Contractor's Former CFO Is Convicted in Four-Year Firm Fraud
Nearly a decade after Florida-based transportation engineer PBSJ Corp. was rocked by a $36-million corporate embezzlement scandal involving its former chief financial officer and two associates, another industry firm has felt the sting of a top executive's financial improprieties.
A federal jury convicted Brian Paluch, former CFO and senior vice president of Paric Corp., a St. Louis building contractor with about $315 million in 2014 revenue, of three counts of mail fraud.
On his Linked-In page, Paluch referred to his role at the firm as his "dream job" for "great leadership."
But as relations changed over a four-year period from 2010 to 2014, the U.S. Justice Dept. said on Aug. 12 he used company funds to pay personal expenses.
The 58-year-old executive, who had been at the firm from 2007 until his firing last year, used a company-issued American Express card to pay for expenses that included personal travel, dining, spa charges, country-club purchases, electronics and personal gifts for family and friends, said Justice.
An attorney for Paluch did not return ENR phone calls, but had argued in a pretrial brief that Paluch was being prosecuted "for accounting errors for minutiae not normally handled by a CFO," according to the St. Louis Post-Dispatch.
Prosecutors contended that Paluch's relationship with Paric CEO Joseph McKee deteriorated after he was passed over for a promotion to firm president. Keith Wolkoff was elevated to that role in 2012.
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He was convicted of three counts of mail fraud and will be sentenced in in U.S. District Court in St. Louis on Nov. 30. He faces a maximum penalty of 20 years in prison and fines up to $250,000 on each count.
Justice did not reveal the total of funds misappropriated by Paluch, but his indictment last December indicated the figure was about $150,000, according to the Post-Dispatch.
The Justice Dept. said that to hide his activities, Paluch submitted altered financial summaries of his monthly credit-card statements and forged company Wolkoff's name on the falsified expense reports "on several occasions."
Paluch, who also was responsible for calculating Paric employee annual bonuses, inflated his base salary in calculating his own bonus for several years, according to the government. It also claims he directed a $5,000 payment to a St. Louis-area law firm, whose name was not disclosed, as an incentive to hire his niece as a summer associate.
According to Justice, Paric officials "provided assistance in the investigation," but neither government nor company officials revealed how Paluch's fraud was discovered or what changes have been made in the contractor's financial-management practices since improprieties were found.
"The jury’s decision should serve as a cautionary tale to others who mistakenly believe that fraud against an employer or any company is acceptable or insignificant," said the company's outside attorney Ron O'Connor in a statement. "While no clients or projects of Paric were affected by this wrongdoing, we are reminded by this appropriate verdict that fraud is not a victimless crime."
He declined to comment further.
W. Scott DeLoach, former CFO of PBSJ, was sentenced to eight years in federal prison in 2007 after pleading guilty to his role in the $36-million, 13-year embezzlement scheme. He also received a two-year concurrent sentence for pleading guilty to using ”straw men” to make illegal donations of $11,000 to a 2004 senatorial campaign.
John B. Zumwalt, former chairman of the company, termed the discovery of the criminal wrongdoing from trusted employees "a knife through the culture of the firm."
PBSJ was acquired by U.K.-based Atkins in 2010.
