Transparent Greed

JOSEPH LICANDRO

Behind every company contaminated with fraud usually lies a group of perpetrators willing to risk jail and the company's long-term sustainability for personal greed. Glass Star, the most popular glass replacement store in the northwest region of the state, with more than 20 branches, was no different. What made Glass Star's fraud unique was not that contamination occurred but that two independent actors committing the same type of fraud prospered simultaneously while upper-level management looked the other way the entire time.

Sure, greed was a strong motivation for Casey Thomas and Chet Sterling, but that was not their only motivation. For Casey, who came from one of the two families that founded Glass Star's nearly three-quarters of a century ago, fraud was about exerting control and implementing his vision — remaking the company from a local brand to a state powerhouse. For lone-wolf Chet Sterling, who married into the company almost 15 years before and was handed the job as manager of the Broad Street store, fraud was more personal. Chet was a taciturn, socially awkward individual with few friends, and he never bothered to make any at Broad Street. Sure, Chet enjoyed the bonuses he earned from his inflated insurance bills. But to him, fraud was also about demonstrating to all of his doubters and detractors that he could run the most profitable store in the company.

Casey Thomas steadily rose through the ranks of his family's glass company during his nearly two decades of employment. Although he knew from a very young age that he would always have a job waiting for him at Glass Star, it was not a foregone conclusion that he would attain the title of vice president and become one of the most powerful men in the company. Casey had to earn that role. He was not a terribly imposing figure, standing a head shorter than most of the other men in the company. But for whatever Casey lacked in stature, he made up for in charisma, hard work and self-confidence. After a five-minute encounter, a stranger could tell that Casey suffered from a Napoleonic complex, and although this probably sparked his inner drive, it also fueled an arrogance that attracted him to fraud. A results-oriented number cruncher to his core, Casey strived for a way to cut corners and maximize profits.

Beginning at the company as an entry-level customer service representative (CSR), Casey steadily ascended the corporate ladder, working in all three divisions of Glass Star — branch stores, corporate management and warehouse and inventory. Glass Star's president, Jack Gulley, called upon Casey to turn around the 19th Street store by naming him head of the store, but it was not the ideal place for a first-time manager. It used to be one of Glass Star's most profitable locations, but it had fallen on hard times when its customer base plummeted due to a deteriorating surrounding neighborhood.

Business as Usual

Casey did not introduce fraud to Glass Star. Fraudulent billing of one kind or another against customers and insurance companies had occurred sporadically at a few other branches. For years, other store managers had suspected Chet in particular of fraudulent billing because his profits consistently surpassed every other branch's, yet his sales were in the middle of the pack. There was no other way to explain it. No one knew precisely how Chet was making so much money, and no one from corporate management cared to ask.

After only a few months as manager, Casey realized that the 19th Street store did not have the client base to compete against Chet's Broad Street location. However, Glass Star used an electronic billing system to submit insurance claims through a third-party vendor. The insurance companies had no oversight in the process, and the opportunity to fudge the numbers was ever present. Casey suspected that Chet was taking advantage of this opportunity by submitting invoices to the third-party billers indicating that his technicians installed dealership glass in cars when in fact less expensive, aftermarket glass was installed. Casey decided to test his theory a few times over the course of two months.

He was careful to use the login number of his assistant manager, Frank Washington, when submitting improperly coded bills. As he predicted, nobody from the insurance company noticed or asked about it. After all, Glass Star was not required to submit supporting documentation showing the type of glass that was actually installed in the automobile. Casey had figured out how Chet was making so much money without ever having to ask him.

Imitation Is the Highest Form of Flattery

Casey decided that Chet was on to something good, and he wanted to exploit it as well. Casey instructed his store employees to bill this way going forward, knowing that they would not refuse. Frank Washington was perpetually late for work and battled personal demons, which kept his employment in perpetual jeopardy, and Casey took full advantage of it. Most of the CSRs were impressionable young women who were not going risk their jobs by standing up to Casey, a member of the founding family.

Not surprisingly, Casey turned around the profitability of 19th Street in only few months, falling behind only Chet and his incomparable Broad Street store. This dramatic turnaround helped Casey earn the promotion to Glass Star's vice president. With Jack Gulley essentially acting as a detached figurehead, Casey had attained unrivaled control of the daily operations. With this newfound power, he wanted to expand Glass Star, and that meant recruiting outsiders and conspiring with others whom he trusted to carry out his dirty work.

Glass Star's Evolution

Glass Star had been one of the most recognizable independent companies in the river city for more than 80 years. Portraying itself as the consummate workingman's company rooted in the traditional family values of hard work and integrity, Glass Star had grown from a single neighborhood store into the most successful glass replacement company in the northeast region of the state. With more than 20 locations and new stores cropping up outside of its geographic base, Glass Star had strategically positioned itself for sustained economic growth and success. It was a full-service glass company providing auto, residential and commercial glass, but auto glass was the company's proverbial bread and butter. Regarding this aspect of its business, management prided itself on being able to offer customers a choice between aftermarket glass and dealership glass.

