The former chief financial officer of a technology marketing company based in Little Rock was sentenced Wednesday to seven years in prison for secretly using nearly $110,000 in company funds to pay off a personal debt while failing to submit $1.9 million in company payroll taxes to the IRS.
The sentence handed down by U.S. District Judge Billy Roy Wilson constituted a break from the 11- to 14-year sentence recommended by federal guidelines, which took into account the amount of money involved, the sophistication of the scheme that was carried out, and, as a prosecutor put it, telling lies to federal agents while "trying to lead them down the wrong rabbit hole."
Wilson credited Andrew Thurman Melton, 69, of Little Rock for serving 20 years in the U.S. Marine Corps, including two tours of duty in Vietnam, and took into account Melton's age and health problems, as well as those of his wife of 33 years. Defense attorney Chris Tarver, senior litigator at the federal public defender's office, said Tina Melton is disabled from a back injury and very ill, having undergone three surgeries in the past 14 months, and relies on Melton for her care to the extent that any prison sentence for Andrew Melton is basically a death sentence for her.
Even the prosecutor, First Assistant U.S. Attorney Pat Harris, agreed that a reduced sentence of 10 years seemed to be "a lot" in Melton's situation. But Harris also pointed out that Melton was 62 years old when he started committing the crimes he was convicted of in a February jury trial -- 12 counts of mail fraud and five counts of failing to submit payroll taxes.
Harris also noted that when Melton siphoned funds from the company, ThermoEnergy Corp., he was a certified public accountant with prestigious connections at area banks, had a salary of more than $200,000 and hadn't paid a dime of a still-outstanding $332,544 tax debt for which the state of Texas had sued him.
The Texas debt, which Melton had agreed to pay just four months before taking the job at ThermoEnergy, stemmed from his failure to pay sales taxes in 2004 and 2005 while he was an officer of Solomon Equities Inc., the parent company of a chain of Trail Dust Steak Houses.
Melton was ThermoEnergy's CFO from 2005 through July 2009, during which time prosecutors said he used company funds to pay off a personal wage garnishment of $3,100 a month that stemmed from his failure to pay an interior decorator for work done at his home.
At the same time, according to court documents, Melton also used company funds "for hundreds of thousands of dollars of other unauthorized or unexplained personal expenses." Assistant U.S. Attorney Hunter Bridges cited $41,000 in veterinary and pet care expenses, $83,000 in unauthorized travel expenses that included two Alaskan cruises, $3,600 in furs, $4,000 in personal vehicle expenses, $5,000 in storage unit costs, $9,000 in health and beauty products including NutriSystem, $10,000 in personal utility bills, $5,000 in jewelry, $9,000 in pool and outdoor equipment, and $16,000 in clothes and other types of personal shopping excursions.
Bridges said Melton also made out $170,000 worth of undocumented checks on the company's account to himself for cash. Plus, Bridges said, Melton made payments from the company account for various personal expenses, including the $13,000 installation of iron gates at his home and $10,000 in payments to cover his personal credit card debts.
In a sentencing memo, Harris noted that a foreclosure lawsuit was filed against the Meltons in January after they failed to make a house payment for three years. The house is scheduled to be sold at auction on July 28, he said.
Melton told the judge from a courtroom lectern, "I'm not the person that Mr. Harris has portrayed me to be. I spent my life trying to do the right thing." He said he and his wife have been "extremely involved in charitable activities" and served on boards of various organizations.
Wilson said that sentencing people is the hardest part of his job, but that even with the prosecutor's recommendation of a sentence below the guideline range, "I think seven years is as low as I can go."
Melton also will be required to make restitution, although the amount of restitution has yet to be determined. Wilson gave attorneys a couple of weeks in which to file briefs on the restitution issue.
After learning about Melton's failure to turn over payroll taxes, the company hired a tax lawyer who worked out a settlement with the IRS that allowed the company to pay the debt without accrued interest and penalties. Prosecutors still say that Melton owes more than $1.7 million in restitution, but Tarver disagrees.
ThermoEnergy Corp. was described in court documents as "a corporation that was trying to clean out unwanted substances from municipal water systems and sought investors to sell this ability to municipalities."
Metro on 06/30/2016