Three trucking company principals, Timothy L. Kephart, Lee W. Stoneburner, and Mark D. Michael, were charged with conspiracy to commit bank fraud in a check-kiting scheme.
According to authorities, at the end of the scheme, approximately $3.6 million in NSF checks were “kited” between the various business accounts of their company, Dart Trucking Co., at the Huntington Bank in Columbiana, OH, said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
Kephart was the chief operating officer, Stoneburner was the president, and Michael was the chief financial officer of Dart, located in Columbiana, OH, with offices in Pennsylvania.
From October 2007, through February 2010, it’s charged, Kephart, Stoneburner, Michael conspired to kite checks in five Dart Trucking company accounts at the Huntington Bank.
All of these accounts were set up as Controlled Disbursement Accounts (CDA). These CDAs were supposed to be a means of organizing and controlling the payment of expenses related to operation of the business. CDAs have a separate routing number for checks that are to clear the account. Due to the checks bearing a separate routing number, it automatically created another day of “float” time for a check item to clear an account because of the bank’s internal processing procedures.
Kephart, Stoneburner, and Michael would deposit checks into one CDA from other CDAs which did not have sufficient funds to cover the checks, thereby falsely inflating that account. The Huntington Bank extended immediate credit for deposited items. This balance remained available for use for the one-day float until another NSF check from another CDA was deposited into the CDA to “cover” that check, according to the U.S. Dept. of Justice.
Kephart, Stoneburner, and Michael “caused these CDAs to be temporarily and artificially inflated in amounts which increased over the course of the scheme as the check-kiting activity accelerated and magnified to the point where the check kiting had to be monitored daily to keep it going for as long as possible,” according to the Justice Dept.
The case is being prosecuted by Assistant U.S. Attorney Christian H. Stickan following investigation by the FBI, Youngstown Office.