Former pharmaceutical executive charged with embezzlement
The former owner and CEO of a New Jersey pharmaceutical company is accused of embezzling millions of dollars from his company by federal officials.
According to the charging documents, John Klein, 75, of Palisades Park, N.J., hired a chief financial officer in 2016 who then created a profit-and-loss statement showing the company’s sales and receivables. According to the CFO, Mr. Klein provided information that included an account receivable of approximately $3.9 million that had not been collected.
In December 2016 and January 2017, Mr. Klein approved a reserve against the uncollected receivable in the financial statements. However, back in May 2016, $3.9 million was transferred into a company bank account that Mr. Klein controlled. In a June 2016 email, Mr. Klein acknowledged that the invoices in question had been paid in full. A review of the company bank account showed that Mr. Klein used the money to pay personal debts, such as credit card payments, property taxes, and private-school tuition for his child.
Mr. Klein is the subject of several federal lawsuits from people who worked at Cambridge Therapeutic Technologies in Teaneck, N.J., as well as individuals he collected investment money from, according to media reports.
If convicted, Mr. Klein faces up to 20 years in prison and a fine of $250,000 or twice the gross profits or twice the gross loss suffered by the victims of the fraud, whichever is greatest.
Practice administrator sentenced for defrauding medical practice
An Indiana man was sentenced to 30 months in federal prison for stealing from the ophthalmology practice where he worked for 5 years as a practice administrator.
Joshua D. Millspaugh, 42, of Westfield, Ind., pled guilty to charges of wire fraud, according to federal officials.
Mr. Millspaugh, who earned an annual salary of over $100,000, was responsible for payroll processing, purchasing, and paying the practice’s bills. After less than a year on the job, he began taking advantage of his access to company money to use the practice’s funds for himself. During his 5 years of employment, he made over 500 such transactions, making purchases, paying personal bills, and sending payroll checks to his personal bank account. He concealed these transactions with false entries in the company’s bookkeeping system. When asked about expenditures, he made up false justifications.
During Mr. Millspaugh’s sentencing, William Whitson, MD, owner and director of the practice, Whitson Vision, told the court that the loss to him and the practice was about more than money. In addition to creating long-term credit and banking problems, the situation damaged both the company’s business reputation and the morale of its other employees.
“Fraud on a small business impacts every area of that business,” said U.S. Attorney for the Southern District of Indiana Zachary A. Myers. “It also breeds mistrust, especially if the fraud is perpetrated by a trusted employee. Mr. Millspaugh exploited his position of trust for purely personal gain, and he is now being held accountable for his actions.”
In addition to the prison sentence, Mr. Millspaugh was ordered to pay $270,000 in restitution and will be federally supervised for 3 years following his release from prison.
A version of this article first appeared on Medscape.com.