Criminal Complaint

Criminal Complaint Reported in the State of Massachusetts - September 2021

Complaint 1 – Theft by False Pretenses

Complaint 2 – Fraudulent Misrepresentation and Fraud in the Inducement

Complaint 3 – Selling Stolen Property

Complaint 4 – Tax Fraud / Embezzlement from the IRS

Complaint 5 – Wire Fraud

Complaint 6 – Failure to Return Stolen Property – Board of Centro Group

Complaint 7 - Embezzlement

Complaint 8 – Aiding and Abetting a Crime 

Complaint 9 - Extortion - Juan Martinez

Complaint 10 – Failure to Return Stolen Property – Name Withheld

Joseph Markland, a resident of MA and ex-CEO of ProHCM Holdings, headquartered in Wrentham, MA, along with other investors in ProHCM, were the victims of theft, fraud, and a number of other criminal offenses listed in this document. The perpetrators were a group of Executives, Board Members, Investors, and other key employees who were responsible for running Centro Group, LLC, a Florida based payroll company. The main cause of complaint is that the listed defendants engaged in theft by using their client tax escrow monies, for purposes other than paying their client taxes. Much like a Ponzi Scheme, they collected client tax money that was supposed to be paid to the appropriate State and Federal tax authorities, and used it for other purposes, and then used the following quarters tax collections to pay prior quarters taxes. They also paid all the penalties and interest on the late taxes to hide the fact that money was misappropriated. In many cases funds from client A were used to pay the taxes of client B. The accumulated debt is estimated to be $4 million. 

While the money was stolen in Florida, the complaint is being filed in MA because of what happened after the theft. In 2017-18 the defendants proceeded to engage in the sale/merger of their company, Centro Group, to ProHCM, where there was the known theft of funds, with the intent to use the capital and assets of ProHCM to replace the stolen client tax funds. The Defendants not only openly sold a company where money was stolen, but also manipulated financial statements to hide the theft from ProHCM. ProHCM first became aware of the theft 4 months after the sale and proceeded to stop the ongoing Ponzi Scheme. The sale and fraud resulted in millions of dollars in lost equity to ProHCM and its investors, and personal harm to Joe Markland, the CEO and largest investor, as both companies were forced into bankruptcy as those who had their funds stolen demanded payment. Mr. Markland suspects that corporate tax filings were also more than likely misstated, resulting in tax fraud.

In this case we have 2 people who have already come forward admitting that these crimes were committed. Both parties claim to be pawns in the fraud. 

They are as follows:

Chris Green – CEO of Centro Group 

Mr. Green wrote a lengthy letter to all the stockholders of Centro Group in October 2018 essentially laying out the history of the theft. He states that this may have gone back to 2011. Mr. Green was also the main contact in the sale of Centro Group to ProHCM. Mr. Green’s letter is attached. 

Juan Martinez – CFO of Centro Group

Mr. Martinez wrote an email to himself acknowledging that the Executives and Owners of Centro Group were aware of the “hole” as he called it, in advance of the sale. He implicated several people. Mr. Martinez proceeded to take a severance even though he resigned just a week after the merger with the knowledge that there would be major problems because of the undisclosed financial situation. Mr. Martinez’s letter is attached. 

Another piece of evidence is a copy of the forensic audit conducted 4 months after the merger. The forensic audit indicates there was over $1.8 million in stolen funds going back to January 2017.

Much like a Ponzi Scheme, those who were on the bottom of the pyramid (those who had their money stolen), are getting their money paid back by leveraging the bankruptcy courts. The courts have attached the ProHCM assets to be paid to the creditors of the other company, Centro Group. For that reason, they have little interest in criminal prosecution. As their lawyers have said, it is hard to get money from people in prison. Those at the bottom of the Ponzi Scheme are getting paid back by those at the top, including Mr. Markland, and the other investors of ProHCM. The only remaining harmed parties are those affiliated with ProHCM and thus Mr. Markland is looking for the State of MA to take action on behalf of its citizens and business. While the theft took place in Florida, the Theft by False Pretenses and fraud took place in MA.

