Reuters/Jim Bourg
FBI police vehicles.
- On September 5, New York-based payroll company MyPayRollHR closed suddenly, leaving about 8,000 people at some 400 companies without their paychecks - and $30 million unaccounted for.
- The FBI launched an investigation and raided the home of MyPayRollHR owner Michael Mann less than two weeks later.
- Now The Wall Street Journal reports that Mann has been charged with bank fraud after he admitted to creating fake companies to obtain $70 million in loans.
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Earlier this month, about 8,000 people were left without paychecks due to the sudden closure of MyPayrollHR, a New York-based payroll software company. Now the owner of MyPayrollHR, Michael Mann, has reportedly admitted to defrauding banks to receive $70 million in loans since 2010.
The Wall Street Journal's Ruth Simon reports that Mann admitted to the crime in a US District Court filing on September 20. Mann told authorities he created multiple false companies to obtain the loans, but his MyPayrollHR business was legitimate.
When MyPayrollHR closed on September 5, about $30 million in paychecks due to the company's clients went missing. According to the Journal, about 8,000 employees at 400 different companies were impacted. The FBI launched an investigation into MyPayRollHR and raided Mann's home on September 16 in search of evidence.
According to the court filing, Mann told law enforcement that he had transferred the money needed to fund the payroll payments to one of his personal bank accounts. Mann apparently said he transferred the money to an account controlled by Pioneer Bancorp Inc. to temporarily address an outstanding debt. However, Pioneer froze Mann's account, preventing him from cycling the money back out to the appropriate payroll accounts, per the report.
The Journal reports that Bank of America Corp also froze Mann's accounts when it was determined that he was transferring millions of dollars between accounts at Bank of America and Pioneer. Cachet, the firm responsible for dispersing the paychecks, reversed the deposits to MyPayrollHR's clients when it could no longer access the money, the report says.
Cachet's sudden reversal led to some accounts is what apparently led to having the paycheck amount removed twice, leaving some employees with negative balances in the days following MyPayRollHR's closure on September 5. The National Automated Clearing House Association reported that 97% of employees who missed paychecks due to MyPayrollHR's closure have since had their wages restored.
Mann is cooperating with authorities, and claims that "almost all" of the fraudulent loans he obtained had been used to fund and sustain his businesses, the Journal reported.