Thursday, July 13, 2017

Federal grand jury indicts former Innovative Objects, Joplin, owner for $26 million fraud schemes

A federal grand jury in Springfield indicted a former Neosho businessman Wednesday for his roles in two  fraud schemes that the FBI and IRS say netted him $26 million.

Russell Grundy, 48, Hilton Head, South Carolina, and formerly of Neosho,was arrested today, according to a news release from the U. S. Attorney for the Western District of Missouri. Grundy was owner of Innovative Objects in Joplin before selling the business to Miami Nations Enterprise, part of what the government says are his fraudulent dealings.

Out of the $26 million, the government alleges that the former owner of Innovative Objects, PILR Technology, Choice Technologies, Wyerless, and Audio Input,defrauded Miami Nations Enterprise, a claim that had been made earlier in a lawsuit filed in October 2015 in Greene County Circuit Court.

An additional $862,856, came when Grundy committed fraud against Land O'Lakes/Nutra Blend, according to the news release:

From the release:

Grundy (through his company Innovative Objects) was contracted by Land O’Lakes, Inc., and its subsidiary, Nutra Blend, LLC, from January 2004 to Sept. 27, 2015, to create propriety software to inventory, track, and coordinate the disbursement of products. Grundy also contracted with Land O’Lakes and Nutra Blend to provide equipment and technical support for the use, upkeep and maintenance of the software.

The indictment alleges that Grundy falsely told Land O’Lakes and Nutra Blend that third party software programs were built into that proprietary software and were essential to the successful operation of the software.

Grundy (through his company Innovative Objects) was contracted by Land O’Lakes, Inc., and its subsidiary, Nutra Blend, LLC, from January 2004 to Sept. 27, 2015, to create propriety software to inventory, track, and coordinate the disbursement of products. Grundy also contracted with Land O’Lakes and Nutra Blend to provide equipment and technical support for the use, upkeep and maintenance of the software.

The indictment alleges that Grundy falsely told Land O’Lakes and Nutra Blend that third party software programs were built into that proprietary software and were essential to the successful operation of the software. Grundy allegedly claimed that some of the payments made to Innovative Objects were remitted to third party license holders. In reality, the indictment says, there were no third party licensee fees; instead, Grundy kept those payments for his personal or unrelated expenses.

The indictment charges Grundy with six counts of wire fraud related to a series of payments from August 2013 to April 2015, totaling $862,856.

Grundy engaged Miami Nations Enterprise in negotiations to provide financial assistance in the form of loans, and for Miami Nations Enterprise to purchase a controlling interest in all of Grundy’s technology-based companies.

According to the indictment, Grundy falsely 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 allegedly presented numerous e-mails, invoices, conditional award letters and other documents to support his false claims. From May 19, 2014, to June 24, 2015, Miami Nations Enterprise loaned Grundy the money to cover the costs associated with software and hardware purchases and training necessary to obtain the $3.5 million Wal-Mart contract.

On Aug. 24, 2014, Miami Nations Enterprise paid an additional amount to purchase a 70 percent interest in Grundy’s companies.

Officials with Miami Nations Enterprise later discovered that neither Grundy nor any of his companies had been awarded any contract with Wal-Mart, and determined that the e-mails, conditional contract award, invoices and bank deposits Grundy had used to support his claims were fraudulently created.

The indictment charges Grundy with 10 counts of wire fraud related to a series of payments from May 19, 2014, to April 12, 2015, totaling $5,990,000

Miami Nations Enterprise alleged in its lawsuit against Grundy that he cheated them out of $24 million.

From the September 11, 2016 Turner Report:

The lawsuit filed by Miami Nation Enterprises, an economic subdivision of the Miami Tribe of Oklahoma, in October 2015, claims Russell Grundy committed fraud by making the following representations:

-Innovative Objects would be landing a contract with Wal-Mart to provide software development. There was no such contract, the petition says.

-A company known as Green Star Consulting Group had awarded the Wal-Mart contract to Innovative Objects. The Nation claims that Green Star Consulting Group does not exist.

-The Nation loaned money and guaranteed lines of credit to Innovative Objects and other Grundy companies and bought a 70 percent interest in Innovative Objects.

-Financial statements "were inaccurate in an amount in excess of $3 million.

-Assets were listed that did not exist.

-"Grundy caused employees of one of more companies to work on non-existent projects to perpetuate the notion that one or more of the companies had a contract with Wal-Mart to provide services."

Grundy denied all allegations and filed a countersuit, claiming the Nation had failed to pay him $50,000 a month rent on Innovative Objects' property at 2340 S. Range Line Road, Joplin, and had failed to pay $79,690.32 in back taxes it had agreed to pay, as well as late charges of $7,500.

The Nation says it does not owe Grundy a cent because the entire arrangement came as a result of Grundy's alleged fraud.

The Nation is asking for more than $24 million, plus punitive damages.

In addition to the fraud schemes, the federal grand jury indictment charges Grundy with four counts of making a false statement on a loan application:

Grundy applied for three loans from UMB Bank on Oct. 17, 2014, totaling $11,390,800. Grundy applied for a $1,850,000 loan from the People’s Bank of Seneca on Aug. 27, 2015. Grundy allegedly made material false statements in each of those loan applications.

Grundy is also charged with 10 counts of money laundering.

The indictment also contains a forfeiture allegation, which would require Grundy to forfeit to the government any property obtained as a result of the alleged wire fraud violations, including a money judgment of at least $26,060,000.

This case is being prosecuted by Assistant U.S. Attorneys Patrick Carney and Casey Clark. It was investigated by the FBI and IRS-Criminal Investigation.

1 comment:

Steve Holmes said...

I wonder what kind of due diligence the Nation did on Grundy prior to the deals, or if that investigative work was outsourced to the City of Joplin.

Suppose Grundy is David Wallace in disguise?