Former Union auctioneer Stuart B. Millner pleaded guilty Tuesday, Feb. 7, to federal charges in connection with an alleged “Ponzi-like scheme” to defraud clients and financial institutions out of millions of dollars over five years.
Millner, 77, pleaded guilty to two counts of bank fraud, one count of mail fraud affecting a financial institution and one count of mail fraud. He faces up to five years in prison.
Millner appeared in front of U.S. District Judge Catherine D. Perry. Sentencing has been set for June 2017.
Millner operated Stuart B. Millner & Associates (SBMA), located at 102 E. Springfield Ave., Union.
According to the U.S. Attorney’s Office in the Eastern District of Missouri, SBMA was engaged in the business of appraising, marketing, liquidating and auctioning assets from industrial and commercial facilities. SBMA entered into contracts with several clients to conduct auctions to sell their property and collect the proceeds from the sales, for which SBMA would receive a commission.
In the plea agreement, Millner admitted that he caused SBMA to misdirect proceeds from the sales of one client’s property to pay debts owed to previous clients, contrary to SBMA’s representations and agreements.
The amount of loss attributable to Millner’s conduct will be determined by the court at sentencing, but the plea agreement indicates that the government will argue that the losses exceeded $3 million.
In March 2016, Millner was indicted by a federal grand jury on three felony counts of bank fraud, one felony count of mail fraud affecting a financial institution, four felony counts of wire fraud and two felony counts of mail fraud, according to the U.S. Attorney’s Office in the Eastern District of Missouri.
The indictment charges that this “Ponzi-like” activity violated several federal laws, including statutes criminalizing mail fraud and wire fraud.
The indictment alleges that SBMA would pay clients within 31 days of the sale of property but instead Millner used those funds to pay previous clients or to pay off operational debt.
Millner allegedly instructed employees to “use other people’s money” to pay debts and other clients.
In reports to clients, Millner allegedly falsified the amount property was sold for and the date it was sold.
According to the indictment, Millner provided false information to financial institutions that overstated the value of Millner assets and omitted debt.
Millner allegedly falsified loan applications for $3 million in loans from both StanCorp. Mortgage Investors, LLC, on behalf of Garvin Industrial Associates, Evansville, Ind.; and Ridgestone Bank, on behalf of Columbus Business Center (CBC), Columbus, Miss.
By falsifying information, Millner caused losses totaling more than $2,500,000 to Garvin and CBC.
Millner has property in four locations subject to forfeiture, including a home on Camp Mo-Val Road, Union. The indictment also lists nine bank accounts from U.S. Bank, United Bank of Union and Bank of Sullivan, as well as seven cars that are subject to forfeiture.
In August 2015, the FBI seized files and electronics from Millner’s offices. The Missourian later learned that the company’s bank accounts were frozen the day after the August raid, and that Millner retained legal counsel.
The subsequent investigation indicated that an employee of SBMA sent an email to Benteler Automotive, the buyer of a 600-ton stamping press, that reflected the equipment was sold for $600,000.
The sale included a buyer’s premium of $50,000, which is 8.33 percent of the sale, substantially less than 15 percent, or $90,000, the buyer’s premium stated under the contract with Benteler, according to the U.S. Attorney’s Office.
The buyer’s premium is a percentage additional charge on the winning auction bid that is charged by the auctioneer to cover administrative expenses.
According to the complaint, bank records show a receipt of $650,000 from the buyer to SBMA by wire transfer to the Bank of Sullivan. The account of the buyer where the wire transfer was initiated is located in Ohio, making the sales interstate commerce, which falls under federal jurisdiction.
Following the investigation into internal communications at SBMA, the FBI alleges that an employee of the company sent Millner an email Aug. 1, 2014, that stated, “Please note that the $650,000 has been wired into our account.”
An employee of Millner’s alleged that she was instructed by Millner to modify company records to indicate that the stamping press sold for “substantially less,” according to the complaint.
The investigation uncovered an email from an SBMA employee to a Benteler representative who stated the press sold for $517,500, which was $450,000 for the equipment and a $67,500 buyer’s premium equal to 15 percent of the alleged sale amount.
The email indicated that SBMA received $132,500 less than it had from the buyer of the press. The email was sent from Union to a Benteler representative in Michigan.