Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that JOHN FARCHIONE, a former customer operations manager of a public utility company (the “Public Utility”), and LOUIS BENDEL, who ran a business purporting to assist customers with payments to the Public Utility, were arrested this morning and charged with honest services fraud, bank fraud, mail fraud, aggravated identity theft, and conspiracy, for their roles in a scheme to defraud the Public Utility and its customers out of more than $3.8 million. BENDEL was presented today before U.S. Magistrate Judge Gabriel W. Gorenstein. FARCHIONE was arrested in Maine this morning and was presented in federal court there today.
Acting U.S. Attorney Joon H. Kim said: “John Farchione, an employee of a public utility, and Louis Bendel, the owner of a payment processing vendor, allegedly stole more than $3.8 million from the public utility and its customers. As alleged, instead of providing the fair and honest services the public deserves and the law requires, the defendants instead looked to the public utility as a vehicle to satisfy their personal greed. We thank our partners at the FBI for protecting New York’s public utilities and their customers.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Farchione, aided by his inside knowledge of the billing and payment process of the public utility for which he worked, found a way to exploit procedures in furtherance of a scheme abetted by Bendel. Bendel, whose job it was to remit customer payments to the utility company, allegedly conspired with Farchione to subvert the system, allowing for their personal enrichment to the detriment of the company and its consumers. The right to honest services is something every member of the public should enjoy, and those who stand in the way will most certainly be held accountable.”
According to the Complaint[1] unsealed today in Manhattan federal court:
From at least in or about 2005, up to and including in or about November 2016, FARCHIONE and BENDEL engaged in fraudulent schemes resulting in the theft of more than $3.8 million from the Public Utility and its customers.
FARCHIONE, who was employed by the Public Utility as a manager in Customer Operations during the relevant time period, devised and implemented the scheme, using his knowledge of the Public Utility’s billing and payment processes. FARCHIONE carried out the scheme with BENDEL, who operated a business that aggregated payments from customers of the Public Utility for the purpose of passing such payments on to the Public Utility. FARCHIONE and BENDEL effected the fraud in part through conspiring to submit fraudulent checks and payments to the Public Utility, in amounts owed by customers who provided cash to BENDEL believing he would submit those payments to the Public Utility on their behalf.
In fact, however, FARCHIONE and BENDEL kept the customer cash for themselves and submitted fraudulent checks to the Public Utility that purported to convey aggregated payments by multiple customers of the Public Utility. FARCHIONE, by virtue of his position as an employee of the Public Utility, was able to conceal the nature of the fraudulent checks, and thereby perpetuate the fraudulent scheme, through his knowledge of and access to the Public Utility’s account payment system.
Additionally, FARCHIONE and BENDEL conspired to create fraudulent positive balances on certain customer accounts associated with BENDEL, causing the Public Utility to issue unearned account refunds, the proceeds of which were obtained and shared by FARCHIONE and BENDEL.
FARCHIONE, 64, of Queens, and BENDEL, 69, of Seaford, Long Island, are each charged with one count of honest services fraud, which carries a maximum sentence of 20 years in prison; mail fraud, which carries a maximum sentence of 20 years in prison; bank fraud, which carries a maximum sentence of 30 years in prison; conspiracy to commit honest services fraud, mail fraud, and bank fraud, which carries a maximum sentence of 30 years in prison; and aggravated identity theft in connection with the fraudulent schemes, which carries a mandatory sentence of two years in prison, to be served consecutively to any other sentence imposed.
The statutory maximum and mandatory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Kim praised the investigative work of the FBI in this investigation.
[1] The charges contained in the Complaint are merely accusations, and FARCHIONE and BENDEL are presumed innocent unless and until proven guilty.