The following pages include an overview of the complaint and some of the supporting evidence.

The Law

Larceny by false pretenses is a crime under Massachusetts General Laws Chapter 266 Section 30. Unlike the other types of larceny, larceny by false pretense occurs when someone knowingly lies or makes false representations to someone in order to obtain someone else’s property. In order to obtain a conviction for larceny by false pretense the prosecution has to show:

· The defendant knowingly lied or made a false representation.

· The defendant lied hoping that the person he or she was lying to would believe the lie.

· The victim the defendant lied to actually believed the lie.

· The victim gave away his or her property because they believed the lie.

Overview of Complaint

Mr. Markland alleges that the Defendants engaged in the merger of Centro Group, LLC and ProHCM to gain access to the ProHCM assets to pay for stolen client tax funds. By attaching Centro Group to ProHCM through a merger, the Defendants gained access to the capital and assets of ProHCM to pay down the debt.

The Defendants, as identified in the attached Centro Group, LLC Operating Agreement (Exhibit D), were responsible for “all management powers over the business and affairs of the Company”. The Board shall also “have full, exclusive, and complete discretion, power and authority to manage, control, administer, operate the business and affairs of the Company, and to make all decisions affecting such business and affairs.”

The Defendants had accumulated significant debt through the improper use of client tax funds as indicated in the Statement of Facts.

ProHCM cash and assets were targeted to be used to pay down the CENTRO GROUP, LLC tax debt. Mr. Green used an estimated $800,000 of ProHCM cash to pay down the tax theft within 3 months of the merger. The assets of ProHCM (after a forced asset sale) are also being used through bankruptcy courts to pay down the theft of funds. This use of ProHCM cash and funds from the sale of ProHCM assets supports the claim of Theft by False Pretenses. 

Juan Martinez, the CFO of Centro Group and then ProHCM after the merger indicated in an email that he wrote to himself prior to the merger (Exhibit 1), that he knew ProHCM funds were going to be used to pay down Centro debt but did not act. As an Accountant, Mr. Martinez knew the use of these funds was wrong.

The Defendants initiated the sale through Mr. Markland and used fraud and deception to convince Mr. Markland to pursue the merger. The Defendants were responsible for the Sale as identified in their operating agreement (Exhibit 2) – “each Member entitled to vote pursuant to the provisions of this Agreement shall vote for, consent to and raise no objections against such Approved Sale, and take all actions in connection with the consummation of the Approved Sale as may be requested by the Board, including, but not limited to, becoming party to a purchase and sale agreement, merger and/or other agreements related to the Approved Sale.”  

Mr. McAlone and Mr. Green acquired a greater portion of ProHCM through the purchase of the stock of Don Rowe. Mr. Markland alleges that this act was intended to build trust of Mr. Markland, while gaining more control of the ProHCM assets. 

All the Defendants participated in the fraud in some way. The Board signed the merger agreement, Abdel Karim participated in the due diligence, and Juan Martinez, as CFO, concealed the theft for personal gain.

As noted above and in their Operating Agreement the Board was responsible for this action.

 The Law

Any claimant or representative of a claimant who knowingly and willfully makes a false statement or representation for the purpose of obtaining a benefit or payment under this chapter shall be guilty of a felony and on conviction thereof shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both. A misrepresentation is a false statement of a material fact made by one party which affects the other party's decision in agreeing to a contract.

Overview of the Complaint

Mr. Markland alleges that Defendants misrepresented the financial condition of Centro Group, LLC on numerous occasions for the purpose to induce Mr. Markland to engage in a merger to solve their client tax theft problem. Had they properly represented the financial condition, the merger and resulting damages would not have taken place.

