new money used to pay old investors, right? That, my friends, is a Ponzi scheme. After [00:32:30] the indictment, it took a little while for things to get rolling. As I was researching this case, I waded through a ton of the court filings. Richardson. He switched attorneys at least twice.

Caleb: That's always a good sign.

Blake: Yeah, a good sign, right? You got to get a great client. It actually might have been more. It's hard to tell in some places. The start of the trial was delayed due to its complexity, including the number of witnesses and exhibits. And finally, the trial got [00:33:00] rolling in early November 2019. So, you know, what did we say the indictment was in August of 2018? Trial was in November. Trial began in November of 2019, and on November 7th, 2019, a jury found Richardson guilty on all ten counts of the indictment. Okay, so so.

Caleb: Didn't take didn't take long.

Blake: Isn't it funny how all that time. Just to get to a trial. And then in less than a week, it's all over. It's all over, right?

Caleb: Cut and dried. [00:33:30] Like. Like we said, it's not a complex case. And it doesn't seem like Richardson is very good at defending himself.

Blake: It's interesting because they did cite in one of the files I did read. They did cite the complexity of it. And you think, I suppose if you're a prosecutor, you got to piece this all together, right? Because there's like deposits and checks and wires and all that stuff. Yeah. And like and I did at one point I did pull the witness list and it was just like there's like 50 people. There's like 50 witnesses on this. Yeah. Right. And so like and.

Caleb: I think that's. [00:34:00]

Blake: True. They want wanted, they want it to be an open and open and shut case clearly. Right.

Caleb: Well and I think part of it, part of it and I assume part of the complexity includes like okay, so here's the first investor. How much money did you invest? I invested this much. How much money did you receive in returns. Oh this much. How much of your original investment did you get back? Did you ever pull the money back out? You know, it's all that kind of stuff where that's going to be different for every single investor. And obviously if if we're talking, you know what, [00:34:30] it was $9 million that was totally invested into the that was deposited into that account. That's that's going to be a lot of people that that you're going to have to get all those boring details from during this thing. And then also, it's one of those things where I feel like it's it's almost like a fetish of these, these cases to try to follow the money that went out of the bank account into the Fraudster's account and what they spent it on, even though to me that seems irrelevant. It's like [00:35:00] just as long as you know it, that they got it at that point. You're I mean, don't get me wrong, I love those stories about what they spent their money on, but it doesn't seem like it's particularly relevant to a conviction. But then again, I'm not a district attorney. Yeah.

Blake: Um, for those of you who are interested in boring details, the indictment is in the show notes. So check it out. Because this they do they they don't mention the investors by name, but they do cite several [00:35:30] investors as, as as part of making their case. Yeah. And I don't know why. It's, it is funny to read about like when, when people have ill gotten proceeds and what they spend the money. It's especially good in the Securities and Exchange Commission does it better than anybody. But, um, but those are fun to read and I absolutely. I enjoy reporting those anyway. Yeah. After the conviction, Richardson changed attorneys again, at least in part because he hadn't [00:36:00] paid the attorney that represented him during the trial. Right.

Caleb: So maybe his attorney got changed on him.

Blake: Well, yeah, I think they they if I remember right, the filing was something about the attorney withdrawing. And um, in the filing, it said he asked to be relieved and it was noted that he even had to pay his own hotel bill on all his travel to Springfield. Oh, um.

Caleb: It's horrible. It's a travesty.

Blake: Yes. In [00:36:30] any case, Richardson made many motions in the months following his conviction, including one for a new trial to be released from custody, delay the sentencing. Some of those were granted. And so that kind of dragged things out. And then the pandemic started, right. Got rolling here in the US in earnest in March of 2020. And around that time that this was all happening. So there were delays related to that. And then finally in March of 2021, a continuance for sentencing was granted [00:37:00] again. But it was noted, I read this one. It said, quote, no further. And this is all caps, by the way. No further continuances will be granted absent extraordinary circumstances. Okay, so I have to assume by this point the pandemic was no longer considered an extraordinary circumstance. Right? Right, right. Yeah.

Caleb: Yeah, I think I remember March 2021 where we were like, oh, this is the rest of our lives forever. Yeah. Great.

Blake: So so yeah, not an extraordinary circumstance.

Caleb: Not at all.

Blake: Um. In [00:37:30] June 2021, Richardson was sentenced finally to 188 months, more than 15 years in prison in order to pay 8.8 million in restitution. Local reporting. And this is one of my favorite parts of the story. Local reporting noted at the time that Richardson continued to swindle money from people even as he awaited sentencing.

Caleb: Yeah.

Blake: Including including defrauding one victim for over $100,000.

Caleb: Nice. So. Well. But but that period of time, it was [00:38:00] a pretty long period that he was it was sentencing. I mean, that was over over a year. That was like a year and four months. Yeah.

