AURORA, Mo. (Edited News Release) – A former Aurora, Missouri, business owner was convicted in federal court on Friday of a series of fraud schemes worth more than $ 30 million.
Russell Grundy, 51, of Hilton Head Island, South Carolina, formerly of Aurora, was sentenced by United States Judge Stephen R. Bough to eight years in federal prison without parole. The court also ordered Grundy to pay $ 14,847,451 in compensation for his victims.
On January 30, 2020, Grundy pleaded guilty to two counts of wire fraud, one count of making a false statement on a loan application, and one count of money laundering. According to court documents, Grundy̵7;s numerous schemes to defraud financial institutions, a Native American Tribe, and his former clients, potentially reached more than $ 30 million and resulted in nearly $ 15 million in actual losses.
This white-collar thief maintains a luxurious lifestyle by stealing millions of dollars from his clients, partners, and lenders to build expensive homes, buy luxury cars, and acquire lots. vacation, “said United States Attorney Tim Garrison. “This theft occurred not once or twice, but repeated over the years by a series of fraudulent schemes. Even after being accused, while free from bond pending trial, he has recklessly continued to engage in crime. Now he is responsible for the widespread financial damage his greed has inflicted on his victims. “
“The detailed multi-million dollar fraud schemes and misinformation provided in many of Mr. Grundy’s documents have resulted in significant damage to his business partner, a significant client and many financial institutions, all of which violate public trust, “said Adam Steiner, Acting Special Charging Agent of the IRS Criminal Investigation division in St. Louis. Louis Field Office. “Today’s sentence reflects the government’s decision to restore and ensure that trust. In addition, the IRS Criminal Investigation, together with law enforcement partners and the United States Attorney’s Office, will continue to identify, investigate , and prosecute individuals like Mr. Grundy. “
Grundy is the owner of many companies focused on advanced technologies, from software development to computer security to meeting its client’s software and technological hardware needs. Grundy’s companies include Innovative Things, LLC, PILR Technology, LLC, Choice Technologies, LLC, Wyerless, LLC, and Audio Input, LLC.
Land O’Lakes / Nutra Blend Fraud Scheme
Grundy (through his company Innovative Objects) was contracted by Land O’Lakes, Inc., and its subsidiary, Nutra Blend, LLC, from January 2004 to September 27, 2015, to create inventory propriety software, track, and link shipping products. Grundy also contracts with Land O’Lakes and Nutra Blend to provide equipment and technical support for software use, maintenance, and maintenance.
Grundy incorrectly told Land O’Lakes and Nutra Blend that third party software programs are built on proprietary software and are essential to successful software operation. Grundy claimed that some of the payments made on innovative items were delivered to third party license holders. Honestly, there are no third party license fees; instead, Grundy hid payments for his personal or unrelated expenses.
Land O’Lakes and Nutra Blend paid more than $ 1.8 million in fraudulent license fees between 2012 and 2015.
Miami Nations Enterprise Fraud Scheme
Grundy has partnered with Miami Nations Enterprise, a subsidiary company of the Miami Nations Tribe, in negotiations to provide loans and to purchase a vested interest in all Grundy technology-based companies.
Grundy wrongly told Miami Nations Enterprise that his companies had been awarded a $ 3.5 million contract from Wal-Mart Stores, Inc., to develop and provide information technology services. Grundy presented numerous e-mails, invoices, conditional award letters, and other documents to support his false claims. Miami Nations Enterprise lent Grundy money to cover the costs associated with the software and hardware purchases and training required to obtain the $ 3.5 million Wal-Mart contract. Grundy now admits that he instead used those funds for his own personal expenses, including building a new home in Charleston, South Carolina.
On August 24, 2014, Miami Nations Enterprise paid an additional $ 2 million to purchase a 70 percent interest in Grundy companies.
Miami Nations Enterprise officials later discovered that neither Grundy nor any of its companies were awarded any contracts with Wal-Mart, and identified e-mails, conditional contract rewards, invoices, and bank deposits Grundy used to support his claims were fraudulently created. Miami Nations Enterprise officials advised that if they were aware of Grundy’s misrepresentation, they would not buy any part of the Grundy companies or allow him millions of dollars as requested to meet the specifications for a information security programs that never existed. Based on records from the financial institution, as well as numerous misrepresentations made by the defendant, Miami Nations Enterprise transferred a total of $ 8,010,000 to Grundy.
False Loan Application Information
Grundy applied for three loans from UMB Bank on October 17, 2014. Grundy specifically admitted that he fraudulently obtained a $ 5,440,800 loan by providing false information on the loan application. Grundy also submitted a “Terms to Change the Terms” which effectively allowed him to refill an existing debt based on the information he provided to the bank. The total amount of loans and “changes to the terms of the agreement” fraud obtained by Grundy was more than $ 12 million. After the sale of the confiscated land and warehouse built with fraudulently obtained loans, UMB officials reported the remaining final loss of $ 4,214,126 after the sale of those assets.
Grundy wrongly said that Land O’Lakes had agreed to a 20-year lease for the warehouse space he wanted to build using the loans he requested from the bank. Based on the lease agreements given to UMB Bank officials, Grundy claimed he would receive $ 18 million in future revenue.
Grundy admitted that he greatly increased the amount of money that Land O’Lakes had to pay to get UMB loans. Instead of a lease agreement between Grundy and Land O’Lakes to rent warehouses, there are two lease agreements. A lease agreement is for three years at a cost less than Grundy claims. The second lease agreement is a “monthly” lease agreement at a smaller amount. In fact, true and accurate leases signed and approved by Land O’Lakes only guarantee Grundy $ 540,000 in revenue.
Additional Financial Fraud
After being accused by a federal grand jury, Grundy was granted a bond with government objections. During his pretrial release, according to court documents, Grundy committed two more notable financial frauds.
Grundy contracted with an individual for the creation of a mobile app, for which he was paid $ 13,230 in advance. The app was never completed but Grundy denied the victim’s request for a refund. As a result of this incident, the government moved to recover its bond. The court chose not to withdraw his bond but specifically said that Grundy cheated on the victim.
A few months later, Grundy again made a false statement about loan documents to Palmetto State Bank in South Carolina in a fraudulent attempt to obtain another loan. Grundy severely increased his assets and income to get a loan. But for the diligent efforts of bank officials, Grundy’s fraud and false documents could result in losses of up to $ 75,000. Grundy surrendered his bond and was taken into federal custody.
The case is being sued by Assistant US Attorneys Patrick Carney and Casey Clark. It is being investigated by the FBI, IRS-Criminal Investigation, FDIC-Office of Inspector General, and the Small Business Administration – Office of the Inspector General.
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