ALBANY — A Texas man who allegedly aided payroll fraudster Michael T. Mann with his $101 million scheme has been indicted in federal court on wire fraud charges.
Derek R. Schwartz, 52, is the second person besides Mann to be indicted in one of the largest financial crimes the Capital Region has ever seen, and he faces up to 20 years in prison if convicted.
Mann, formerly of Saratoga County, pleaded guilty in 2020 to orchestrating massive fraud through a money kiting scheme that resulted in hundreds of small to mid-sized businesses and several mid-sized to large financial institutions losing a combined $101 million.
The scheme imploded in late August 2019 when a bank froze one of the accounts through which he was kiting up to $1 million a day. Hundreds of people whose direct-deposit paychecks were processed by MyPayrollHR in Clifton Park, one of Mann’s companies, saw their money disappear.
Mann was sentenced earlier this month to 12 years in federal prison and ordered to pay restitution of $101.04 million, a sum the defense and prosecution agree he doesn’t have and likely never will. He also was sentenced to a concurrent eight-to-24-year term in state prison.
Luke Steiner, 33, of Minneapolis, pleaded guilty in February 2020 to conspiring with Mann to commit fraud, and is awaiting sentencing. Steiner played an important role in the scheme, falsely verifying bogus invoices showing money owed to Mann’s companies were valid, which allowed Mann to list them as accounts receivable and obtain lines of credit based on them.
The indictment alleges that:
- Schwartz recruited Steiner for the role he filled from October 2013 to August 2019.
- In 2014 and 2015 Schwartz recruited at least two other people to perform the same function as Steiner.
- From 2014 to 2019, Schwartz lied to one of Mann’s lenders to further the scheme.
- Schwartz worked with Mann to fabricate bogus vendors for one of Mann’s companies.
Schwartz, of Coppell, Texas, faces four counts of wire fraud and one count of conspiring to commit wire fraud. He was indicted Thursday in federal court in Albany and will be arraigned at a later date.