Thursday, October 6, 2016
NEWARK, N.J. – A Bergen County, New Jersey, man who was charged in a scheme to defraud two international companies out of $3 million by fraudulently billing them for services that were never completed was indicted today on additional tax charges, U.S. Attorney Paul J. Fishman announced.
Philip Charles de Gruchy, 63, and Barbara Brown, 66, both of Park Ridge, New Jersey, were originally charged in February 2016 in a nine-count indictment with one count of conspiracy to commit mail fraud and eight counts of substantive mail fraud. The indictment handed up today adds six counts against de Gruchy, charging him with subscribing to false individual and corporate tax returns in 2009 and 2010, resulting in more than $800,000 taxes owed to the United States.
According to documents filed in this case and statements made in court:
From August 2007 through April 2, 2010, Brown was employed by “Company A,” a toy and juvenile products retailer headquartered in Wayne, New Jersey, first as director of customer relationship management and then as director of global customer relations management. She had authority to hire and pay contractors. Brown caused Company A to enter into a business relationship with CEM Inc., a company that Brown and de Gruchy secretly controlled. From Nov. 5, 2007, through March 4, 2010, CEM submitted approximately 170 invoices to Company A totalling more than $3 million for alleged marketing consulting work. The purported work was unnecessary, worthless, or never completed. Brown failed to disclose that she and De Gruchy had a financial interest in those invoice payments.
Although the checks that Company A issued to CEM were mailed to various Canadian addresses, the checks were ultimately deposited at bank branches located in Park Ridge, New Jersey. Checks were written out of the CEM account payable directly to either de Gruchy, Brown or two companies affiliated with de Gruchy: Silk Farm Inc. and Ontario LLC. Money obtained from the scheme was used for personal purposes, including home renovations, mortgage payments on the Park Ridge residence that Brown and de Gruchy shared, and credit card expenses.
From July 2010 through Nov. 11, 2011, de Gruchy was employed as the director of global relations management by “Company B,” an international manufacturer and retailer of luxury suitcases and accessories, headquartered in South Plainfield, New Jersey. He was responsible for a data migration project designed to assist Company B with identifying customer purchasing patterns. De Gruchy obtained verbal approval from Company B to hire Brown to assist him on the migration project. At no time did de Gruchy reveal his personal and financial relationship with Brown.
From November 2010 until November 2011, Brown submitted invoices in her own name or the name of her company, BI Insights, totaling more than $300,000 for purported work related to the data migration project. De Gruchy approved all of the invoices submitted by Brown and BI Insights. The work was alleged to be unnecessary, worthless, or never completed. Checks from Company B totaling $216,825 were sent to one of the Canadian addresses used to receive checks from Company A and were then deposited into a National Bank of Canada account held by Brown and De Gruchy.
Counts 10 and 11 of the superseding indictment charge de Gruchy with subscribing to false individual joint income tax returns for tax years 2009 and 2010. He allegedly intentionally overstated expenses and understated gross receipts, including receipts from the fraudulent conduct charged regarding Company A and Company B for those tax years, causing those returns to understate his total income for those years by $1.6 million.
De Gruchy is charged in Counts 12 and 13 of the superseding indictment with subscribing to false corporation tax returns for CEM for tax years 2009 and 2010. He allegedly falsely claimed certain business expenses payments, including payments made to “Individual 1,” which were then kicked back to de Gruchy, causing those business returns to understate CEM’s taxable income by $649,465 for those tax years.
De Gruchy is charged in Counts 14 and 15 of the superseding indictment with subscribing to false corporation tax returns for Silk Farm for tax years 2009 and 2010. He allegedly falsely claimed certain business expense payments, including payments made to Individual 1, which were then kicked back to de Gruchy, causing those business returns to understate Silk Farm’s taxable income by $377,578 for those tax years.
The counts of conspiracy to commit mail fraud and substantive mail fraud each carry a maximum potential penalty of 20 years in prison. The charges of subscribing to a false tax return each carry a maximum potential penalty of three years in prison. Each count of the indictment is punishable by a fine of $250,000 or twice the amount of the pecuniary gain or loss from the offense.
U.S. Attorney Fishman credited special agents of the FBI’s Newark Field Office, under the direction of Special Agent in Charge Timothy Gallagher and IRS-Criminal Investigations, Newark Field Office, under the direction of Special Agent Jonathan D. Larsen, with the investigation leading to the charges.
The government is represented by Senior Litigation Counsel Leslie F. Schwartz of the U.S. Attorney’s Office in Newark.
The charges and allegations contained in the indictment are merely accusations and the defendants are considered innocent unless and until proven guilty.
De Gruchy: Wanda Akin Esq., Newark
Brown: David B. Glazer Esq., Livingston, New Jersey