Feds: Amy Scarpelli exploited two key reporting requirements

Key points:

Between 2010 and Spring 2014, employees at the U.S. Bank branch Amy Scarpelli managed suspected something was wrong, as they found themselves requesting “unusually large amounts of currency,” according to an affidavit prepared by Special Agent Morgan Morgan of the U.S. Secret Service. But everything seemed legitimate, and there were no signs that anything illegal was going on at the Miamisburg bank.

However, as federal officials outlined in dual affidavits filed last week with the U.S. District Court in Dayton, employees had trouble keeping the appropriate level of cash in the bank because of illegal transactions. During that period, Scarpelli carried out an elaborate scheme in which she embezzled $5.2 million from the bank by exploiting key reporting requirements, officials said.

“They gambled extensively, traveled frequently and treated their large social network of friends that revolved around their house in West Carrollton and the campground, and lake house at Lake Waynoka, Ohio to drinking and dining and cruises,” Morgan’s 68-page affidavit says of Scarpelli and her friends. The friends — Melanie McCully, William Wax, Deanna Leis and her father Charles Leis — are mentioned in the affidavit, but none has been charged with a crime.

Scarpelli — now the bank branch’s ex-manager — allegedly embezzled the funds by creating fake loans against the dormant credit account of a business customer, a Miamisburg roofing materials supplier, Rooftek Roofing and Supply Inc. (RRSI). By November 2011, that customer’s account had become inactive, federal investigators said.

But that one account became Scarpelli’s platform for fake loans and fake repayments, engineering multiple withdrawals of relatively small cash bundles. She and her friends used the stolen funds to travel, going on annual cruises, investigators allege. But back in Ohio, their purchases included a $200,000 lake house and a $72,000 pole barn to house their “toys,” says the affidavit, which was made public Tuesday, five days after Scarpelli’s arrest on Oct. 2.

Those toys, according to the affidavit, included four campers, three boats (two pontoon boats and a ski-boat), six motorcycles, a full-size Nissan truck, a golf cart and a pair of “classic cars,” including late 1960s Chevrolet Camaros. The affidavit features photos of these vehicles, as well as homes, the barn and vacations — all from Scarpelli’s legitimate income from U.S. Bank of $61,000 to $69,000 a year since 2009, investigators say.

Scarpelli, 48, of West Carrollton, has not been indicted yet, and her attorney, Dennis Gump, has said she is not guilty of any crimes.

After a detention hearing in federal court last week, Scarpelli — wearing prison stripes and with hands and legs in restraints — returned to Butler County Jail in Hamilton. Federal prosecutors say her properties — purchased with what they say was stolen money — are subject to civil forfeiture actions.

Evading requirements

Scarpelli exploited two key reporting mandates: U.S. Bank’s requirement that loans of $50,000 or less required just her signature alone as branch manager. And the federal government’s requirement that currency transactions of more than $10,000 be reported.

The government relies on currency transaction reports to uncover potentially illegal moves, such as drug trafficking.

By creating a series of false entries into the bank’s computer system showing that RRSI had repaid false credit advances, Scarpelli made sure the roofing business never received a monthly statement, which would have triggered scrutiny.

One affidavit filed in federal court against Scarpelli identifies 12 crimes for which it says there is “probable cause to believe” have been committed.

There were always hints of trouble, according to the affidavits.

“After the embezzlement was discovered, bank employees told (Secret Service) Agent (Matthew) Schierloh that they finally understood why they always had so much trouble keeping the appropriate level of cash in the bank,” one affidavit said.

And the branch’s cash levels were higher when Scarpelli was on vacation, investigators said.

“It seems like the system failed on a number of different opportunities because of this woman,” said Julie Conroy, research director for Aite Group’s retail banking practice. Boston-based Aite is a research and advisory firm serving financial services businesses.

Most banks watch credit reports on employees on an annual basis, Conroy said. The idea is to monitor whether employees are experiencing financial distress or spending substantially more than they earn, she said.

In an unrelated investigation in Spring 2014, U.S. Bank found an “unusually high volume of cashier’s checks” being issued from Scarpelli’s branch, an affidavit said.

Looking more closely, the bank found that more than $5 million had been drawn off the credit line of a single customer — RRSI.

An ensuing audit found that a similar amount of money had never been repaid to the bank, investigators said.

One simple safeguard that might have added another layer of scrutiny, according to Conroy: Requiring a second manager’s signature even for loans less than $50,000.

“There were a number of places where she might have been tripped up and caught a little bit earlier,” she said.

Fake loans, fake repayments

As branch manager, Scarpelli could pay credit advances to customers of up to $50,000 with her signature alone. An advance exceeding $50,000 required two signatures, one from a branch manager and a second from a supervisor.

Scarpelli’s loan withdrawals were never more than $45,000, which allowed her one signature to suffice for authorization, investigators said.

Fake loans, meanwhile, were being “repaid” with fake repayments.

“U.S. Bank determined that Scarpelli was making a series of false entries into the bank’s computer system,” one affidavit says. “These false entries ultimately caused false credits to be entered on the general ledger.

“Albeit fraudulently, these false credits effectively reconciled corresponding debits that Scarpelli had caused through the loan in transit tickets,” the affidavit added.

Dana Ripley, a U.S. Bank spokesman, last week said the bank does not comment on open investigations.

Asked whether the bank was beefing up safeguards, he said: “Right now, our focus is on cooperating with local and federal law enforcement.”

Pressed on whether customers’ money is safe, Ripley said: “I can confirm that customer money is not involved. Their money is safe. This involves U.S. Bank’s money.”