SPRINGFIELD, Mo. — A federal judge sentenced a former Aurora business owner to eight years in prison Friday in connection with the defrauding of client companies, a Missouri bank, a Native American tribe and other victims in schemes potentially involving more than $30 million.
U.S. District Judge Stephen R. Bough ordered Russell Grundy, 51, to serve the prison term without parole and to pay $14,847,451 in restitution to his victims at a sentencing hearing in federal court in Springfield.
Grundy, a former resident of Aurora most recently residing in Hilton Head, South Carolina, pleaded guilty Jan. 30 to two counts of wire fraud and single counts of making a false statement on a loan application and money laundering. Court documents alleged that Grundy, the owner of several companies purportedly offering advanced technology in software development and computer security, engaged in multiple fraudulent schemes potentially involving more than $30 million and resulting in actual losses to his clients of almost $15 million.
"This white-collar thief maintained his lavish lifestyle by stealing millions of dollars from his clients, partners and lenders to build expensive homes, buy luxurious cars and take numerous vacations," Tim Garrison, U.S. attorney for the Western District of Missouri, said in a news release. "This theft occurred not once or twice but repeatedly over several years through a series of fraud schemes. Even after being indicted, while free on bond awaiting trial, he brazenly continued to engage in criminal fraud."
Grundy was indicted by a federal grand jury following an investigation by the FBI, the Criminal Investigation division of the Internal Revenue Service and the offices of the inspector general for the Federal Deposit Insurance Corp. and Small Business Administration.
The defendant's businesses included the limited liability companies Innovative Objects, PILR Technology, Choice Technologies, Wyerless and Audio Input. He contracted with Land O' Lakes Inc. and its subsidiary, Nutra Blend, from January 2004 through September 2015 to provide them with the software to inventory, track and coordinate the shipping of their products. In doing so, he falsely informed Land O' Lakes and Nutra Blend that third-party software programs were built into the software he was providing and that some of the payments made to him were to cover third-party licensing fees.
The U.S. attorney's office in Springfield said in its news release that there were no third-party license fees and that Grundy used those payments "for personal or unrelated expenses." In total, the two companies paid more than $1.8 million in fraudulent license fees between 2012 and 2015, the U.S. attorney's office said.
Grundy defrauded Miami Nations Enterprise, a subsidiary of the Miami Nations Tribe, in negotiations to provide loans and to purchase a controlling interest in his technology-based companies.
The U.S. attorney's office said he provided Miami Nations Enterprise numerous fraudulent emails, invoices, award letters and other documents to support a false claim that Walmart had awarded him a $3.5 million contract to develop and provide information technology services. He used that false claim to obtain loans from Miami Nations Enterprise meant to cover costs associated with his software and hardware purchases. But he instead used the money for personal expenses, including the building of a new home in Charleston, South Carolina.
In 2014, Miami Nations Enterprise paid Grundy an additional $2 million to purchase a 70% interest in his companies before discovering that he and his company had not been awarded any such contract with Walmart and that the documents he used to support his claim were phony. By then, Miami Nations Enterprise had transferred more than $8 million to Grundy, the U.S. attorney's office said.
Grundy applied for three loans from United Missouri Bank in October 2014 by providing false information on a loan application and submitting "a change-in-terms agreement" that allowed him to refinance an existing loan. The total amount of the loans and change-in-terms agreement fraudulently obtained by him was more than $12 million, according to the U.S. attorney's office. Following the seizure and sale of land and warehouses built with the loans, the bank reported a resulting loss of $4,214,126.
The defrauding of the bank involved a false claim that Land O' Lakes had agreed to a 20-year lease for warehouse space Grundy wanted to build using the loans he obtained. He claimed he would receive $18 million in future income from the lease. In actuality, the two lease agreements he had with Land O' Lakes guaranteed him no more than $540,000 in income.
While out on bond following his indictment by a federal grand jury, Grundy committed two additional fraudulent acts, contracting with an individual for creation of a mobile app for which he was paid $13,320 upfront but never delivered. The U.S. attorney's office sought but was not granted revocation of his bond as a result of that alleged fraud, and a few months later, Grundy again made false claims on loan documents with Palmetto State Bank in South Carolina that could have resulted in losses to the bank of $75,000 had bank officials not detected the fraud, according to the U.S. attorney's office.