Former CEO Transferred Company Money to Girlfriend to Pay for Personal Luxuries
March 31, 2010 - MARK E. PHILLIPS, 35, of Seattle, Washington, was arrested this afternoon on a criminal complaint charging him with two counts of wire fraud. PHILLIPS, the founder and former CEO of MOD Systems Incorporated, will make his initial appearance on the complaint today at 2:30 in front of Magistrate Judge James Donohue on the 12th floor of the U.S. Courthouse, 700 Stewart Street, Seattle, Washington.
According to the criminal complaint, PHILLIPS is a co-founder of MOD and served as a director and chief executive officer of MOD from its founding in 2005, until March 27, 2009. MOD is a start-up technology company engaged in the business of developing music and video downloading technology for retail kiosks. The company notified federal investigators of suspected embezzlement of corporate funds by PHILLIPS on March 16, 2010, which caused federal investigators to examine a series of wire transfers made out of the company’s account. Records indicate that PHILLIPS caused company money to be transferred to a bank account controlled by his then-girlfriend. The money was supposed to be used to pay for services provided by the woman’s company, but she never invoiced the company for any services or kept any of the money transferred into her account. Instead, the money was controlled by PHILLIPS, and he directed her to pay for luxuries for himself including an expensive watch and a personal investment in another start-up company. The company’s own review concluded that PHILLIPS had used more than $500,000 in company funds for his personal expenses and luxuries.
Wire fraud is punishable by up to 20 years in prison and a $250,000 fine.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
The case is being investigated by the FBI.
The case is being prosecuted by Assistant United States Attorneys Aravind Swaminathan and Matthew Diggs.