A former CFO who stole $ 700,000 from the Rapid City Rush was sentenced Monday to three years in federal prison in a three-hour court hearing filled with revelations about the hockey team’s finances.
Jennifer Durham has committed “hundreds of criminal acts over a nine-year period,” prosecutor Benjamin Patterson told Federal Court in Rapid City. “She was hurting an already struggling team.”
Durham is guilty but committed his crimes against the background of the company’s “culture of corruption”, defense attorney John Murphy said. She has become a “scapegoat” for all of the Rush’s financial woes.
Durham, 42, was sentenced by Judge Jefferey Viken after pleading guilty to tax evasion and two counts of wire fraud.
Viken sentenced Durham to 37 months followed by three years on probation. He also ordered him to pay nearly $ 1 million in restitution: $ 700,000 to the Rush and $ 186,277 to the IRS.
Viken said Durham could visit the facility selected for her by the Bureau of Prison on January 19. He said he ordered the postponement in the hope that there would be a decrease in coronavirus cases or a vaccine as doctors in Durham say she is at serious risk of contracting and dying from the virus.
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Durham has “overwhelming medical issues,” including two kidney transplants that require multiple medications to prevent organ rejection, Murphy said. He highlighted the high rate of coronavirus cases in some federal prisons, including FMC Carswell, the main medical prison for women. 521 of its 1,285 inmates contracted the virus. Six, including a woman from South Dakota, have died.
Durham was hired as the Rush’s CFO in 2008, started flying in February 2010, and was fired in June 2019 after the team’s new owner, Spire Hockey, brought in his own CFO, brought in his own CFO. said IRS Special Agent Brian Pickens.
She embezzled the money through multiple methods and underreported her income by $ 688,867 between 2010 and 2018, according to the factual document she signed.
The Durham investigation began in October 2019 when Speyer discovered “inconsistencies and irregularities in certain accounts,” Rush chairman Todd Mackin told the Journal at the time.
In addition to focusing on Durham’s actions, the hearing uncovered new facts and accusations regarding Rush’s financial practices and management under Scott Mueller, the former principal owner.
The Rush gave under-table bonuses to players from 2010 to 2013, Pickens said. These bonuses broke league rules and put players in criminal danger. But suing Rush’s management or the owners involved in these payments is not possible due to the statute of limitations.
Mueller said the property was not involved in these payments.
The Rush did a poor job of managing cash and had “non-existent” internal controls to spot financial problems, Pickens said. He had not carried out an audit since 2010 and a full audit would have detected the embezzlement of Durham funds.
There was no audit because “I trusted you,” Mueller said in Durham.
Pickens also said a payment of $ 174,547 that the Rapid City government made to the Rush in January 2019 was transferred to Mueller. Patterson said Mueller then returned all of the money to the Rush.
The Rush gave the money to Mueller because he had used a significant amount of his own money to keep the team afloat, Pickens said. Mueller gave the team $ 660,000 between 2017 and 2018 without being reimbursed, Patterson said.
The agreement between the city and the Rush did not specify what the Rush could use the money for, Pickens said. Pickens said Mueller said he would have to shut down or relocate the team without City support.
As the Rush struggled, it paid executives large salaries while Mueller had other profitable businesses and properties, Murphy said. Mueller also benefited from tax write-offs by owning the Rush.
The Rush had made late payments to their players due to insufficient funds, said Emma Setzer, chief financial officer of Speyer. She said the company had $ 2 million in the hole when it took over in January 2019.
Mackin said Spire created safeguards to prevent future mismanagement.
Murphy asked for a probation sentence, citing Durham’s health issues, lack of criminal history and cooperation with the investigation.
He said Setzer easily discovered the Durham scheme because it was straightforward – she had no offshore accounts, fake identities or businesses to hide the money.
Durham stole a lot of money, but it was a “tiny fraction” of Rush’s $ 3 million annual budget, Murphy said. The company was “already losing money” from low ticket sales and the loss of sponsors, so it is “just not the case” that Durham caused its downfall.
“I know what I did was wrong,” Durham said, adding that she had not only broken the law but had broken the hearts of people who trusted her.
Her friends and family did not speak during the hearing, but wrote letters about her character and being a wonderful mother to her three children, Viken said.
Patterson asked for a sentence of 46 months, or 3.8 years.
He agreed that Durham wasn’t to blame for all of Rush’s financial woes, but she was a “huge part” of it. She stole more and more each year until she stole $ 130,000 a year.
Durham not only stole the business side of Rush, but also his charitable foundation, Patterson said. The foundation – which donated for Durham’s medical concerns – may have to close due to a lack of funds, Viken said in a letter.
Durham was only sorry because she got caught and blamed others in her letter to Viken, Patterson said.
Viken said Durham wrote that she stole money to pay for her medical issues and because she was upset about pay gaps and other forms of sexism at the company. But Durham only used a “small fraction” of the medically stolen money, Patterson said. Most have been traveling, dining, entertainment, Walmart and Best Buy, Pickens testified.
Patterson said that although Durham has health issues, she is healthy enough to work and travel, which means she is healthy enough to go to jail. Sentencing her to probation would send the message that you can avoid jail if you are sick.
Patterson said he was okay with letting Durham surrender so she didn’t have to wait in Pennington County Jail, which has fewer resources than a medical jail.
He also said the Rush had to pay Durham’s unemployment money after being fired from her new job due to the pandemic.
Mackin said Durham’s actions were having a negative impact on how the entire Rapid City community views the Rush.
“It hurts,” Mueller said, adding that he would pray for Durham and his family.
Viken said he agreed that sending people to jail shouldn’t turn into a death sentence due to the pandemic, but the virus cannot be a “no-get-out card” . He said he would recommend the Bureau of Prisons to send Durham to a medical prison.
Durham’s sentence is similar to others who had no criminal history before stealing large sums of money for many years, Viken said. Sentencing her to probation would send the message that the federal government does not take financial crimes seriously.
– Contact Arielle Zionts at email@example.com.