The Defendants initiated the sale of an asset, Centro Group, LLC, where criminal acts existed. The use of client tax funds for anything other than what Centro was contracted to use them for is the criminal act. The initiation of a sale of stolen property is an independent act of fraud. 

The Defendants also misrepresented financial statements in their disclosure documents. The year-end 2017 Balance Sheet indicated there was little debt. Mr. Markland’s email to Chris Green just days before the merger indicated only $100,000 in debt.

Defendant Giraldo Leyva, through his lawyer, at the mediation in January 2019, continued to misrepresent the stolen funds as “Operating Debt”. The use of client tax funds is not operating debt as there is no legal document that would have enabled the use of the tax funds for anything other than pay taxes.

Mr. Markland alleges that if the debt were in fact “Operating Debt” and not Theft as indicated by the ProHCM attorneys, all the subsequent actions including the bankruptcy may not have been necessary. ProHCM could have continued the practice which may have provided the time to resolve the problems. The difference between Operating Debt and Theft are significant to this claim.

The Defendants, through their signatures on the merger agreement, made promises that were fraudulent.  

Paragraphs 80-85 were “false representations of material fact with knowledge of its falsity for the purpose of inducing Mr. Markland to act thereon, and Mr. Markland reasonably relied upon the representation as true and acted upon it to his damage”.  Taylor v. AM Chemistry Council, 576 F.3d 16,31 (1st Cir 2009), quoting Russell v Cooley Dickinson Hosp., Inc., 437 Mass. 443,458 (200)
 

Overview of the Complaint

Mr. Markland alleges that the Defendants sold an asset that was essentially stolen. The asset, Centro Group, was built with stolen funds and the assets represented in the sale were eventually claimed by their creditors.

· The Board of Directors had the responsibility to provide oversight to the operation of the Centro business and ensure that theft and fraud were not occurring.

· The Board of Directors had access to financial information at any time. 

· Mr. McAlone and Mr. Green, through the receipt of emails from their clients indicating client tax issues, should have taken action to understand the nature of these claims.

The defendants failed “to exercise reasonable care or competence in obtaining or communicating information” to Mr. Markland.  

The responsibility of the Board Members is described in the Centro Group Operating Agreement. 

The Law

Willful nonpayment of employment taxes is a felony under Sec. 7202, punishable by a fine of up to $10,000, imprisonment up to 5 years, or both. When an employer withholds money from its employees' paychecks and then does not pay it over to the Treasury, this act is considered embezzling money from the U.S. Treasury…. Under Sec. 7202, willful means a voluntary, intentional violation of a known legal duty. The IRS does not have to prove that the person had bad faith or a bad purpose. In addition, the financial circumstances of the person or the company he or she is acting for are not taken into account in determining whether the failure to pay the tax was willful.

Overview of the Complaint

Mr. Markland alleges that the Defendants committed tax fraud by not willfully paying for which they collected on behalf of employers. After the merger Mr. Green, as CEO of the combined entities, often came to MA for work as ProHCM was still operating in MA. He continued the “Ponzi Scheme” while operating out of MA. It is unlawful to knowingly collect client tax escrow funds and not pay the taxes.

As a separate issue Mr. Markland also alleges that the use of client tax funds without authorization should be recognized as revenue or a loan to the organization and not operating debt, which would have impacted the Centro tax filings. Mr. Leyva’s attorney during the mediation referred to the tax debt as “operating debt” which would lead one to believe the stolen money was not booked properly which would have resulted in a misstatement of income subjecting them to tax fraud.   

The Law

Wire fraud is a criminal act of fraud or an attempt to commit fraud with the aid of some form of electronic communication – such as a telephone or computer – and/or communication facility. It is the means of communication used in a fraud scheme that distinguishes wire fraud from mail fraud. Both crimes are covered in the United States under U.S. Code, Title 18.

Overview of the Complaint

All communications between the parties were conducted via phone and email. Mr. Markland had many conversations with Chris Green, Dan McAlone, and Juan Martinez. He also spoke to Giraldo Leyva and Abdel Karim on multiple occasions. As long trail of emails is included in this document. 

