On Monday, January 14, 2013, a federal jury convicted former New York City Citibank executive secretary to retired Wall Street Tycoon, William Salomon, of fraud, tax evasion and other criminal charges following a week-long trial before U.S. District Judge William J. Martini in Newark federal court.
Prosecutors say Karen Febles worked for Salomon, whose father was one of the three former managing partners of Wall Street investment bank, Salomon Brothers, a firm created in 1910.
Febles’ responsibilities included assisting Salomon with his professional and personal finances. She was hired as William Salomon’s assistant in 1997 and remained in that position until Citibank fired her in September 2011. The 50-year-old Wallington, N.J., woman had exclusive control over Salomon’s bank accounts and prepared and negotiated checks on his behalf.
Febles, who took the stand during her trial, broke down in tears as she was bombarded with questions about how she handled Salomon's finances. When asked by her defense attorney if she ever committed fraud against her former employer, she replied, "No, never," before dissolving in tears.
After a few routine questions, Prosecutor Evan S. Weitz amplified his scathing line of questioning as he grilled the shaken former secretary about the fancy cars she bought and the expensive vacations, and cruises she took during her tenure as executive secretary -- where her lifestyle clearly exceeded her annual take home pay, listed in the U.S. Attorney's press release as a mere $50,000.00.
According to the criminal complaint, between 2007 and September 2011, Febles siphoned at least $1.3 million of Mr. Salomon’s funds from his bank accounts directly into 21 personal bank accounts, including two custodial bank accounts that she maintained for her minor son, which the jury found that Febles used to conceal her bank and wire frauds.
An audit of hundreds of checks showed that Salomon signed checks before Febles augmented the instruments adding more money. Investigators said Febles would then present the altered checks negotiating many for cash.
A review of Febles transactions revealed that more than $900,000 in checks and almost $400,000 cash was taken from Mr. Salomon’s bank accounts and deposited into Febles accounts. In 2011, over the course of five months, Febles spent hundreds of thousands of dollars on luxury purchases, which included $52,720 in cash for a 2011 Range Rover; $34,650 in cash for a Mercedes-Benz; $43,200 in cash for one year’s rent for a three-bedroom home in Clifton, N.J.; and more than $45,000 in cash for six months’ rent for two apartments in Palisades Park, N.J.
In addition to the aforementioned illegal expenses, a slick Febles spent more than $115,000 on vacation and travel expenses. The rent on a four-bedroom home in Mahwah, N.J. cost Febles $56,000. Further analysis of Febles’ unfettered shopping spree revealed she spent more than $20,000 on other car payments and personal expenditures such as entertainment, meals, travel, and clothing.
The tax fraud charges Febles faced came because of failure to pay or disclose to the Internal Revenue Service during tax years 2009 and 2010, the money she stole from Mr. Salomon. In those two years, she filed tax refunds in the amounts of $14,839 and $9,293, respectively.
Had Febles disclosed the money that she stole from Salomon on her tax returns during those two tax years, she would have owed almost $270,000 to the United States for tax years 2009 and 2010.
In a statement, U.S. Attorney Fishman said Febles bamboozled the elderly Salomon by using her trusted position as his executive assistant to shamelessly "loot Salomon of nearly $2 million by betraying her employer’s trust" to finance a luxurious lifestyle her true salary would never have allowed her to enjoy.
"(The) jury verdict ensures she will soon find out the true cost of her choices," said Fishman.
The jury convicted Febles of bank fraud, four counts of wire fraud, three counts of money laundering, and two counts of tax evasion. The bank fraud count carries a maximum of 30 years in prison and a maximum fine of $1 million. Each of the four counts of wire fraud carries a potential prison sentence of 30 years and a maximum fine of $1 million. Each of the three counts of money laundering carries a maximum of 20 years in prison. Each of the two counts of tax evasion carries a maximum of five years in prison in addition to a maximum fine of $250,000.
Febles' sentencing is set for June 5, 2013.
"This case shows that the appearance of success can be a mask for a tangled web of financial lies," said Acting Special Agent in Charge of IRS-Criminal Investigation, Newark Field Office, said Shantelle Kitchen.
Acting Special Agent David Velazquez added that the FBI remains committed to vigorously investigating individuals who violate positions of trust.
"Karen Febles took advantage of her unique relationship with her employer in order to fulfill her selfish need for luxurious items and trips. Today’s verdict sends a message to others, in similar positions of trust, that these activities will be fully investigated by the FBI," said Velazquez.
Fishman lauded special agents of the Newark Office of the IRS-Criminal Investigation Unit, under the direction of Acting Special Agent in Charge Kitchen, and special agents of the Newark FBI, under the direction of Acting Special Agent in Charge Velazquez for their investigation, which lead to Monday's conviction.
President Barack Obama’s Financial Fraud Enforcement Task Force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes coordinated this case.
The task force includes representatives from regulatory authorities, inspectors general, state and local law enforcement and various federal agencies whose workforce together produced a powerful array of criminal and civil enforcement
The task force is working to improve efforts across the federal executive branch in connection with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.