Mann gets 12-year sentence in $101 million fraud case

ALBANY — Michael Mann on Wednesday drew a 12-year prison term — significantly less than sentencing guidelines specify — for a payroll fraud scheme that caused $101 million in losses for businesses large and small and anxiety for thousands of their workers.

Prosecutors had called for 22 years in prison, slightly more than the minimum specified by federal guidelines, and objected to the 12-year sentence handed down by U.S. District Court Judge Lawrence Kahn, a prelude to possibly appealing it.

Mann, of Edinburg, maintained a Ponzi scheme for six years. Toward the end, he was kiting millions of dollars a day between accounts to keep it going. It collapsed at the end of August 2019 when one bank and then a second froze key accounts used by his companies, including in Clifton Park.

Hundreds of companies that used his payroll services lost money in the collapse, as did thousands of their employees, temporarily if not permanently. A few large corporations are out millions of dollars; most other victims lost much smaller amounts but suffered great stress because they were not able to absorb even a relatively small loss. The numerous civil lawsuits filed in the wake of the collapse are still in motion.

Mann in August 2020 pleaded guilty to both state and federal charges. An hour after his sentencing in federal court Wednesday, he was sentenced in Saratoga County Court to 8 to 24 years in prison, to be served concurrently with the federal sentence.

Kahn ordered Mann to report to federal prison Sept. 21.

The victims

Some of Mann’s victims were present in the courtroom for his sentencing Wednesday.

Bonnie Rosengrant offered one of 165 victim impact statements submitted to the court in advance of sentencing, and as she awaited the proceeding, she spoke to The Leader-Herald.

“He destroyed a lot of people’s lives and livelihoods,” she said.

Rosengrant had operated the Hometown Diner in Rindge, New Hampshire, for eight years when the payroll accounts were frozen. All told, she spent about $30,000 of her savings covering lost wages and tax withholdings for her employees, and she doesn’t expect to see a cent in restitution.

Mann, 51, was ordered to repay the $101 million stolen but has no way to do so. He’ll be in his 60s at least before he’s free again.

The sums the victims cite — a thousand here, a half-million there — are only part of their losses.

For Rosengrant, it was a crash-and-burn that cost her the classic silver diner that she’d helped dig a foundation for and which she subsequently built into a popular destination with 80-hour workweeks.

When COVID hit six months after Mann hit, she lacked the savings to cushion the blow, and closed her doors.

Facing the prospect of starting over at 65, she opted to retire and begin drawing Social Security.

Rosengrant still has anxiety attacks over the debacle, even when doing something as innocuous as gardening.

She has thought about sitting in Mann’s driveway with a sign, but her husband talked her out of that. But she did drive three hours to see Mann in person Wednesday.

“I have nothing else to do,” she said.

“I hope he gets the book thrown at him.”

Melanie O’Malley of Colonie, an admin of the 1,900-strong Facebook group created for victim’s of Mann’s actions, also was in the courtroom Wednesday.

The proprietor of O’Malley’s Oven has been, by her own reckoning, “insanely fortunate” with timing. She was the sole employee of the bakery when Mann’s scheme imploded and she lost only $1,400. She was a startup in an incubator space when COVID hit, and didn’t lose her business.

“I was minimally affected, which put me in a good position to help coordinate and unite people who were much more affected and reeling,” O’Malley said. “One family had to sell their car and cancel Christmas and were worried about losing their home.”

She and Rosengrant both remarked on the limited regulation of the payroll industry, which moves so much money so quickly among so many businesses, an environment ripe for abuse.

O’Malley also had harsh words for Pioneer Bank, a key electronic stop on Mann’s money-kiting circuit. She learned in court Wednesday that Mann had personally visited Pioneer as his scheme was imploding to ask it to unfreeze a pass-through account so money could go to workers who’d earned it.

Pioneer — which wound up with millions in losses of its own — would not, she said.

O’Malley said she questioned Pioneer CEO Tom Amell at a shareholders’ meeting and his response was that the matter is under litigation.

She said she saw no real contrition from Mann for what he did.

“He’s sorry he got caught,” O’Malley said.