Blake: That he was paid for his could have paid for his poor lawyer's hotel room.

Caleb: I mean, he was probably bored. What was he going to do with his time? You know.

Blake: While we were all.

Caleb: Make sourdough bread. No, he's gonna he's gonna he's gonna, you know, siphon off a few people's stimulus checks to continue. You to invest or in or proceeds. It's a yeah to invest in smart prong technologies. The [00:38:30] company for which he's with which he's no longer affiliated. Come on. Yes. It's easy. Easy.

Blake: As of this recording. The saga of Douglas A Richardson, CPA of Lebanon, Missouri is ongoing. Believe it or not, almost immediately after his conviction, Richardson filed an appeal. But then the Eighth Circuit Court of Appeals affirmed that conviction in September of 2022. Geez. But the story doesn't end there. One thing that turned up while [00:39:00] I was researching the case is that federal prison records show that he is not in their custody.

Caleb: Wait, he broke out of jail?

Blake: I don't know, it was weird. So that's what.

Caleb: It sounds like when you say that.

Blake: I'm like, wait, what happened? So I contacted the DOJ for the Western District of Missouri, and what I learned is that he is still technically he's technically serving his sentence. Okay. However, he has been transferred to a local detention facility [00:39:30] for ease of transfer to for hearings related to this new appeal. He is going on. Okay. So yes, that's right. He is still appealing this case. And I even asked the spokesman for the Western District of Missouri if I could interview the prosecutors. And he he declined because, you know, because the appeal is ongoing.

Caleb: Right. So so let me see if I got this right. So the the Department of Justice says he's not in their custody because the.

Blake: Bureau of Prisons, [00:40:00] the Bureau.

Caleb: Of Prisons says.

Blake: Technically, right, he's not technically in Bureau of Prisons because he because he's at a local detention facility.

Caleb: Yeah, he's just like in the city, you know, or a.

Blake: County or whatever.

Caleb: Yeah. Like lockup, because that's because he's kind of in nowhere. Missouri. So to to so that he could get to his appeal in nowhere Missouri. They're like, what's the closest what's the closest room with with bars and a lock. And they're right there like, okay, cool. He can be [00:40:30] there.

Blake: Right? You got it, man.

Caleb: Okay, that kind of makes sense.

Blake: Yeah. So even though Douglas Richardson, CPA, is not shown to be imprisoned, he very much is imprisoned. And the Bureau of Prisons shows his scheduled release date as June 11th, 2032. So, Greg, did we learn anything?

Caleb: Yeah, we we we did good. We did.

Blake: Okay.

Caleb: The the thing [00:41:00] that keeps coming to mind is, is background checks. Okay. And we've talked about background checks on previous episodes. We have background checks. They're they're incredibly important and and and not perfect. They're not they're not they're not perfect and and they're laborious. So I get it why companies don't do them. But in hindsight, well like, for instance, I want to know I'm I'm sure I know the answers to these questions, but [00:41:30] did smart Prong know that Doug used to own a construction company that failed? Because right there I go. Your own company failed. Come on, take care of the finances of our company. I'm sure lightning's not going to strike twice. What do they mean? Right, there I go. This doesn't seem like a smart hire at that point, but then also I go.

Blake: We are assuming. I will just say for the record, it is. We're assuming he's telling the truth about the construction company, right? [00:42:00] Right. Like the weird thing about that, if I, if we're just if we're talking lessons here. Yeah. If he filed for bankruptcy, unless he filed for reorganization, why is he still paying back the debts? Why is that his excuse? Okay. Like, wouldn't it be easy enough for people to disprove that he's not he doesn't have. Because if he if he just filed and if he just did like liquidation, then he doesn't know that money anymore, right?

Caleb: That's you know what I'm saying? That's a good point. I hadn't thought about [00:42:30] that.

Blake: So like I the depth of the deception isn't quite clear to me. Okay. But in terms of like the Missouri, you know, the the enforcement section of the division of the Missouri Secretary of State, I can't, I can't, I don't you were so close. You were right there. If I'm not looking at it, it's okay. But the point is the point is those guys come knocking and they're like, so what's going on here? And he's like, yeah, I had a construction company and it went bankrupt. [00:43:00] I'm still paying the loans back and like, oh, okay. Right. So that could have been a story. But it it isn't clear whether or not there's a story or not. Yeah.

