Risk & Compliance

Treasurer Steals to Pay for E-mail Scam

A Michigan treasurer is sentenced to jail after embezzling over a million dollars from the county so he could respond to a well-known E-mail scam.
Stephen TaubJune 12, 2007

A former Michigan county treasurer was sentenced to nine to 14 years in prison for embezzling more than $1.2 million and then losing it to one of the ubiquitous Nigerian e-mail scams that plague the e-mail inboxes of U.S. companies.

Thomas Katona, former treasurer of Alcona County, Mich., pleaded guilty in May to eight counts of embezzlement, two counts of forgery, and one count of attempted embezzlement. His actions were brought to the attention of the AG’s office in mid-November 2006 by bank personnel when Katona wired about $150,000 of Alcona County funds to banks in Taiwan and England. An audit by the Michigan Department of Treasury in December 2006 discovered a shortage of more than $1.2 million in county funds for the calendar year of 2006. This sum accounted for roughly 25 percent of the county budget, according to a press release from the office of the Michigan attorney general.

A subsequent investigation found that Katona was involved in a “Nigerian” fraud scheme. According to Cox’s office, in June 2006, Katona wired money from his personal account to the same banks and was warned by bank officials and by county employees that he might be involved in a “Nigerian” fraud scheme. He ignored these warnings, however.

In November 2006, Katona flew to London to pick up money from the scheme and notified a local bank in Michigan to reactivate an old account of his so it could receive millions of dollars shortly.

That money never showed up.

Katona’s sentence is at or near the statutory maximum, according to an announcement from Michigan Attorney General Mike Cox. He adds that Judge William F. Myles found “substantial and compelling reasons” to depart upward from the sentencing guidelines that would apply in the “typical” embezzlement case.

The Nigerian scam, which typically begins with an e-mailed letter seeking help moving a large sum of money out of Nigeria, has become notorious among many e-mail users, primarily as a nuisance. But in a portion of its website once devoted to the scam, the United States Secret Service noted that “The letter, while appearing transparent and even ridiculous to most, unfortunately is growing in its effectiveness,” the Secret Service asserts.

In response to this growing epidemic, the United States Secret Service established “Operation 4-1-9” designed to target Nigerian Advance Fee Fraud on an international basis. The Secret Service also noted that its Financial Crimes Division receives approximately 100 telephone calls from victims/potential victims and 300-500 pieces of related correspondence per day. According to the Secret Service, the scam grosses hundreds of millions of dollars annually and losses continue. “In all likelihood, there are victims who do not report their losses to authorities due to either fear or embarrassment,” it adds.

“Victims are almost always requested to travel to Nigeria or a border country to complete a transaction,” the Secret Service warns on its site. “Individuals are often told that a visa will not be necessary to enter the country.” Nigerian con artists may then bribe airport officials to pass the victims through Immigration and Customs. Because it is a serious offense in Nigeria to enter without a valid visa, the victim’s illegal entry may be used by the fraudsters as leverage to coerce the victims into releasing funds, it adds. Victims also face violence and threats of physical harm: In June of 1995, an American was murdered in Lagos, Nigeria, while pursuing a 4-1-9 scam, and numerous other foreign nationals have been reported as missing, according to the Secret Service.

This is not Katona’s first brush with the law. The Associated Press reports that in 1998, Katona pleaded guilty to two felonies after falsifying documents for private accounting clients. Under his plea deal at the time, the charges were dismissed after he stayed out of trouble for a year, according to the wire service. Katona was re-elected in 2000 and 2004.