To know why fraud pervaded Glass Star, it is important to understand this particular time in the company's history. Glass Star was in transition from the old guard who built the company into a city-wide chain to the new guard beholden to loftier sales goals set by corporate management. Some members of the old guard had worked at Glass Star for more than 30 years. Beginning their long careers as entry-level technicians straight out of high school, many moved up to store managers and enjoyed considerable autonomy.

With the increased use of credit cards, computers and the Internet and with the growth of the insurance and automobile industries, the old guard witnessed dramatic changes in the way the company conducted business. Long gone were the days when billing a customer's car insurance company for replacement glass was conducted with a phone call and a handwritten invoice in the mail. Now virtually all glass replacement bills were submitted by a click of a mouse. The bills were not sent directly to the insurance company because Glass Star's management had begun employing third-party billing companies to save costs . . . or so they thought.

With members of the old guard starting to retire, the new guard started to take over management positions. As my investigation would reveal, there seemed to be unspoken tension between the old and new guard. While members of the old guard had put in their time to earn their leadership roles, some of the younger employees were thrust into lucrative management positions with sometimes less than a year on the job. Casey handpicked many of the new managers, not necessarily for their acumen or talent but because he believed they would be loyal to his cutthroat, profit-maximizing vision for the company. In exchange for their lucrative compensation, Casey demanded that they meet his profit expectations.

Although he was aware of the laws in place prohibiting insurance fraud and the severe penalties for breaking them, Casey regarded the law not as a roadblock but as a mere stop sign to roll through. When he was managing the 19th Street store, corporate leadership took a “hear no evil, see no evil” approach and turned a blind eye to the billing practices of both Chet and Casey. Now Casey was part of corporate management whose primary responsibility was to supervise the store managers. There was no one else in the company to stop him.

The New Guard in Full Swing

Tyler Burns and Kyle Lawson were two store managers whom Casey held to high expectations. Tyler and Casey had been known each other since high school, and when Glass Star needed to hire more glass technicians, Casey recruited Tyler from a rival store by offering him a significant pay increase. A few weeks after Casey became vice president, the midtown store's manager retired and Tyler was promoted to fill the opening — after less than two years as a glass technician. Unlike most members of the old guard who climbed the company ladder, Tyler did not have to put in any time as a CSR or as an assistant manager. Casey explained to Tyler that the midtown store made average profits and attributed the mediocre performance to the previous manager's antiquated ways and unfamiliarity with computers. With Tyler at the helm, Casey expected the store to become a profit powerhouse like Chet's store.

During Tyler's first few months in charge of the midtown store, its profits dipped below those his predecessor achieved during his last few months — a fact that that Casey pointed out to Tyler on multiple occasions. For the life of him, Tyler could not understand how Chet had been so successful. Initially, Tyler thought he and his CSRs were simply bad salespeople who could not convince customers to buy dealership glass. Despite his best efforts, Tyler had not been able to turn his numbers around after six months on the job.

Late one Friday afternoon, Casey visited the midtown store to deliver Tyler's quarterly status report, and he took Tyler to the office and closed the door. He explained to Tyler that if his numbers did not turn around, Tyler would not be a store manager much longer. When Casey again explained that Tyler needed to be more like Chet, Tyler asked, “What does Chet do? I can't figure it out.” Casey had hoped to insulate himself by letting Tyler figure out the billing scheme on his own, but clearly that hadn't happened.

Casey then used Tyler's computer password to log into the billing system and showed Tyler how easy it was submit bills for dealership glass when aftermarket glass had been installed. The next Monday, Tyler showed his CSRs this “new way to bill.” A few months later, Tyler had turned around the store's profits, exceeding company expectations and earning a nice quarterly bonus.

Casey met Kyle Lawson at a bar when the two struck up a conversation about golf and fishing, and they quickly became regular drinking buddies. Kyle was almost 20 years younger than Casey and had been working odd construction jobs since failing out of college. One day Casey offered Kyle the opportunity to manage a new store that Glass Star was opening in Magnolia Park. Before the store opened, Casey arranged for Kyle to visit Chet's store and learn how to bill. Chet was a subtle trainer, but Kyle was observant. When Magnolia Park opened, it did not take long for him to implement Chet and Casey's preferred billing procedures.

