Bel Air Man Pleads Guilty to Leading $29 Million Kickback Scheme

From the U.S. Attorney’s Office in Baltimore:

Eugene Andrew DiNoto, age 51, of Bel Air, Maryland, pleaded guilty yesterday to conspiracy to commit wire fraud, engaging in an illegal monetary transaction, and filing a false tax return, in connection with a kickback scheme that defrauded his employer of more than $29 million.

The guilty plea was announced by United States Attorney for the District of Maryland Erek L. Barron; Special Agent in Charge Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; and Special Agent in Charge Darrell J. Waldon of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office.

According to his guilty plea, Eugene DiNoto was a longtime employee of Company 1, a family-owned global business headquartered in New York, but with manufacturing facilities in Belcamp and Abingdon, Maryland, both in Harford County. Beginning in 2012, DiNoto and another employee, Elliott Kleinman, began to use their management positions at Company 1 to execute a fraudulent billing scheme whereby they would get illegal kickbacks from various drum vendors doing business with Company 1, which used drums to store and transport its products. As the facility managers, DiNoto and Kleinman oversaw the purchasing and storing of drums for use at the Harford County manufacturing facilities. They also had authority to review drum invoices and authorize payments to the drum vendors.

Anthony P. Urcioli, Sr., is the owner and President of Tunnel, Barrel & Drum Co, Inc. (TBD), located in Carlstadt, New Jersey, and of another drum supply company called Hartford Fibre Drum, Inc. (Hartford), both of which did business with Company 1. After TBD became a drum supplier to Company 1, DiNoto and Kleinman entered into arrangement with Urcioli whereby TBD could continue selling drums to Company 1 if Urcioli agreed to fraudulently invoice Company 1 for more drums than TBD actually sold and delivered to the company. If Urcioli agreed to falsify its invoices in this way, DiNoto and Kleinman said that they and TBD could split the extra money Company 1 paid TBD for the made-up drum deliveries 50/50. DiNoto told Urcioli that he would split his share of the kickbacks with Elliot Kleinman 75/25. Urcioli agreed to participate in the false billing scheme.

From approximately January 2012 to January 31, 2020, DiNoto contacted Urcioli at least once a week to discuss the number and type of drums that he actually wanted delivered to Company 1’s Maryland facilities. During the same conversation, DiNoto told Urcioli how many additional drums to charge, but not deliver, to Company 1 from TBD, and later from Hartford, Urcioli’s other company. After Urcioli created the invoices that fraudulently billed Company 1 for both delivered and undelivered drums, DiNoto approved the invoices and sent them to Company 1’s headquarters to be paid.

Urcioli also created a handwritten purchase order ticket that summarized the breakdown of actual and bogus drum orders and how the kickback amounts were calculated. Urcioli would put a copy of the purchase order ticket in an envelope along with DiNoto’s and Kleinman’s share of the kickback amount payable via checks from TBD and Hartford, and then send the envelope to their personal residences in Harford County, Maryland.

Sometimes, the invoices were not written as DiNoto had instructed, and he would call Urcioli and tell him to send a corrected invoice of adjust the kickback amounts. Occasionally, DiNoto would correct an arithmetic mistake on Urcioli’s purchase order ticket, take a photograph of the changes he made to the ticket, and then email the corrected ticket back to Urcioli.

Urcioli wanted to pay the kickbacks to DiNoto and Kleinman by check so the payments would look like payments to drum wholesalers and be deductible as a cost of goods sold on TBD’s tax returns. DiNoto told Urcioli to make his kickback checks payable to a company linked to DiNoto, called “Sandpiper Enterprises.” Kleinman advised that he wanted his kickback checks payable to a company he formed called “EDK Management, LTD.” Urcioli agreed, and in addition to making the kickback checks drawn on TBD and Hartford accounts payable to those companies, Urcioli wrote the word “drums” on the checks to further the pretense of legitimate purchases.

DiNoto admitted that even though Sandpiper Enterprises was not engaged in any business, he maintained a commercial bank account for Sandpiper Enterprises at a local financial institution, where he deposited all the kickback checks he received. Before accessing the criminal proceeds, DiNoto routinely transferred all or part of the money into one of the personal bank accounts he maintained at the same bank. DiNoto would then withdraw the funds from his personal account or write a personal check against the balance.

Between January 2012 and January 31, 2020, Urcioli falsely invoiced Company 1 a total of $20,300,757. TBD and Hartford kept half that amount while the remaining funds were sent to DiNoto and Kleinman. DiNoto’s share of the kickbacks was approximately $7,071,106. Over the same eight-year period, DiNoto used other drum vendors besides TBD and Hartford to execute his scheme to defraud Company 1. On behalf of those other vendors, DiNoto submitted and approved invoices totaling approximately $9,197,181, resulting in a total loss to Company 1 of approximately $29,497,938.

For the period of 2017 through 2019, none of the more than $7 million in kickbacks DiNoto received for his role in the fraudulent billing scheme appeared as income on the tax returns DiNoto filed with the IRS, resulting in a loss to the U.S. government of approximately $1,374,694.

DiNoto faces a maximum sentence of 20 years in prison for conspiracy to commit wire fraud; a maximum of 10 years in federal prison for engaging in an illegal monetary transaction; and a maximum of five years in federal prison for filing a false tax return. U.S. District Judge Lydia Kay Griggsby scheduled sentencing for DiNoto on July 13, 2022 at 2:00 p.m.

Elliott Dennis Kleinman, age 68, of Bel Air, Maryland and Anthony P. Urcioli, Sr., age 78, of Park Ridge, New Jersey, previously pleaded guilty to their roles in the scheme and are awaiting sentencing.

United States Attorney Erek L. Barron commended the FBI and IRS-CI for their work in the investigation. Mr. Barron thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case.