The founder of DECA Financial Services, once a fast-growing collection agency in Fishers, Ind., is facing federal charges in a $5 million fraud case.
The U.S. Attorney in the Southern District of Indiana announced the arrest of Todd J. Wolfe, 52, and the filing of bank fraud, wire fraud and bankruptcy fraud charges over actions he took in financing his company.
Federal investigators say he filed false financial reports that inflated his company's assets and allowed him to obtain sizable credit lines, which officials say he used for personal expenses. The governments investigation was conducted by the FBI and the U.S. Bankruptcy Trustee.
The phony reports, which were filed with bank BMO Harris, allowed for Wolfe's credit line to be raised from $1 million to $7.5 million over a 30-month period, according to a news release from the U.S attorney's office. Wolfe is accused of using the money to pay for his house, car, personal credit card accounts and lake house.
Wolfe operated DECA in Fishers, located just north of Indianapolis, since 2009. The company was a full service collections company, which at one time employed nearly 75 people and was mostly engaged in collecting delinquent loans for health care, student loans and financial services.
The arrest comes about nine months after creditors, to whom DECA owes more than $17 million, forced the company into involuntary bankruptcy.
A bankruptcy judge in April approved a motion to wind down operations at DECA and liquidate the firm to repay creditors. Court filings by an attorney for Wolfe and his company indicated that Wolfe's living trust is worth more than $14 million, which can be used to repay creditors. But according to the U.S. attorney's office, the value is only at $52,000.
Just four years old, DECA previously was celebrated in Inc. magazine as one of the nation's fastest-growing companies. But over the past two years, problems began to mount. Wolfe said the company was mismanaged by the people he left in charge while he was undergoing stomach cancer treatment.
Wolfe returned to work full time last December but DECAs financial problems by then had hit a critical point as main lender, BMO Harris, declared DECA in default and froze its accounts.
Among other problems DECA had been facing:
A fraud allegation against Wolfe, who is an 80% owner of DECA. In court testimony earlier this year, a former executive accused Wolfe of diverting $2.1 million in company money last year into his personal account with no explanation.
Misstated earnings. Just days before BMO Harris began a special audit of DECAs books, DECA restated its profit-and-loss statement for 11 months of 2013 to change a profit of $9 million into a loss of $5.8 million, according to a judges findings.
Reported misuse of client money. DECA general counsel Dustin Stohler admitted to a judge in February that DECA used $557,000 in returned money from its frozen bank accounts to meet its own payroll, rather than returning most of the money, which came largely from collections, to customers.
A partner of the accounting firm Sikich LLC, which audited DECAs books, testified that DECAs 2011 and 2012 financial statements given to BMO Harris bore Sikichs name but werent actually prepared by the Naperville, Ill., firm.