Kanas City Business Owner Pays $78,000 To Nixa In Fraud Scheme
SPRINGFIELD, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Kansas City, Mo., business owner has paid $78,810 in restitution to the city of Nixa, Mo., as part of a pretrial diversion agreement.
Gary N. Cohn of Kansas City was the subject of a federal investigation for his role in a mail fraud conspiracy. Cohn operates GNC, a Kansas City business that distributes a variety of products to municipalities and other customers. Cohn was identified during a federal criminal investigation that resulted in the indictment and conviction of former Nixa city employees Larry Covington and David Griggs. Covington and Griggs were involved in a scheme to defraud the city of Nixa of more than $756,000 from October 2004 to February 2009.
Covington and Griggs each pleaded guilty to conspiracy to commit mail fraud, conspiracy to commit money laundering, theft from an organization receiving federal funds; Covington also pleaded guilty to one count of mail fraud. Covington was sentenced on Nov. 9, 2010, to nine years in federal prison without parole. Griggs was sentenced on July 26, 2010, to two years and eight months in federal prison without parole.
Cohn maintained a business relationship with the city of Nixa through Covington, who was the city’s street superintendent. Cohn billed the city of Nixa, by mail, for goods that were delivered to Covington for his personal use and for products that were not delivered or were not what was represented.
Under the terms of his pretrial diversion agreement, which was signed on Sept. 30, 2013, the prosecution of the offense was deferred for 18 months while Cohn is placed under supervision and required to pay $78,810 in restitution. Cohn paid that restitution on Monday, Oct. 21, 2013.
Cohn also agreed that he would not conduct any business with any municipality, school district, or other public entity in the southern and southwestern portion of the Western District of Missouri during the 18-month period of supervision.
According to a statement of agreed facts that was signed by Cohn, Covington routinely ordered products from Cohn and GNC at the same time he made fraudulent purchases amounting to approximately $750,000 through dummy companies. Nixa public works department employees reported that specific products ordered from Cohn and GNC were never delivered and could not be located in inventory at any city facility. In fact, the Nixa public works department did not have adequate space to store the quantity of products billed by GNC.
According to Nixa public works department employees, GNC sometimes supplied products that were significantly more expensive than similar products. Numerous products purchased from GNC demonstrated grossly exaggerated prices, one of which was more than 1,339% higher than the suggested retail value of the product.
Cohn admitted that he paid $3,100 to establish an account for Covington at the Show-Me Birds Hunting Resort located in Baxter Springs, Kan. Covington used this account to pay for hunting trips. In a statement to the owner of the hunting resort, Cohn said that he was making the payments in order to "take care of” Covington so that he would continue to buy products from him.
If Cohn violates the conditions of the pretrial diversion agreement, he could be prosecuted for the alleged criminal conduct. If Cohn completes the diversion program and fulfills all the terms and conditions of the agreement, no prosecution will be instituted and the matter will be closed.
The criminal case involving Covington and Griggs was prosecuted by Supervisory Assistant U.S. Attorney Michael S. Oliver. It was investigated by the Nixa, Mo., Police Department, the FBI and IRS-Criminal Investigation.