A New Orleans CPA has been charged with embezzling $1.8 million from a client. Federal prosecutors charged Paul Gardner, age 57, with a single count of wire fraud. A CPA for 30 years, Gardner allegedly began his criminal career in 2010 after being hired by a local oil company to do bookkeeping and payroll work.
Between 2007 and July 2010, Gardner apparently had no problems. By August of 2010, however, prosecutors say Gardner had developed a gambling problem and began embezzling money from the oil company's account.
The FBI says that Gardner had electronic access to the account so he could process the company's payroll. Beginning on August 31st of 2010 and until being caught in May of 2014, prosecutors say that Gardner accessed his client's account numerous times and transferred money into his own personal account. The total transfers were $1,798,000.
Gardner waived indictment and plead guilty later as part of a deal with prosecutors. He was facing twenty years in prison if convicted at trial on all counts. Part of the plea agreement is that he must also pay restitution. Because the money was apparently used for gambling, collecting the full amount is doubtful. Any accounting malpractice insurance Gardner may have probably won't cover his client's losses as most policies exclude embezzlement and theft.
A lengthy prison sentence might make some of his clients happy but it won’t make his one client whole. Accounting malpractice cases such as this one are especially tough for clients but usually preventable.
On January 29, 2015, Gardner agreed to plead guilty. According to court records, Gardner agreed that prosecutors could prove the following:
“The government would establish that beginning on August 31, 2010, and continuing until his termination on June 20, 2014, GARDNER embezzled $1,798,000 from Clovelly Oil. GARDNER accomplished this scheme by manipulating the bi-weekly payroll records of Clovelly. GARDNER logged into Clovelly's on-line Whitney Bank accounting system every two weeks using his username and password given to him so he could prepare Clovelly's payroll. Beginning on August 31, 2010, GARDNER began increasing his bi-weekly compensation by sometimes as much as $20,000.
“Originally, GARDNER transferred the embezzled funds into his Whitney Bank account. However, in 2011, GARDNER opened a new bank account with Iberia Bank to conceal the illegal funds from his spouse who was unaware of his actions. GARDNER admitted that his motivation for the theft was to cover gambling debts incurred at a local casino. Through his attorney, GARDNER self-reported his theft from Clovelly.
“The government would further establish that GARDNER conducted a series of ACH wire transfers resulting in nearly $1,800,000.00 being transferred from bank accounts maintained by Clovelly Oil into personal bank accounts held by GARDNER.”
In May 2015, he was sentenced to 30 months in prison and ordered to pay $1,598,000 in restitution to his former employer. He was also ordered to stay away from casinos after his release and not open any lines of credit without approval from his probation officer.
Shortly after release he was back in court after his probation officer said he violated the terms of his release by opening new lines of credit. Gardner told the judge that he obtained employment but that his employment required he enter casinos. The court was not impressed.
A search of public records in 2020 shows a Paul Gardner CPA in New Orleans is working as a tax preparer but the Louisiana State Board of Certified Public Accountants shows his license as a CPA is revoked.
A similar public records search shows that Gardner was also an attorney. In lieu of facing disbarment proceedings, he permanently surrendered his license to practice law and is not eligible to seek readmission to the bar in Louisiana or any other jurisdiction.
How to Protect Yourself from Payroll Fraud
We know that successful businesspeople are usually too busy to check their accounts. The best way to prevent fraud is to regularly review your accounts for suspicious activity. If you are too busy, hire an accounting form to periodically audit your accounts.
If you use a bookkeeper or payroll company to handle payroll, make sure they are bonded and check the bond yourself to make sure it is issued by a reputable company. A surety bond may pay for losses whereas accounting malpractice insurance probably won't.
Instead of giving unfettered electronic access to business bank accounts, have the payroll processor tell you the amount in advance and then transfer the necessary funds to the processor. In the alternative, simply give the bookkeeper access to an account containing limited funds.
Also make sure that taxes are being paid by checking with the IRS and state revenue agencies.
Finally, if your bookkeeper is or claims to be a CPA, check with the state licensing board. Most states offer an easy online tool to check the status of one’s license. Unfortunately, bookkeepers and tax preparers don’t have to be licensed in most jurisdictions. That may be why Gardner shows up on a current list of tax preparers.
Gardner was able to get away with such a massive theft by taking $20,000 at a time. The fraud took place over 4 years before he was caught. Simple due diligence would likely have caught the problem much earlier.
Victim of accounting malpractice? Visit our accounting malpractice information page. Ready to see if you have a good case? Give us a call. All inquiries kept in strict confidence. For more information, contact attorney Brian Mahany online, by email at [hidden email] or by telephone at (414) 704-6731.
(We consider cases with an out of pocket loss of $500,000 or more. Often we can help you find someone in your area if we can’t take your case.)