Caleb: Well and and see all of that stuff makes very little sense to me because because I see that as being the, the, the $3 million loan that he got saddled with from his failed construction company. I see that because because I get what you're saying. Why didn't he just, you know, file for bankruptcy? You make a valid point. But I see stuff like that as [00:43:30] being, you know, the fraud triangle. You got to have opportunity, pressure and rationalization. If you've got $3 million that you owe, you still owe that. You still owe, then that's going to be good pressure to steal a bunch of money from this side gig that you have, being the fractional CFO of a of a fucking cell phone charger, wire company, whatever it is. So so that part of it made sense to me. So there's a lot of stuff that's just, I guess still question marks. But I still [00:44:00] want to say, because even with that, if you do a so so let's say they did a background check one way or the other, if I see that my CFO had to file bankruptcy himself, I'm not going to hire him as a CFO. If I do a background check and I require personal financial statements from my prospective CFO, and that personal financial statement says that he has $3 million worth of personal debt from a failed business. I'm going to say maybe I don't want that guy. And and it [00:44:30] is I did I did a little poking around. It is legal to require that information from potential applicants.

Blake: They do. They do credit checks all the time.

Caleb: Well, and it's not just credit checks. You can from what. And again, this is this is from a fairly cursory look at this. But this was from the Equal Employment Opportunity Division where you see that it says as long as you, as long as you are asking the same information from all [00:45:00] the applicants, and as long as it's in no way discriminatory or by asking for this information, you're not somehow, you know, making things, making people in certain demographics at a disadvantage. And this was the biggest thing. As long as you can prove that that it that information, this financial information helps you accurately identify responsible and reliable employees. Perfectly legal. And I don't see how I mean, [00:45:30] again, based on fraud triangle kind of stuff, if you've got somebody who did have a bankruptcy or was did have just some ridiculous amount of debt that that's around their neck, I would go, okay, that's going to make me think that maybe you're not going to be as responsible or reliable as an employee, as my fucking CFO. So I. Very justifiable to do that stuff in my mind. The other part of the background checks thing is that background checks are they're not just important for [00:46:00] employers, they're also important for investors. Now, Doug was getting his investment from people who some of which, if not all of which were his clients, that he was asking to invest in smart prong technology.

Caleb: And so he was using his clout as a CPA to, to, you know, as a trusted business adviser, that sort of stuff to get people to invest in it. But like you said, Doug had been convicted [00:46:30] of a fraud and was just awaiting sentencing. And during that period of time, somebody invested $100,000 with him. And it's like, you can just do a quick Google search to see if the Department of Justice has issued a press release about this man that you're about to hand $100,000 check. Just a just do some basic background check shit, and you're not going to get in trouble as much as these poor people [00:47:00] did. Yeah, yeah. Okay. And last and I kind of hate this and I just alluded to it, don't trust anybody just because they're a CPA. The the CPA loves to say that that CPA that is are one of the most trusted professions. And the ACP is not wrong about that, right. Physicians. Physicians are also one of the most trusted professions. And sometimes they leave sponges [00:47:30] inside your chest cavity. So it's you got people who don't do their job good in every single profession. So to protect yourself, you can't just go off of the reputation of the industry in which that person finds themselves.

Blake: Yeah, interestingly enough, I did find a video of Douglas, a Richardson CPA, talking with someone about, you know, tax stuff for investment. [00:48:00] What? Really? Oh, yes. It's still up there on YouTube. Oh, nice. It didn't have many views, and I'm not necessarily going to point it out to people. But the comments of course. Did you see it. Yeah I mean there weren't many. But one is like that guy's in prison now. Nice. So why so why is this video still up, you know. Right. It was I got a kick out of that. But you're right, Greg. You are right.

Caleb: Well, that's it for this episode. [00:48:30] And remember, the only good time to ask someone if you're like Bernie Madoff is on Halloween when you're dressed up like Bernie Madoff.

Blake: And also remember, a true CPA will never stab you in the back. If you're going to get stabbed, a CPA will definitely stab you in the front.

Caleb: If you want to drop us a line, we'd love to hear from you. Send us an email at Omi. Fraud at earmark Cpcomm and Caleb, if people want to reach out to you, where can they find you out there?

Blake: I'm on X, [00:49:00] formerly known as Twitter at C Newquist. Don't expect much, but I'm also on LinkedIn. Linkedin is probably better. Backslash Caleb Newquist Greg, you don't you don't do any of these things anymore.

Caleb: I do I find myself on LinkedIn from, you know, probably every few days just to check to see if there's anything interesting there. So yeah, if you want to if you want to reach me, just hop on LinkedIn. I'm Greg Kite, CPA, which is just LinkedIn backslash Greg [00:49:30] Kite. Yeah. Kite spelled with a Y instead of an I.

Blake: Oh My Fraud is written by Greg Kite and myself. Our producer is Zach Frank. If you like the show, leave us a review or share it with a friend. Rate the show. Write a review wherever you listen to the podcast. Do those things there. Rate or write and subscribe on Apple, Spotify, or wherever you listen to podcasts. Accountants, listen on earmark and get some. This show will come out [00:50:00] before the end of the year, so you need CPE, right? So listen on your mark and get some CPE.

Caleb: It's so easy.

Blake: Incredibly easy. Join us next time for more average swindlers and scams from stories that will make you say oh my, oh my.

Caleb: Fraud.