ALBANY — Prosecutors are asking a federal judge to send Michael T. Mann to prison for 22 years when the perpetrator of one of the biggest financial fraud schemes in Capital Region history comes before him for sentencing Wednesday.
Mann’s defense attorney, by contrast, is asking the judge to depart from guidelines that call for 21.5 to 26.5 years in prison, and instead sentence the Edinburgh resident to only a few years behind bars, with recommendation for a minimum-security facility.
For about six years, Mann and his companies maintained a Ponzi scheme through lies, fraud and check kiting, with the sums snowballing to the point that he was moving around millions of dollars a day when Bank of America and then Pioneer Bank froze his accounts in late August and early September 2019.
As a result, the payroll funds sent to Mann’s Clifton Park-based MyPayrollHR by hundreds of small and mid-sized businesses evaporated, leaving thousands of workers unpaid, panicked and furious.
Mann made a negotiated guilty plea in August 2020 to aggravated identity theft, bank fraud, filing a false tax return and conspiracy to commit wire fraud.
He is to be sentenced Wednesday morning by U.S. District Court Judge Lawrence Kahn in Albany.
Immediately after his federal sentencing, Mann will be sentenced on state charges in Saratoga County Court to anywhere from five to 15 years and eight to 24 years in prison, to be served concurrently with his federal sentence.
Total damages are estimated at $101 million. Lawyers prosecuting and defending Mann both have said he does not have the money to make the restitution that is expected to be ordered as part of his sentence.
Defense attorney Michael Koenig and the U.S. Attorney’s Office for the Northern District of New York last week submitted sentencing memos that paint two different pictures of Mann on the way to making very different sentencing recommendations.
Koenig — who refers to his client as “Michael” in his memorandum — leads off with heavy emphasis on his client’s extraordinary and timely cooperation with investigators and his guilty plea Aug. 12, 2020.
Koenig also states:
- Mann voluntarily had his attorney contact authorities just days after his scheme collapsed and in the resulting meeting provided extensive information on what he had done; he did so with no promise of leniency and he allowed searches of all his electronic devices without warrants.
- The “draconian” sentencing guidelines are unduly harsh and punitive and don’t take into account all circumstances.
- Mann is a first-time offender, and while not attempting to minimize his misconduct, he has accepted responsibility and shown remorse, Koenig wrote.
- His cooperation and his guilty pleas in state and federal court spared the state and federal governments the need to conduct investigations that would have taken years and cost millions.
- Mann has also cooperated fully with parties in the numerous civil lawsuits that have been filed in the past 22 months.
- A more lenient sentence than guidelines call for would send a positive message to other felons about voluntarily ending their actions and cooperating with prosecutors.
- Kahn should follow the precedent of judges who departed from sentencing guidelines — one of them citing “the utter travesty of justice that sometimes results from the guidelines’ fetish with abstract arithmetic” — and give Mann a prison term along the lines of the 42, 60 and 84 months sentences handed down for similarly egregious financial crimes.
- Mann was a charitable and caring person before his arrest, has continued to live productively since his arrest, and has made restitution to the extent possible; he may never make further restitution if sentenced under federal guidelines.
- Mann should be allowed to self-report to prison in late September or early October, to give him time to resolve his personal affairs, and the judge should recommend a minimum-security prison for him.
The U.S. Attorney’s Office puts a different spin on the same set of facts.
In its memorandum, it leads off with a description of what happened to one of Mann’s hundreds of victims: A New Hampshire diner owner who had to leave her dying mother’s bedside to deal with her employees being unpaid as Mann’s accounts were frozen.
She ultimately spent $30,000 of her own savings to replace her employees’ missing wages and payroll taxes, leaving her with no financial cushion when COVID-19 hit six months later and leading to the closure of her business.
To support their recommendation, the prosecutors’ memo also says:
- Mann had the mentality of a riverboat gambler, trying to make back his losses with ever-bigger bets, but playing with other people’s money instead of his own.
- Mann devoted hours a day to running his scheme and was still trying to fix the situation when it collapsed; he thought he could make it work if he could continue it for another year or two, an idea he called misguided in retrospect.
- Mann’s decision to immediately confess to authorities when his scheme imploded did save the government months of investigative work and litigation; however, it was a sign not of upstanding character but desperation after his accounts were frozen and all other options were gone. A confession even two weeks earlier could have averted tens of millions of dollars in losses by hundreds of client businesses and thousands of their workers.
- Federal guidelines mandate 24 months in prison for the identity theft charge, to be served consecutively after 235 to 293 months for the other 11 counts Mann pleaded guilty to.
- Kahn should sentence Mann to serve 264 months in prison followed by 36 months of supervised release and order $101,038,793.31 in restitution to victims.
- Victims’ letters to the court stretch hundreds of pages. One victim attempted suicide after his business was destroyed. Others speak of mass layoffs, the panic a missing payday causes those who live paycheck to paycheck, death threats from employees, and even the diversion of money used to care for sick and abused pets at an animal shelter.
- Mann has no hope of being able to repay his victims for their financial losses, nor for the subsequent expenses such as loss of income and lawyers’ and accountants’ fees; there’s also no way to repay them for their stress and anxiety.
- A 264-month sentence would protect the public from Mann and serve as a deterrent to misconduct by the many other payroll companies operating in a lightly regulated industry.