A Holdout from the Old Guard

Jimmy Hopkins prided himself on running his Princeton Street stores the right way. After serving ten years in the Navy, Jimmy started his own glass repair store in the Crestwood area of town. A few years later, Glass Star's former president Buck Thomas (Casey's uncle) offered to buy out Jimmy's store, pay him a healthy salary and make him the manager of the company's new Crestwood location. Although Jimmy enjoyed being his own boss, the financial opportunity was too great; plus, Glass Star had an outstanding reputation at that time.

Jimmy's nearly 30 years at Glass Star were successful and enjoyable. The Crestview location performed well financially, and his customer satisfaction rating was always near the top. However, the last few years had been tough on him. Ever since Casey took the reins as vice president, he had been after Jimmy to improve his store's statistics. Jimmy also did not care for the way Casey pitted the store managers against one another. Casey created an incentive mechanism, dubbed the “Profit Game,” in which managers had to compete with each other for best store profits. Casey sent a company-wide email with the results of each manager's periodic profits to shame low-performing stores and reward the high performers.

Casey also set profit goals for each manager. While Jimmy did not find anything inherently wrong with the concept of profit goals, he thought Casey's goals were unrealistic. Moreover, Casey was not shy about letting a manager know if he failed to meet his expectations. Worst of all, Casey had no qualms about embarrassing low performers in front of all the other managers at their quarterly meetings.

Hanging on the wall inside Jimmy's office was a poster with bold letters detailing the criminal penalties for committing fraud. One day when Jimmy was out to lunch, Casey visited his store and showed a CSR named Tammy how the store could make more money by “altering” third-party bills. Casey told her that billing this way would improve the store's standing in the Profit Game. When Tammy told Jimmy about the plan, he pointed to the sign in his office and reminded her that insurance fraud was a crime. He warned her that if he caught her committing billing fraud, he would fire her on the spot.

Although Jimmy was not privy to Casey's conversation with Tammy, he had no reason to disbelieve her, especially when another CSR corroborated her account, so Jimmy decided to conduct an investigation. Two years earlier, Glass Star had switched to a company-wide network system, and it was now possible to pull a warehouse order and the matching invoice submitted to the third-party biller for any particular installation. Jimmy had long heard the rumors about Chet, Tyler, and Kyle, so he decided to start with them. Over the next few weeks, Jimmy meticulously reviewed the billing records from the three managers' stores. While Jimmy was not surprised that they were committing fraud, he was shocked by its volume. Jimmy also suspected that the scheme stretched beyond the previous two years, but those were the only numbers he could access on the network. Earlier records were kept at corporate headquarters.

Jimmy called the state insurance fraud hotline to report his findings and received a call back from Detective Patrick. They set up a meeting, and Jimmy laid out his findings. His motivations were clear and pure: Jimmy respected the hell out of Buck Thomas and the rest of the old guard who built the company into a trusted brand, but most of these people had retired. Jimmy did not like the direction Glass Star had been moving in since Buck had passed the torch. It was one thing for Casey to needle him about profit numbers, but it was another for Casey to instruct Jimmy's direct employees to commit billing fraud.

After Detective Patrick met with Jimmy, he tipped off the victim insurance companies. He also subpoenaed relevant records from the third-party billing company going back a decade. These records corroborated the information Jimmy had provided covering the previous two years.

To support his analytical research, Detective Patrick visited some random Glass Star customers from the previous two years whose warehouse records did not match their billing records to see what windshields they had installed. Dealership windshields can easily be spotted by the manufacturer's insignia printed on the windshield; aftermarket windshields do not contain an insignia. As Patrick expected, all of the windshields he examined were aftermarket. He photographed the windshields to preserve them as evidence and then drafted his case report and brought it to my desk.

Brand New to the Job

I was a young prosecutor who had been promoted to the economic crimes unit from the burglary unit less than a week before, so when Detective Patrick presented me with his report, I was a little nervous. I had never prosecuted a case where the defendants committed a crime in a corporate setting for the direct benefit of their employer — not that these defendants did not have their own selfish motives. The voluminous amounts of bills and computer records did not make the task seem any easier.

My two primary tasks became readily apparent to me when Detective Patrick placed his initial case report on my desk: I needed to build a successful prosecution against Casey and ascertain accurate restitution figures. Regarding the first challenge, Casey had successfully distanced himself from the fraud, and not one single fraudulent bill was issued using his unique computer login. While all of the Glass Star employees who submitted fraudulent bills deserved to answer for their crimes, the ultimate success of the prosecution hinged on whether we could hold Casey accountable for his actions. To do that would require Tyler, Chet, Kyle, Frank and lower-level CSRs to cooperate with the investigation and point the finger at Casey. Of course, I had no guarantee anyone would cooperate. When the president learned his company was under investigation, he initially suspended the employees identified as fraudulent billers. It was doubtful that they would roll on Casey with their jobs hanging in the balance.

