A federal jury returned guilty verdicts this afternoon against Judith Paixao and Kevin Lombard, a husband and wife who embezzled federal funds that were intended to provide job training, benefits and equipment for injured Marines returning from Iraq and Afghanistan.
Instead, the jury found, the couple used some of the funds to pay for a variety of personal expenses, including a vacation in Bermuda, cell phone bills for their family members, and the costs of a New Year’s Day sailing trip around San Diego Bay.
“Any fraud against our federal agencies is a serious matter,” said U.S. Attorney Laura Duffy. “But the fraud committed by these defendants -who used money set aside to help wounded veterans and spent it on themselves - is particularly offensive. These defendants capitalized on the misfortune of wounded marines in their time of vulnerability and took advantage of the VA’s commitment to serving wounded veterans to defraud the VA and enrich themselves.”
“Today, the jury’s guilty verdicts of Kevin Lombard and Judith Paixao send a clear message that fraud against our veterans will not be tolerated. These veterans endured many sacrifices to protect our country from harm. IRS-Criminal Investigation is committed to working with our partners to protect America’s veterans from tax evaders and fraudsters.”
From 2007-2009, Paixao and Lombard were directors of the Wounded Marine Careers Foundation (“the Foundation”), a tax-exempt entity that trained injured veterans for careers in the film industry. Evidence presented at trial showed that the defendants conspired to defraud the Department of Veterans Affairs (“VA”) and submitted false claims to the VA to get funds for training and equipment they never provided. In addition, the defendants were convicted on several felony counts related to embezzling funds from the Foundation. Finally, Defendant Paixao was convicted on one count of mail fraud for her role in a scheme to defraud another charity out of scholarship funds.
Evidence presented at trial showed that the defendants made numerous false and misleading statements to the VA in order to obtain funds for training and equipment, and then did not provide the training or equipment to the veterans. Although the defendants claimed to have donated over $200,000 to start the Foundation, they ended up taking over $400,000 from the Foundation’s accounts over the course of two years.
Rather than paying the Foundation’s creditors (some of whom were board members), the defendants transferred funds to their own personal credit cards and bank accounts. Although some of this money went to repay expenses they had fronted to the Foundation, the defendants ended up taking over $100,000 for themselves. The defendants then used these funds to pay for a variety of personal expenses, including a vacation in Bermuda, cell phone bills for their family members, and the costs of a New Year’s Day sailing trip around San Diego Bay.
The defendants routinely commingled the finances of the Foundation with their personal finances, thereby obstructing the ability of the Internal Revenue Service to monitor the Foundation’s tax-exempt status and determine the defendants’ personal income tax liability.
Among the witnesses who testified at trial were three of the injured veterans who used their vocational rehabilitation benefits to participate in the first training class: Gunnery Sergeant Nick Popaditch and Lance Corporal Joshua Frey. Lance Corporal Frey, who had previously been quoted in a favorable New York Times article, testified at trial that after the article was published the defendants did not give him all the equipment he was promised, and failed to provide him with certain training and job placement.
Evidence at trial also showed that Defendant Paixao defrauded the Bob Woodruff Foundation in connection with a restricted grant of almost $100,000 by concealing the fact that one of the intended recipients – a Marine who had been injured in Fallujah – had left the program. Instead of notifying the Bob Woodruff Foundation and asking for a reallocation of the funds, Ms. Paixao took the grant money and used it for other purposes.
Both defendants remain on bond and were ordered to return to court on October 19, 2015 for a sentencing hearing.