The Houston Chronicle reports that Anthony Chiofalo, who worked as general counsel for Tadano America Corporation (a Japanese manufacturer), was charged with theft for fraudulently billing over $9.2 million to his employer. According to prosecutors, Chiofalo got Tadano America to pay fictitious law firms for work that was never done. The fake law firms consisted of nothing more than some stationary, a phony spreadsheet, and a rented mail box. The bank account to which all of the checks were destined was allegedly exclusively controlled by Chiofalo.
Chiofalo joined Tadano America as general counsel in 2009 at a salary of $110,000. According to recently filed civil lawsuit, Chiofalo first tested out his fraudulent billing scheme in November 2010 when he got Tadano America to pay a $25,000 retainer to one of his fake laws firms. Thereafter, using phony invoices from several invented law firms, Chiofalo allegedly submitted a series of fraudulent bills, ranging from $20,000 to $1.3 million. Chiofalo not only fabricated law firms and lawsuits, but even went so far as to fabricate lawyers (with bios and resumes) who worked at the phony law firms.
Similarly, Chiofalo was building and decorating a dream home in the suburbs while the fraudulent billing was taking place. According to a civil lawsuit filed by Tadano America, Chiofalo allegedly used almost $2 million in company funds to furnish the home with artwork and collectibles. Tadano America is attempting to recover those items.
Chiofalo’s scheme was uncovered when Tadano America noticed that litigation in 2011 and 2012 was much more extensive and costly than it had ever been in the past. In May 2012, the company’s board of directors asked Chiofalo for an explanation. He submitted the phony invoices and spreadsheets detailing the legal services rendered and the billing hours incurred. This triggered an internal investigation, which uncovered the scheme. Tadano America subsequently notified the district attorney’s office of the scheme, leading to criminal charges being filed.