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United States v. Kirincic

October 30, 2007

UNITED STATES OF AMERICA
v.
STEVEN A. KIRINCIC, DEFENDANT.



The opinion of the court was delivered by: McKENNA, D.J.

MEMORANDUM AND ORDER

1.

The above defendant pleaded guilty on February 28, 2005, without a plea agreement, to Count One of a two-count indictment. That count charged him with conspiring, in violation of 18 U.S.C. § 371, to "embezzle, abstract, purloin, and misappropriate moneys, funds, premiums, credits, and other such property of a person [Mutual of America Insurance Company ("MoA")] engaged in the business of insurance affecting interstate commerce in violation of Title 18, United States Code, Section 1033(b)(1)." (Indict. ¶ 2.) The offense conduct is described as follows in paragraph 3 of the indictment:*fn1

a. In or about March 2000, KIRINCIC and MEYER formed a partnership called Stesco to manage and invest client money through investment products offered by Mutual of America Insurance Company ("Mutual of America").

b. On numerous occasions from in or about February 2000 through February 2002, in Manhattan, New York, KIRINCIC, then a Vice President of Billing Services for Mutual of America, used his access to Mutual of America's computer systems to alter the company's records to fraudulently record deposits into Mutual of America investment products for Stesco clients.

c. During the course of the conspiracy, MEYER received cash from a Stesco client for deposit into that client's Mutual of America account, and instead of depositing that cash, MEYER split the money with KIRINCIC, and KIRINCIC used his position at Mutual of America to make it appear that a contribution had been made, when in fact it had not. (Indict. ¶ 3.)

The Presentence Investigation Report*fn2 as revised on October 7, 2005 ("PSR") calculated a Guidelines offense level of 19 (composed of 6 levels as the base offense level pursuant to U.S.S.G. § 2B1.1(a)(2), plus 14 levels pursuant to U.S.S.G. § 2B1.1(b)(1)(H), on the basis that the relevant loss exceeded $400,000 but not $1,000,000, plus 2 levels pursuant to U.S.S.G. § 3B1.3, on the basis that defendant abused a position of trust, less 3 levels pursuant to U.S.S.G. § 3E1.1 for acceptance of responsibility). (PSR ¶¶ 38-48.) Since defendant's criminal history category is I, the resulting Guidelines sentence range is 30-37 months. The loss figure -- "an amount between $400,000 and $1,000,0000" (PSR ¶ 31) -- used in the Guidelines calculation represented "intended loss"; the actual loss to MoA was $41,173.76. (PSR ¶¶ 34 & 40.)*fn3

A Fatico hearing as to the loss amount was held on August 18 and November 2, 2006, at which George Medlin, an MoA executive vice president responsible for MoA's internal audit division, testified.

As described in the PSR and summarized by the government, the scheme worked as follows*fn4

Stesco earned fees by charging its clients a sliding scale advisory fee ranging from 15% to 5% of quarterly earnings, depending on the client's total account balance. (Gov't Letter Mem., Jan. 13, 2006, at 1.) "To increase the amount of money [defendant and Meyer] could make from their investment advisory business, Kirincic and Meyer conspired to create false earnings in the [MoA] accounts of Stesco clients, as well as in their own accounts and the accounts of family members." (Id.) False earnings entries in MoA accounts were created by defendant, who had access to the accounts, in three ways: "(1) fictitious contributions; (2) backdating; and (3) unit debit remainders." (Id. at 2.)

Fictitious contributions were entered into MoA's computer system either by changing a figure, as by changing a $25 remittance to a $3025 remittance (see PSR ¶ 21), or by misapplying customer contributions, as by depositing a $20,000 check received from a customer in Meyer's account and then arranging a $20,000 credit to the customer's account without Meyer losing the $20,000 credit. (See id. ¶ 23.)

Backdating involved crediting a Stesco client deposit to the client's MoA account as of a date earlier than the date as of which it should have been credited. Since MoA customers' deposits are converted into units of MoA investment products, backdating a deposit to a date on which the unit value of an investment product was lower would result in the Stesco client holding more units than would have been the case absent backdating, as when a $500 deposit that should have been credited on May 14, 2001, when the relevant unit value was $39.16, was credited as of April 3, 2001, when the unit value was $33.37, so that the Stesco client got 2.21 extra units. (See id. ¶ 25.)

The unit remainder manipulation worked as follows: On certain occasions, after a contribution was processed, Mutual of America records show that the contribution would be reversed out, but using a different VTD [i.e., valid transaction date] than that used for the deposit. Because a different VTD date was used, the unit value was different, and the same dollar value corresponded to a different number of units. The proper dollar value would be reversed out, but the incorrect number of units would be removed, leaving remainder units in the account. These remainder units would then be transferred to another fund. (PSR ¶ 27.) As a result of this type of manipulation, as an example, a credit of $4,483.13 was created to a Stesco client's account. (See id. ¶ 28.)

The result of the described manipulations was that a number of Stesco clients were credited on the records of MoA with amounts -- whether calculated in cash or in units of MoA investment products -- greater than they were entitled to have credited to them. MoA attributes $265,525 of these overcredits to fictitious contributions, $128,049.45 to unit ...


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