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Home Depot Fraud Case Grows With Two More Managers TargetedProsecutors seek to seize houses allegedly bought with kickbacks
Federal prosecutors have expanded their investigation of kickbacks that enriched Home Depot managers at the company's expense to include two more former managers. Evidence developed in the course of the investigation prompted federal prosecutors last week to seek the seizure of two Georgia homes, one of them worth $2.5 million. The investigation has already resulted in guilty pleas by former Home Depot managers Anthony M. Tesvich, James P. Robinson and Ronald K. Johnston.
Daily Report2009-02-05 12:00:00 AM
Federal prosecutors have expanded their investigation of kickbacks that enriched Home Depot managers at the company's expense to include two more former employees.
Evidence developed in the course of the investigation -- which has already garnered guilty pleas from three former Home Depot managers -- prompted federal prosecutors last week to seek the seizure of two Cobb County, Ga., homes, one of them worth $2.5 million, in civil forfeiture filings.
The new filings in federal court in Atlanta provide new details of the investigation into suspected kickbacks, and allegations of wire fraud, mail fraud and money laundering by Home Depot managers that began in 2006. The investigation first surfaced publicly in July 2007 when Home Depot acknowledged that it had fired four purchasing managers for violating the company's ethics policy.
The investigation -- which so far has centered on the international home supply chain's flooring department -- has already resulted in guilty pleas by former Home Depot managers Anthony M. Tesvich, James P. Robinson and Ronald K. Johnston. All three men are slated to be sentenced in April by U.S. District Judge Richard W. Story.
The most recent court filings state that former company managers Ian J. Evans and Ronald D. Matheny were engaged in activities similar to those outlined in the earlier cases and that evidence developed in the course of investigating Tesvich, Robinson and Johnston identified "other individuals who engaged in similar activities." Those filings claim that Evans and Matheny received more than $8 million from Home Depot suppliers in return for stocking the chain's stores with those suppliers' merchandise.
Neither Evans nor Matheny has been charged with a crime. Federal law gives federal prosecutors the right to seize any properties that they suspect may be linked to a crime. Those properties are forfeited through a civil forfeiture claim brought by the U.S. Attorneys against the properties rather than the property owners. Federal law does not require either a criminal conviction or a criminal charge against the property owner in order for the property to be forfeited.
Court filings do not list attorneys for either man. Evans' Mableton, Ga., telephone number is unlisted, and he could not be reached for comment. Matheny could not be located for comment.
A spokesman for U.S. Attorney David E. Nahmias said the Justice Department would not comment on information contained in the pleadings. In response to questions from the Daily Report, Home Depot issued a written statement saying that the company "will continue to cooperate with the U.S. attorney" in the ongoing investigation. The statement also noted that while Home Depot's prior policy did allow for "a nominal level of entertainment expense to foster an appropriate level of relationship building among our vendors and merchants," in 2007, it "moved to a zero-tolerance policy, which has been broadly communicated to our merchandising associates and suppliers."
Home Depot also said that the current investigation has had no "material effect" on its financial condition or operations.
According to a civil forfeiture complaint, Evans began working at Home Depot in 1996. He was promoted to a managerial position as "merchant" in 1998, a job he held until March 2001 when was fired for "performance-related issues."
Matheny began working at Home Depot in 1987. From May 2002 until April 2005, he was a product merchant in the flooring department responsible for the purchase of all rugs and related accessories sold by the international chain. He also was responsible for inventory oversight and maintaining relationships with the company's vendors, according to the forfeiture filing.
The forfeiture seeks the seizure of Evans' $2.5 million mansion on nearly four acres of land at 1325 Buckner Road in Mableton, which he now has for sale, and a home at 5542 Valley Brook Road in Mableton that Evans and his wife bought for their daughter.
The forfeiture complaint alleges that "Evans conspired with Home Depot employee Matheny ... to effectuate a scheme to fraudulently deprive Home Depot of its intangible right to the honest services of its employees," in violation of federal law.
The complaint also details a money trail from Home Depot suppliers through a string of personal and corporate bank accounts held by Evans and Matheny that they used to buy real estate, make personal purchases or pay their living expenses.
In 2001, shortly after being fired from Home Depot, Evans established several small companies, including a consulting firm representing flooring suppliers seeking to do business with Home Depot. He also set up a separate firm with Matheny, who was then still a Home Depot manager, according to the forfeiture complaint.
Between 2002 and 2005, more than $8.3 million in payments from Home Depot suppliers were passed through Evans' consulting company accounts and that of the firm Evans and Matheny owned jointly, according to the forfeiture complaint.
Two suppliers in particular -- Norcross, Ga.-based international rug import firm Mahdavi's and Norcross rug and home furnishing importer Trade Am International, Inc. -- each made an estimated $1 million in payments to Evans' and Matheny's firms between 2002 and 2005, the complaint states.
Trade Am's Norcross telephone number has been disconnected, and no one answered the telephone at a new downtown Atlanta listing for the company. Trade Am's Georgia business license is also listed as not in compliance by the secretary of state. Mahdavi's telephone number also has been disconnected, and the company's Web site has been taken down. FBI agents who interviewed representatives of Mahdavi's and Trade Am and reviewed internal documents of both suppliers found that payments made to Evans' consulting company, Vendor Efficiencies, and the firm he shared with Matheny, JDJ Distributing, were reported as being "for consulting work and sales representation with Home Depot," according to the forfeiture complaint. Payments were made "based on a percentage of rug sales to Home Depot," the complaint stated.
From 2002 to 2005, Evans' and Matheny's consulting firms also channeled more than $1.4 million to Matheny through a solo consulting firm he set up in 2002 that he ran out of his Smyrna, Ga., home, according to forfeiture documents.
During that time, Matheny purchased "millions of dollars of rugs" for Home Depot from Mahdavi's and Trade Am, according to the complaint.
Matheny and his wife, who had access to his consulting firm account, used money from vendors seeking to do business with Home Depot to make purchases and pay living expenses, according to the complaint, while Evans bought real estate.
Evans used funds from suppliers to pay off the mortgage on his Powder Springs, Ga., home valued at more than $300,000, according to the complaint. The Evanses sold their Powder Springs home last year.
Federal prosecutors are seeking to seize both Mableton residences, basing the forfeiture on allegations that Evans engaged in multiple financial transactions using funds derived from unlawful activity traceable to the Home Depot kickback scheme, according to the forfeiture complaint.
Meanwhile, Tesvich, Robinson and Johnston are slated to be sentenced for their roles in the kickback scheme on April 1.
Tesvich resigned from Home Depot in 2005 after he was questioned by company security officials about suspected kickbacks from a Taiwanese flooring supplier seeking to do business with Home Depot. Robinson and Johnston left Home Depot's employ in July 2007 when the company abruptly terminated four employees in connection with the kickback investigation.
Tesvich, a former product development merchant, pleaded guilty last June to one count of conspiracy to commit wire fraud and three counts of tax evasion stemming from his failure to report or pay more than $1.4 million in federal taxes on bribes he took from foreign suppliers.
Robinson, a former divisional merchandising manager for flooring products, pleaded guilty last July to fraud conspiracy and tax charges stemming from more than $750,000 in bribes that foreign suppliers channeled to him through Tesvich.
Johnston, a former flooring merchant, pleaded guilty last month to fraud conspiracy and tax charges stemming from his failure to pay taxes on $186,000 in illegal income generated by bribes from suppliers from whom he arranged to buy merchandise at the expense of other, honest competitors.