ALBANY - The owner of Clifton Park based MyPayrollHR has been arrested on federal charges accusing him of committing $70 million in bank fraud, federal prosecutors said.
Michael T. Mann, 39, of Saratoga County, appeared in federal court in Albany Monday and was released on bond. He faces up to 30 years in prison, if convicted.
Mann is accused of committing the fraud beginning in either 2010 or 2011 as he fraudulently obtained at least $70 million from banks and other financial institutions, officials said.
He created companies solely to use in the scheme then fraudulently represented to banks that they had money coming in, prosecutors said.
The Mann-operated MyPayrollHR collapsed earlier this month as a casualty of the scheme, according to federal filings.
The company processed payroll and tax payments for about 1,000 small business clients around the country.
But Mann's accounts at two banks were frozen earlier this month on allegations he was illegally moving money between them to artificially inflate the money in them.
He'd also routed payroll payments through one account to temporarily reduce his debts there, according to a federal affidavit filed in the case.
When the banks detected the illegal money moves and froze his accounts, they also inadvertently stopped the payroll money from flowing back out, according to a federal affidavit in support of the complaint.
MyPayrollHR abruptly ceased operations Sept. 5 as MyPayrollHR failed to route employers' payroll payments to an intermediary, Cachet Financial Services, according to the federal affidavit.
Around the same time, the complaint reads, Bank of America and Pioneer froze Mann's companies' accounts after detecting the fraudulent balance inflation activity, called "kiting," the complaint reads.
Mann then allegedly admitted to his fraud to investigators in an interview Sept. 10, the complaint reads.
"In sum and substance, Mann stated that he wished to accept responsibility for his conduct, and confess to a fraudulent scheme that he had been running for years," the affidavit reads.
Mann placed the start of the fraud in 2010 or 2011, when he began borrowing larges sums under false pretenses, the affidavit reads.
He called MyPayrollHR legitimate, but said other companies he created only to use in the fraud. Mann provided the $70 million estimate to investigators.
"He claimed that he committed the fraud in response to business and financial pressures, and that he used almost all of the fraudulently obtained funds to sustain certain businesses, and purchase and start new ones," the affidavit reads.
If convicted of the federal charge against him, Mann would face up to 30 years in prison.
The case is being investigated by the FBI, with assistance from the New York State Attorney General's Office and is being prosecuted by Assistant U.S. Attorneys Michael Barnett and Cyrus P.W. Rieck.
The FBI also continues to seek information from those who may have suffered a financial loss due to the alleged activities of Mann, MyPayrollHR and his affiliated companies.
The FBI has previously provided an email address — [email protected] — and asked those impacted business owners to email contact information, number of employees and the estimated financial impact to the business and its employees.