Los Angeles, CA – LAWFUEL – Law News Network – The owner of Pacific States Logistics Management, Inc. of Long Beach, California was sentenced today to 18 months in federal prison, followed by 36 months of supervised release, for wire fraud and tax evasion by United States District Judge A. Howard Matz in Los Angeles. In addition to his prison sentence, William Martindale was ordered to pay $909,325 in restitution for defrauding Celtic Capital Corporation in an accounts receivable based loan scheme. In May 2006, Martindale pleaded guilty to one count of wire fraud and one count of tax evasion related to this scheme.
In his plea agreement, Martindale admitted that he controlled and operated Pacific States Logistics Management, Inc. (Pacific) in Long Beach, California and Industry, California. During 2000 and 2001, Pacific was in the business of distributing commercial quantities of groceries and packaged food items to wholesalers and smaller distributors.
Martindale, aided and abetted by others known and unknown to the government, knowingly participated in a scheme to defraud Celtic Capital Corporation (Celtic Capital), and to obtain money and property from Celtic Capital under fraudulent pretenses. Essentially, Martindale’s scheme to defraud Celtic Capital worked as follows: Celtic Capital entered into a written agreement to loan money to Martindale’s company based on the amount of its sales of grocery items to customers. Further, Martindale’s company agreed to provide Celtic Capital with proof, in the form of sales invoices and shipping records, that it had sold grocery items to Pacific’s customers. Celtic Capital’s loan to Pacific would be secured by Pacific’s accounts receivables due from its customers. As part of the loan agreement, Pacific agreed to inform its customers to pay these receivables to a special bank account for the benefit of Celtic Capital.
In furtherance of his scheme, Martindale sent phony documents to Celtic Capital. The phony documents included bogus Pacific invoices for sales of products to customers and fake shipping documents. The false documents Martindale submitted to Celtic Capital made it appear that Pacific had sold large quantities of groceries to customers when, in truth, these sales never occurred. The customers identified on the fraudulent invoices submitted to Celtic Capital never ordered or received delivery of the products identified. Further, the customers never intended to pay Pacific the amounts due on the invoices for products that they never received. Martindale sent these fraudulent documents to Celtic Capital for the purpose of inducing Celtic Capital to loan money to Pacific for the nonexistent sales.
Relying upon the phony documents provided by Martindale, Celtic Capital loaned several million dollars to Pacific. For a period of time, Martindale repaid Celtic Capital a portion of the money that Celtic Capital had loaned to Pacific based on the nonexistent grocery sales. However, beginning in February 2001, Martindale stopped repaying Celtic for loans that Pacific obtained based on the phony invoices. Additionally, Martindale caused a portion of the money sent by Celtic Capital to Pacific to be diverted to his personal bank accounts or otherwise to be spent for his personal benefit.
In addition to causing Celtic Capital to loan money to Pacific based upon false pretenses, Martindale personally diverted money from Pacific for his personal benefit. Martindale also caused Pacific to transfer money to another company that he controlled from which he also personally diverted funds. Martindale failed to report all of the funds he diverted from either company as income on his federal income tax return for calendar year 2000, and did not pay income tax on this money. Specifically, Martindale filed a false and fraudulent U.S. Individual Income Tax Return, Form 1040, with the Internal Revenue Service for the tax year 2000. Martindale knew at the time he filed his income tax return for the year 2000 that his taxable income for that year was substantially greater than the amount he originally reported. Martindale did not report all of the diverted funds he had received from Pacific, nor from the other company that he controlled, as income on his year 2000 tax return. Since he did not report the monies he received, Martindale did not pay any income tax on the money he diverted.
In imposing sentence, Judge Matz characterized Martindale’s scheme as, “A looting…of funds for purposes of personal pursuits, including gambling.” Martindale was ordered by Judge Matz to begin serving his prison sentence on January 08, 2007.
The investigation and prosecution of Martindale was handled by the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, and the United States Attorney’s Office in Los Angeles.
United States Attorney’s Office Contact Michael Wilner (213)894-0687
Assistant United States Attorney
