Controller Convicted of Paying Herself as Real Estate Agent on Phony Deals

Allison Tussey —  March 19, 2014 — Leave a comment

Paula Rae Donnell, 54, Fullerton, California, a controller for a real estate company, was convicted of embezzling over $370,000 from her employer.

The defendant was convicted in a court trial Friday, March 14, 2014, of one felony count of grand theft, five felony counts of filing a false tax return, and seven felony counts of filing a false statement, with sentencing enhancements for property loss over $200,000 and aggravated white collar crime over $100,000. She faces a maximum sentence of 13 years in state prison and is scheduled to be sentenced April 18, 2014, at 1:30 p.m. in Department C-35, Central Justice Center, Santa Ana, California.

On June 3, 2002, Donnell was hired as the controller for Ultimate New Homes Sales & Marketing (UNHS). She was responsible for maintaining the company’s accounting records, calculating and writing payroll checks for employees, handling employee benefits and insurance, and interacting with the California Employment Development Department (EDD) related to unemployment or disability insurance issues with current or former UNHS employees. She earned a base salary and a closing bonus for each home that closed escrow.

Between 2004 and 2010, Donnell embezzled over $373,000 from UNHS, by creating false entries in the company’s check ledger to hide checks and online transfers made to the defendant, paying herself commissions as a sales agent even though she actually was not one, and paying herself the closing bonus far in excess of the company’s actual home sales closings per month. On one occasion, during the housing recession, UNHS closed escrow on 27 homes and Donnell paid herself bonuses on 100 homes closing in that month.

In 2007, Donnell stopped paying herself payroll with taxes withheld and instead paid herself as an independent contractor with no taxes withheld. On March 17, 2010, Donnell claimed that she had been laid off and filed five continued claims for unemployment benefits with EDD. In the next two months, she fraudulently stated she had earned no money during that time period despite continuing to receive money from UNHS. On June 2, 2010, Donnell resigned from her position at UNHS.

Donnell‘s embezzlement doubled her income but she failed to report a majority of the embezzled funds on her state personal income tax returns from 2005 to 2009.

This case was investigated by the Anaheim Police Department, California Franchise Tax Board, and EDD.

Deputy District Attorney Megan Wagner of the Major Fraud Unit is prosecuting this case.

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Allison Tussey

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