Call Now (800) 681-1295

Accountant Sentenced After Embezzling Over $500K from Healthcare Foundation

Table of Contents

    Kathleen Federico, 52, of Kansas City, Missouri, was recently sentenced by U.S. District Judge Greg Kays to 27 months in prison without the possibility of parole after pleading guilty to one count of wire fraud, a violation of 18 U.S. Code § 1341 (frauds and swindles). Formerly an accountant for St. Luke’s Foundation, a non-profit healthcare system that includes more than a dozen hospitals, Federico embezzled nearly $558,000, taking part in two scams between 2003 and 2017.

    See our Criminal Tax Law Q and A Library

    Accountant Receives 27-Month Prison Sentence in Wire Fraud Case

    Federico pleaded guilty to one count of wire fraud in June 2019 after being charged via “information” – a type of written document that, like a tax indictment, formally notifies a defendant that criminal charges have been filed against him or her. The primary difference is that no grand jury vote is necessary for an information.

    The charges focused on Federico’s career at St. Luke’s Foundation, where she worked as an accountant from May 7, 1999 through February 23, 2018, when she was fired after nearly 20 years. The information alleged – and Federico later admitted – that, beginning in June of 2003 and continuing for more than a decade through March of 2017, she used her position to embezzle a total of approximately $557,675. (In fact, a previous audit suggested that Federico may have in fact embezzled more than $1 million, but prosecutors lacked the evidence necessary for inclusion in the charges.)

    The funds were embezzled through two separate but “related” schemes, according to a Department of Justice (DOJ) press release. Through the first scheme, Federico embezzled more than $452,000, writing herself checks and then covering the evidence – at least temporarily – by altering ledgers and invoices. The second scheme, which involved using foundation money to make personal credit card payments, yielded an additional $105,000.

    The funds were spent on assorted personal expenses, including approximately $21,000 toward online “drug purchases,” $30,000 toward traveling, and $150,000 toward “shopping and retail.” Federico also took “more than $67,000 in cash,” in addition to making mortgage and utility payments.

    The maximum prison sentence for wire fraud, which is a felony offense under 18 U.S. Code § 1341, is a staggering 20 to 30 years in prison, depending on the details of the offense. An offender can also be fined up to $1 million, which is an exceptionally high penalty even among serious crimes. (For context, the maximum criminal penalty for tax evasion – a felony punishable by up to five years in prison – is $100,000, unless the offender is a corporation. Note, also, that criminal penalties can be greatly compounded by additional civil penalties.)

    Federico received a sentence of two years and three months in federal prison, without the opportunity for parole. In addition, she was ordered to pay restitution approximately equal to the amount embezzled.

    Does IRS-CI Investigate Non-Tax Crimes?

    Federico’s case was investigated by the Federal Bureau of Investigation (FBI). However, many “white collar” or financial crimes are investigated, among other agencies, by IRS-CI, which is the Criminal Investigation division of the Internal Revenue Service.

    A formidable division of the IRS – its conviction rate exceeded 91% in fiscal year 2019 – IRS-CI works with the FBI and other law enforcement agencies to detect and intervene in criminal activity. IRS-CI agents, who are also called “special agents” (not to be confused with “revenue agents,” i.e. auditors), investigate a wide range of both tax and non-tax crimes, including but not limited to:

    Money laundering, for instance, is classified as a non-tax crime. However, because of its massive tax and economic impacts, it falls within the scope of crimes that IRS-CI investigates.

    See our Audit Representation Q and A Library

    See our Employment Tax Law Q and A Library

    To keep exploring this topic, refer to the following articles:

    Tax Evasion Defense Attorneys Serving Northern + Southern California

    At the Tax Law Office of David W. Klasing, we are criminal tax defense attorneys with over 20 years of combined experience fighting felony and misdemeanor charges, including tax evasion (26 U.S. Code § 7201), willful failure to file or pay taxes (26 U.S. Code § 7203), tax perjury (26 U.S. Code § 7206(1)), return preparer fraud (26 U.S. Code § 7206(2)), and tax obstruction (26 U.S. Code § 7212).

    Our seasoned trial attorneys have a record of high achievement under high pressure. Contact us online right away to request a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 for 24/7 support. Our office handles felony and misdemeanor tax cases in federal court and throughout the state of California.

    In addition to our staffed main offices in Irvine,  the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los AngelesSan BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan JoseSan FranciscoOakland, Carlsbad and Sacramento.

    Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship.  With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link.   Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.

    Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company?  Absolutely not!  See our policies that address this issue here.

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934