Criminal Justice News

Wednesday, September 05, 2012

Two ATM Company Executives Sentenced to Prison for Roles in Multi-Million-Dollar Bank Fraud Scheme

The United States Attorney for the District of Connecticut announced that two executives of a company that operated a network of automated teller machines were sentenced today by United States District Judge Janet Bond Arterton in New Haven for their roles in a multimillion dollar bank fraud scheme. Joseph Sarlo, 56, of Trumbull, Connecticut, and Lexington, South Carolina, was sentenced to 42 months of imprisonment, followed by four years of supervised release; and John DeMilo, 44, of Branford, was sentenced to 22 months of imprisonment, followed by four years of supervised release.

According to court documents and statements made in court, Sarlo was the chief executive officer and DeMilo was the general manager of Branford-based New England Cash Dispensing Systems Inc. (“NECDS”), which was in the business of operating a network of automated teller machines (ATMs). Beginning in approximately March 2000, NECDS entered into an agreement with Domestic Bank of Cranston, Rhode Island, whereby NECDS would supply ATM services in conjunction with Domestic Bank, the victim in this case. The ATMs in the network were stand-alone machines located in various commercial establishments, such as convenience stores and gas stations, and other locations throughout several northeastern states, including Connecticut. While all the ATMs in the NECDS network bore the logo of Domestic Bank, NECDS was responsible for contracting with merchants and placing the ATMs in their establishments and would perform maintenance on the ATMs. Ultimately, there were three funding sources for ATMs within the NECDS network: Domestic Bank provided the cash for specified ATMs in the network, NECDS supplied cash for other ATMs in the network, and certain merchants supplied cash for other ATMs. Over the course of time, the number of ATMs in the network that were funded by Domestic Bank increased, while the number of ATMs funded by NECDS decreased.

At Sarlo’s direction, NECDS personnel, including DeMilo, Mirza Baig, and Gary Vestuti, implemented a scheme to defraud Domestic Bank out cash that Domestic Bank supplied for use in NECDS’s ATM network. As part of the scheme, NECDS personnel ordered excess cash from Domestic Bank and used it to refill ATMs that would otherwise have been refilled with NECDS’s funds. The co-conspirators also engaged in a cover-up to prevent the bank from recognizing that money was missing by “floating” Domestic Bank’s money. Specifically, the co-conspirators would order extra money for an ATM that was funded by Domestic Bank knowing that the extra cash would be used to fill another ATM that previously had been shorted cash. This was done regularly over several years and resulted in Domestic Bank receiving false information through the periodic replenishment process indicating that its cash was appropriately accounted for.

Domestic Bank ultimately lost approximately $4.8 million in funds that it had supplied to NECDS. Baig has admitted that he took approximately $2 million of the misappropriated cash, which he used for his own personal enrichment. A portion of the stolen cash was used by NECDS to pay business expenses in order to continue as a going concern.

Sarlo, DeMilo, Baig, and Vestuti each pleaded guilty to one count of conspiracy to commit bank fraud. On August 24, 2012, Baig was sentenced to 51 months of imprisonment, and on September 13, 2011, Vestuti was sentenced to 27 months of imprisonment. Each of the four defendants has been ordered to pay restitution in the amount of $4,805,540. In addition, BAIG has been ordered to forfeit an interest in his house of up to $1.2 million, as well as two vehicles.

This matter was investigated by the Federal Bureau of Investigation and was prosecuted by Assistant United States Attorney Paul Murphy.

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