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Former Aurora, Mo. business owner, fined $ 30 million for fraud

AURORA, Mo. (edited press release) – A former business owner in Aurora, Missouri, was convicted in federal court Friday for a series of fraud schemes totaling more than $ 30 million.

Russell, 51, of Hilton Head Island, South Carolina, formerly Aurora, was sentenced by U.S. District Judge Stephen R. Bough to eight years in federal prison without parole. The court also ordered Grundy to pay $ 14,847,451 in compensation to his victims.

On January 30, 2020, Grundy pleaded guilty to two counts of wire fraud, a misrepresentation of a loan application and a money laundering count. According to court documents, Grundy̵

7;s multiple schemes to defraud financial institutions, a Native American tribe and his former clients, potentially amounted to more than $ 30 million, resulting in nearly $ 15 million in actual losses.

“This thief stole his lavish lifestyle by stealing millions of dollars from his clients, partners and lenders to build expensive homes, buy luxury cars and take several vacations,” said U.S. Attorney Tim Garrison. “This theft did not occur once or twice, but repeatedly over several years through a series of fraud schemes. Even after being indicted, he boldly continued to commit criminal fraud while free from bond and awaiting trial. Today, he is held accountable for the extensive financial damage that his greed inflicted on his victims. ”

The detailed multi-million dollar fraud schemes and false information provided in several documents by Mr. Grundy, resulted in significant harm to his business partner, a significant client and several financial institutions, all of which violate public confidence, ”said Adam Steiner, Acting Special Agent in charge of the IRS Criminal Investigation division in St. Louis. Louis Field Office. “Today’s statement shows the government’s willingness to restore and secure this trust. In addition, IRS Criminal Investigation, along with law enforcement partners and the U.S. Attorney’s Office, will continue to identify, investigate, and prosecute individuals such as Mr. Grundy. ”

Grundy was the owner of several companies that focused on advanced technologies, ranging from software development to computer security to meet the needs of software and hardware technology in its clientele. Grundy’s companies included Innovative Objects, LLC, PILR Technology, LLC, Choice Technologies, LLC, Wyerless, LLC and Audio Input, LLC.

Land O’Lakes / Nutra Blend Fraud Scheme

Grundy (through his company Innovative Objects) entered into a contract with Land O’Lakes, Inc. and its subsidiary, Nutra Blend, LLC, from January 2004 to September 27, 2015 to create accurate software for inventory tracking, tracking and coordination of products. Grundy also contracted with Land O’Lakes and Nutra Blend to provide equipment and technical support for the use, maintenance and upkeep of the software.

Grundy falsely told Land O’Lakes and Nutra Blend that third-party software programs were embedded in the proprietary software and were essential to the successful operation of the software. Grundy claimed that some of the payments to Innovative Objects were transferred to third party licensees. In fact, there were no third party licensee fees; instead, Grundy held these payments for his personal or unrelated expenses.

Land O’Lakes and Nutra Blend paid more than $ 1.8 million in fake license fees between 2012 and 2015.

Miami Nations Enterprise Fraud Scheme

Grundy engaged Miami Nations Enterprise, a subsidiary of the Miami Nations Tribe, in negotiations to grant loans and buy a controlling stake in all of Grundy’s technology-based businesses.

Grundy erroneously told the Miami Nations Enterprise that his company had been awarded a $ 3.5 million contract by Wal-Mart Stores, Inc., to develop and provide information technology services. Grundy presented several emails, invoices, conditional allotment letters and other documents in support of his false claims. Miami Nations Enterprise lent Grundy the money to cover the cost of purchasing software and hardware and the training needed to obtain the $ 3.5 million Wal-Mart contract. Grundy admitted today that he instead used those funds for his own personal expenses, including building a new home in Charleston, South Carolina.

On August 24, 2014, the Miami Nations Enterprise paid an additional $ 2 million to buy a 70 percent stake in Grundy’s companies.

Officials at Miami Nations Enterprise later discovered that neither Grundy nor any of his companies had been awarded a contract with Wal-Mart, and determined that emails, conditional contract award, invoices and bank deposits Grundy had used to support his claims, was fraudulently created. Miami Nations Enterprise officials announced that if they had been aware of Grundy’s false representations, they would never have bought any part of Grundy’s businesses or chained him millions of dollars as requested to meet the specifications of an information security program that never existed. Based on records from the financial institution as well as the many misleading representations from the defendant, the Miami Nations Enterprise transferred a total of $ 8,010,000 to Grundy.

False information about loan application

Grundy applied for three loans from UMB Bank on October 17, 2014. Grundy specifically admitted that he fraudulently obtained a loan of $ 5,440,800 by providing false information in the loan application. Grundy also filed a “Change in the Terms and Conditions Agreement” that effectively allowed him to refinance an existing loan based on the information he provided to the bank. The total amount of the loans and “change of terms” that Grundy fraudulently obtained was more than $ 12 million. Following the sale of the seized land and warehouse buildings built with the fraudulently obtained loans, UMB officials have reported a residual final loss of $ 4,214,126 following the sale of these assets.

Grundy erroneously claimed that Land O’Lakes had agreed to a 20-year lease for storage space, which he wanted to build using the loans he applied for from the bank. Based on leases provided to UMB Bank officials, Grundy claimed he would receive $ 18 million in future income.

Grundy admitted that he was grossly exaggerating the amount that Land O’Lakes had to pay to obtain a loan from UMB. Instead of a lease agreement between Grundy and Land O’Lakes to lease the warehouses, there were two leases. A lease lasted for three years for an amount far less than Grundy claimed. The second lease was a “month to month” lease for an even smaller amount. In fact, the genuine and accurate leases signed and approved by Land O’Lakes guaranteed only Grundy $ 540,000 in income.

Additional financial fraud

After being indicted by a federal grand jury, Grundy was given a bond over the government’s objections. According to court documents, Grundy committed two further known financial frauds during his prior release.

Grundy contracted with a person to create a mobile app, for which he was paid $ 13,230. The app was never terminated, but Grundy declined the victim’s request for reimbursement. As a result of this incident, the government moved to have his bond revoked. The court chose not to revoke his bond, but specifically said that Grundy deceived the victim.

A few months later, Grundy again made false statements about loan documents to Palmetto State Bank in South Carolina in an attempt to fraudulently obtain another loan. Grundy greatly overestimated his assets and income to get a loan. But for the diligent efforts of bank officials, Grundy’s fraud and forged documents would have resulted in losses that would have amounted to $ 75,000. Grundy surrendered his bond and was taken into federal custody.

This case was prosecuted by Assistant U.S. Attorneys Patrick Carney and Casey Clark. It was investigated by the FBI, IRS criminal investigation, the FDIC Office of the Inspector General and the Small Business Administration Office of the Inspector General.

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