To ascertain the restitution figures, I needed to review Glass Star's inventory warehouse order forms and match them to each bill the company submitted to the insurer. Subpoenas to Glass Star were not going to suffice because I doubted the leadership team would cooperate, and I could not know if they provided the complete set of records. When Detective Patrick reached out to Glass Star's attorneys requesting additional records, he was met with stiff resistance. The attorneys assured him that Glass Star's internal investigation had uncovered the full amount of the fraud, which allegedly dated back only two years. Detective Patrick also had very little luck setting up interviews with employees.

Meanwhile, as Detective Patrick and I launched our investigation, several of the victim insurance companies began seeking compensation from Glass Star for the overbillings. Jack Gulley and his attorneys tried to placate them by insisting the fraud was isolated and unknown to the corporate management. Gulley then cut a check to each company covering the fraud and contractual penalties.

Jack Gulley's claim that the fraud went back two years — whether he believed it or not — was inaccurate. Jimmy sent Patrick and me a company-wide email that Casey sent from over three years before, describing an investigation into a similar fraud at a different local business. The email did not instruct employees to refrain from such practices but warned them that “we do not want to bring a similar situation onto Glass Star.” Essentially, Casey was telling employees that they could engage in fraud provided they did not get caught.

Detective Patrick arranged an interview with Glass Star's former marketing director, Bill Jones, and it proved to be quite revealing. Jones had left the company about a year before Jimmy blew the whistle. When Patrick advised Bill that fraudulent billing had been occurring at Glass Star over the past two years, Bill said that he was surprised because he thought Gulley and Casey had stopped the problem three years ago when Casey sent out the email. At a minimum, Jones' statement revealed that some members of corporate management had knowledge of fraudulent billing occurring prior than the past two years.

Patrick then procured a search warrant for Glass Star's email and billing records. As we hoped, Glass Star's management was caught off guard when the search warrant took place, and they had no time to destroy records. The records yielded from the search confirmed our suspicions that the fraudulent billing had been occurring at the company for almost a decade. The warrant also generated negative media attention. Although we will never know for certain, the negative publicity seemed to force Gulley's hand. Within a few weeks of our search, Glass Works officially cut ties with all the employees linked to the fraudulent billing, with one glaring exception — Casey Thomas.

Gathering Witnesses

The records had identified Frank Washington as a prolific fraudulent biller — clear proof that someone working directly under Casey's was involved in the scheme. Frank had been dismissed a year before for consistent tardiness and other problems. While Patrick and I eagerly anticipated interviewing Frank, we also needed more witnesses to come forward against Casey. Favorable testimony from Frank alone would not be enough to build a strong case. Casey could portray Frank as a vengeful former employee whom defense attorneys would accuse of operating out of pure spite. Frank's testimony combined with that of other codefendants would be more credible.

Initially, I issued arrest warrants for Chet, Tyler, Kyle, and the CSRs whose computer identification numbers appeared on the fraudulent bills but held off on issuing a warrant for Casey; I wanted to lock down the cooperation of my witnesses first. One by one, each former employee agreed to cooperate and testify against Casey because the threat of significant jail sentences weighed heavily on their minds. All of these defendants, particularly Tyler and Kyle, provided credible and damning testimony against Casey. To one degree or another, they testified that Casey either directed them to fraudulently bill or made statements showing his approval of the fraudulent billing Chet initiated. Interestingly, Chet told us that he originally learned his billing “technique” at a professional seminar for auto-glass repair companies.

None of our witnesses had evidence that Gulley or other members of corporate management actively encouraged the fraud. Although Detective Patrick and I strongly believed that Gulley knew, neither his willful blindness nor negligent supervision could serve as grounds for fraud charges under state law. The fact that we did not file charges against Gulley might have actually strengthened our case against Casey, as he could not claim the prosecution was overreaching or vindictive.

After Casey's attorneys exhausted all of their legal maneuvers, Casey pleaded guilty to fraud charges and is now a convicted felon. The judge sentenced Casey to house arrest, probation, community service, repaying costs of investigation and heavy fines to the state. Casey's prosecution also spurred Glass Star to repay nearly $1 million in restitution to the victims dating back almost a decade when Chet first brought fraud into the company. Jack Gulley later suspended Casey's employment. The other defendants received lesser sentences based on their cooperation.

About the author

Joseph Licandro, J.D., is a prosecutor for the Fourth Judicial Circuit in Duval County, Florida. He is a member of the Special Prosecution Division, which focuses on white-collar and organized crime. His primary area of focus is insurance fraud. Mr. Licandro graduated from the University of Notre Dame and the University of Florida, Levin College of Law. He is married to his beautiful wife, Catherine, who is also a prosecutor for the Fourth Judicial Circuit. They are the proud parents of two young children.