March 30, 2015
This week in college textbook sales fraud, at home and abroad
by Liam O’Brien
Bookstores, like all businesses, are susceptible to fraud. However, all committed perpetrators of fraud know that targets like bookstores, which aren’t wildly profitable, tend to be a bit of a challenge for sustained criminal activity. Swiping a dollar copy of A Sentimental Education from the store, for instance, is easy (though not in any way recommended); amassing hundreds of thousands of dollars in ill-gotten gains from the same store is hard.
College bookstores, as we’ve previously covered, are still making actual profits, which seems to make them a particularly attractive target for fraud. This week brings us two new stories of alleged campus bookstore misdeeds, one from the heartland of America and the other from all the way in Hungary.
In Dubuque, the case against James Spaulding, former manager of the bookstore at Clarke University, moves forward with Spaulding’s alleged accomplice pleading guilty to filing a false tax return. The Cedar Rapids Gazette reports:
Thomas DeFelice is charged with one count of conspiracy to file false tax returns. He faces up to five years in prison and a fine up to $250,000. He is set for an initial appearance, arraignment and guilty plea next Tuesday, March 31 in U.S. District Court.
According to the superseding information, DeFelice and former bookstore director, James Spaulding, 35, now of Longmont, Colo., formed a fictitious New Hampshire corporation called RVP Wholesale Books in 2011. Spaulding was in charge of ordering textbooks and other books for the student bookstore, and would submit invoices to the college for payment to book suppliers.
Spaulding, who pled guilty to mail fraud and false tax returns last year, bilked the university out of over $300,000 between 2011 and 2012 before leaving Iowa and moving to Colorado. Spaulding would submit invoices to the university’s billing department for nonexistent books purchased from RVP, and split the proceeds with DeFelice, who allegedly handled the passage of money through the two men’s shell corporation in sales-tax-less New Hampshire.
The fake invoice grift can be fairly effective, assuming you don’t open your fake book publisher/wholesaler in a way that can be traced back to you. However, it’s even more brazen to run the con on your own employer, not to mention then hiding your money from Uncle Sam and finally lying about it to a grand jury. Spaulding faces a maximum sentence of 26 years in jail, plus fines of more than $750,000, while DeFelice faces a much lesser max charge of 5 years and $250,000.
Spaulding’s scheme was uncovered in 2013 after an internal review, so let that be a lesson to anyone trying to skim from their own bookstore: don’t get even a little greedy, because it will set off alarms. There simply isn’t enough money at stake to miss.
Meanwhile, in Hungary, one of Budapest’s most prestigious universities is being investigated by the government for the alleged embezzlement of 100 million forints, or around $360,000. Via Hungary Today:
The Government Control Office told the website that it has filed lawsuits in three cases of disloyal management, two cases of embezzlement and one case of fraud, totalling over HUF 100 million. According to Vs.hu, auditors discovered that the university bookstore was unable to give account of HUF 80 million in revenue and found that the university’s former rector, Tamás Mészáros, and its director of finances had both been reinstalled in different positions shortly after receiving a HUF 15.3 million and HUF 13.4 million respectively as a final settlement.
The government’s case of financial mismanagement against the university could run very deep, assuming that the text translated by Google on this page is to be believed.
See you next week, scammers.
Liam O’Brien is the Senior Sales & Marketing Manager at Melville House, and a former bookseller.