Area man pleads guilty
U.S. Attorney Mary Beth Buchanan said Fredrick F. Zeigler III of Chalk Hill has pleaded guilty to four charges of intentionally filing false income tax returns and no contest to one count of bank fraud. In exchange, he will serve a prison term of 15 to 18 months. Senior U.S. District Judge Gustave Diamond accepted the plea.
The U.S. Attorney’s office presented to the court information that showed that for the tax years 1995 and 1996, Zeigler treated a number of expenditures and expenses incurred in the operation of his business, CMG, when in fact they were purely personal purchases.
Among the examples cited by the office were the following:
– The purchase of a boat that was deducted as a consulting expense.
– More than $5,000 worth of work done on the furnace at his residence that was deducted by the business as computer expenses.
– A real estate purchase that Zeigler made for himself that was treated on the company books as a consulting fee.
– The installation of a security system at his mother’s residence that was booked by the company as a computer expense.
– The purchase of a vintage Corvette Sting Ray that was hidden as depreciation and expense associated with a tractor.
– Taxidermy work done on a bear that Zeigler shot in Alaska and brought back to Pennsylvania that was treated as a business expense.
The government contended that not only did Zeigler falsely characterize personal expenditures as business-related expenses, he also directed some of the people with whom he dealt on the personal transactions to prepare paperwork to make it appear as if the item was in fact a legitimate business expense.
In connection with the bank fraud plea, Buchanan’s office said that from July 1996 to March 1997, while CMG was selling vacation packages through telemarketing rooms around the country, Zeigler entered into an agreement with a bank in Portland, Ore., to market a Visa credit card along with the vacation package.
The advantage to CMG was that the target group of the marketing campaign, people with poor or little credit, often could not afford the vacation packages, but with the marketing of the credit card the telemarketers were able to offer the potential vacationers that opportunity to charge the vacation that they could not otherwise afford to a new credit card, Buchanan’s office reported.
According to Buchanan’s office, what the consumers frequently were not told was that the credit limit on the new Visa card was very low, so low that once the vacation was charged to the card and the annual fee for the card was deducted, the consumer was left with about $13 of available credit.
The result was that the first time people tried to use the new card, it was rejected for having insufficient available credit, said the government.
By the terms of its contract with the bank, CMG was aware that the bank required a minimum monthly income of $833 to issue the Visa card.
The bank eventually terminated its participation with CMG because their auditors determined that consumers who had in fact declined the vacation and credit card offers were still being sent credit cards and CMG was forwarding to the bank falsified income information in connection with the credit card program, according to the federal prosecutors.
Buchanan’s office said the investigation into these matters demonstrated that in many instances, CMG’s own books and computer screen printouts showed that a given consumer’s monthly income was insufficient to receive the credit card, but once CMG forwarded that information to the Oregon bank, the income figure had been falsely inflated to qualify for the card.
Prosecutors said at least two of the people who ran telemarketing rooms that sold the CMG vacation package/credit card program were prepared to testify that Zeigler had in fact told them it would be all right to falsely inflate the income information for people who wanted to apply for the credit card, in order to qualify them.
In addition, Buchanan’s office said at least one former CMG employee was prepared to testify that a CMG vice president has instructed her to contact telemarketers with whom CMG was doing business and advise them to inflate income information in order to qualify more credit card applicants.
Although the bank did not, in the end, suffer any financial loss, CMG received in excess of $700,000 in fees in connection with its participation in the credit card marketing program.
Diamond scheduled sentencing for at 10 a.m. May 14. The law provides for a potential sentence of three years in prison, a fine of $250,000 or both for the tax offenses and up to 30 years in prison, a $1 million fine or both in connection with the bank fraud plea.
Pending sentencing, the court released Zeigler on $5,000 bond.