Payroll exec arrested on bank fraud charges

The executive at the center of the payroll firm that went bust, saddling payment processors with millions of dollars in losses, was arrested Sept. 23, 2019, near Albany, New York. Michael Mann, the owner of MyPayrollHP, and its parent company, ValueWise Corp., based in Clifton Park, New York, has been charged by federal prosecutors with a $70 million fraud scheme.

A criminal complaint filed in U.S. District Court in Albany accuses Mann of obtaining at least $70 million in bank loans through a convoluted fraud scheme involving bogus companies.

According to the complaint, Mann admitted to creating companies for no other purpose than to obtain loans and lines of credit by borrowing against those companies’ nonexistent receivables. The scam began in 2010 or 2011, the complaint said, and involved two banks, Bank of America and Pioneer Bank, a mutual savings bank located in the Albany region. Mann also admitted to a check kiting scheme involving accounts he maintained at BofA and Pioneer Bank.

Mann made headlines earlier this month when MyPayrollHP abruptly ceased operations, leaving thousands of employers and their employees in a lurch, and leaving payment processing companies that handled its payroll payments on the hook for about $35 million. MyPayrollHP appears to have been Mann’s only legitimate business, according to the complaint.

Kiting exposed

The closure of MyPayrollHP was triggered when Mann allegedly tried to temporarily cover fraudulently obtained loans by diverting client payrolls to his account at Pioneer Bank, his largest creditor. At about the same time, BofA and Pioneer froze his accounts after uncovering his check kiting activities. Because of the account freezes, Mann was unable to redirect funds to MyPayrollHP’s payroll processors in time to meet processing deadlines, as he said he had intended, the complaint said.

“In sum and substance, Mann [in an interview with investigators] stated that he wished to accept responsibility for his conduct, and confess to a fraudulent scheme that he had been running for years,” the FBI wrote in the criminal complaint.

Mann faces up to 30 years in prison and $1 million in fines, according to the complaint. He may also face state charges. Following the closure of MyPayrollHR, New York Governor Andrew Cuomo requested the matter be investigated by the New York State Department of Financial Services.

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