Tricia Canavan, president of United Personnel Services in Springfield, Massachusetts, broke down in sobs as she described in court the impact Mann had on the company her parents founded in 1984: Chaos, death threats, police in the office for weeks, managers taking mental health leave, and roughly $500,000 in losses to date, none of it recovered.

United Personnel specializes in entry-level manufacturing placements, and many of its contract workers are live paycheck-to-paycheck, she said.

The sentence

Mann’s attorney, Michael Koenig, and the U.S. Attorney’s Office both submitted lengthy sentencing memoranda. Prosecutors sought a 264-month term in accordance with federal guidelines that call for 259 to 317 months in prison. Koenig didn’t specify an exact term but asked for Kahn to go significantly below the guidelines, which he’s allowed to do, and give Mann something along the lines of the 42-, 60- and 84-month terms other major financial criminals have drawn, all below the sentencing guidelines.

Koenig and Assistant U.S. Attorney Michael Barnett pressed these requests in shorter form Wednesday morning, before Kahn imposed sentence.

A point both attorneys made, but from different directions, was the timing of Mann’s fall from grace:

Koenig noted that Mann surrendered immediately upon the collapse of his scheme and confessed without promise of leniency, a degree of cooperation virtually unheard of for white-collar criminals. When things went wrong, Koenig said, Mann decided to work to put them right.

Barnett acknowledged that Mann was very helpful with his own prosecution but said it was the desperate act of a man who had no alternative; had Mann had this revelation two weeks earlier, the small and mid-sized businesses and their thousands of employees would not have been victimized. The loss would have been the same, but it would have been spread out over many fewer people and organizations.

Barnett also acknowledged that Mann had not used his ill-gotten gains to fund a lavish lifestyle. He said he wished Mann had, because then there’d be cars and yachts and mansions to seize and sell to help make restitution. Instead, the money went to Mann’s ponzi scheme and the network of companies he used to maintain it.

“He basically flushed this money down the drain,” Barnett said.

Koenig acknowledged that one couldn’t help but be moved by the victim impact statements, and said he and Mann never minimized the impact of Mann’s actions.

But he told Kahn that sentencing is about the entirety of the defendant and his circumstances and actions.

Koenig invoked the memory of another infamous Capital Region white-collar criminal, Schenectady insurance magnate Albert Lawrence, who embezzled $37 million to keep control of his insurance empire, victimizing thousands in the process.

At his March 2001 sentencing, Lawrence’s attorney — one Michael L. Koenig — argued in the same federal courthouse that Lawrence’s entire life, philanthropy and thievery, should be considered.

Sentencing guidelines called for Lawrence to get 97 to 121 months in prison. He was sentenced to 37 months and $37 million in restitution.

(Ultimately, that sentence was moot: Lawrence served only a few months, due to terminal cancer, and didn’t make restitution.)

Mann himself read a brief statement, his voice shaking slightly at times.

“First, I want to say to Ms. Canavan I’m very sorry for what you went through. I caused that,” Mann said.

“I feel sick when I think of the damage I’ve done.”

He never turned to face the crowd of victims and other onlookers in the courtroom, O’Malley later noted with annoyance.

Koenig had asked Kahn for a lighter sentence; the right to report to prison on his own, rather than be taken into custody; a two-month delay in that self-report date; and a recommendation to the Bureau of Prisons that Mann be incarcerated at FCI Butner, in North Carolina, where the former Saratoga County resident has relocated with his wife.

Kahn’s sentence granted most of this, with a Sept. 21 date to self-report to prison rather than the early-October deadline Koenig sought.

Kahn also directed that Mann pay $101.04 million in restitution and have no unauthorized contact with a co-conspirator awaiting sentencing. He ordered Mann to devote 25% of his gross income while in prison to restitution and 10% or $100 a month, whichever is greater, upon release.

Kahn reminded the attorneys they have the right to appeal the sentence. Barnett lodged an objection and indicated a possible appeal in the near future.

The court adjourned, and the spectators — young, old, white, Asian, Black — filtered out.

Riding an elevator down to the ground floor with a Leader-Herald reporter, Rosengrant suggested a postscript to the earlier interview:

“You can add that I’m angry.”

By Paul Wager