The former chief financial officer of a Short Hills-based investment management firm on Wednesday admitted to embezzling more than $10.4 million from his employer, U.S. Attorney Paul J. Fishman announced.
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David Newmark, 39, of Towaco, N.J., former CFO of Columbus Hill Capital Management, LP, surrendered to federal authorities on Wednesday and pleaded guilty to one count of wire fraud and one count of tax evasion in federal court in Newark.
“David Newmark admitted stealing from his own management company, creating a phony account to collect more than $10 million in fraudulent deposits,” said U.S. Attorney Fishman in a news release Wednesday. “Making personal use of company cash, it was only a matter of time before he was caught with his hand in the piggy bank. Now not only will Newmark have to pay back the money he stole, he will have to pay a debt to society as a convicted felon.”
According to the release, court documents and statements made in court give the following picture of what happened:
Between February 2008 and March 2011, Newmark embezzled from his former employer by requesting checks and wire transfers from custodians of the investment management company accounts and diverting the funds to bank accounts he controlled. He admitted to depositing the checks and wires – including a single wire transfer of more than $2.4 million in April 2010 – into a bank account he set up with a name similar to that of his employer.
The majority of the $10.4 million that Newmark admitted embezzling came from the management company, rather than investor funds, Fishman said in his announcement.
For the 2008 tax year, he said, Newmark did not disclose to the IRS more than $2.8 million he received in connection with the scheme, which resulted in a tax loss to the United States of $1,012,441.
The wire fraud charge carries a maximum potential penalty of 20 years in prison and a $250,000 fine or twice the pecuniary gain or loss resulting from Newmark’s criminal conduct.
The tax evasion charge carries a maximum potential penalty of five years in prison and a $250,000 fine. Sentencing is currently scheduled for April 24, 2012. As part of his guilty plea, Newmark has agreed to make full restitution to the victims of his offenses for all losses resulting from his crime and has agreed to forfeit $10,442,379.90 to the United States. Newmark paid an initial installment of $525,165.65 today.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark; and IRS – Criminal Investigation, under the direction of Acting Special Agent in Charge JoAnn S. Zuniga in Newark, for the investigation leading to today’s guilty plea. U.S. Attorney Fishman also thanked Columbus Hill Capital Management for its cooperation in the investigation.