The Law

Receiving stolen property is with the specific intent or purposeful desire to deprive the victim of the property permanently, is required in some jurisdictions.

Overview of the Complaint

Mr. Markland alleges that the use of client tax funds for anything other than what the funds were intended is illegal. Mr. Markland was informed of this by the ProHCM Corporate attorneys. Mr. Markland also alleges that ProHCM funds from MA banks were stolen to pay back the Defendants tax debt. 

Mr. Markland alleges that all Defendants were aware of the Theft prior to the dispersion of ProHCM assets in January 2019 and had the opportunity to take action to prevent the additional harm. Mr. Green was part of the theft. Mr. McAlone was on the ProHCM Board and was notified in August of 2018 of the theft. Mr. Green sent the Board Members and Stockholders a letter in October 2018 informing them of the theft (Exhibit 3). They received the bankruptcy filing documents in October 2019. And Mr. Markland called Defendants Jeff Hicks and Mike Moran in the Fall of 2018.

The Defendants, with this knowledge, failed to act, and their inaction between the time they were informed of the theft and debt, and the sale of any asset, resulted in significant and irreversible damages to ProHCM and Mr. Markland. 

The Law

Embezzlement in Massachusetts is defined as a type of larceny involving taking property of another person or entity by a person who was entrusted to care for said property. 

Overview of the Claim

As referenced previously the Defendants, by misappropriating client tax funds, participated in embezzlement. This fact is well known in the bankruptcy documents.

Mr. Markland contends that ProHCM funds, from ProHCM banks in MA, were diverted to pay down the tax theft from Centro Group.

The Law

A charge of aiding and abetting has three requirements. First, someone else must have committed a crime. Second, the defendant must have assisted that person in the commission of the crime. Third, the defendant must have had knowledge of that person’s criminal intent or criminal plans. 

An accessory to a crime can have knowledge of criminal intent before, or after, the commission of the crime. An individual who is aware of the crime before it occurs and gives assistance in preparation to commit the crime is called an “accessory before the fact.”

One is liable as an accomplice to the crime of another if he or she gave assistance or encouragement or failed to perform a legal duty to prevent it with the intent thereby to promote or facilitate commission of the crime. 

Overview of the Complaint

Mr., Martinez participated in the crime as an accessory. In his own words in his April 19, 2018, email he says he knew there was a “hole” which he helped facilitate as the CFO of Centro Group. He knew it was wrong and proceeded to misappropriate funds and not report the crime.

Mr. Martinez also was party to the Theft by Fales Pretenses as he knew that the intent was to merge with ProHCM and access the ProHCM funds. He states he was, 

“asked to move client impounded cash in March and April of 2018 to the CENTRO (Simplepay) operating account. Total of transfers was $104,618.83 over two transfers made on 3/14/2018 for $47,620.08 and 4/4 for $56998.75. In both cases I was assured that the merger was close and that the cash would be made available to replace the money.”

In his own words he knew there was a large tax “hole” and also knew that there was an intent to use ProHCM funds to pay down this debt. 

He further states that he knew this was a criminal act in the following statement,

“I explained the various terrible outcomes if we do not very quickly take this issue seriously and correct it. Everything from this being a criminal act to the scandal that will befall shareholders.”

Mr. McAlone may also have aided and abetted a crime. As seen in the emails regarding client tax funds, Mr. McAlone was well aware that there were tax problems and even offered to pay for the problems. Mr. McAlone failed to report the crimes and also benefitted from ensuing theft and fraud. 

The Law

"Whoever, verbally or by a written or printed communication, maliciously threatens to accuse another of a crime or offence, or by a verbal or written or printed communication maliciously threatens an injury to the person or property of another…with intent thereby to extort money or any pecuniary advantage, or with intent to compel any person to do any act against his will, shall be punished by imprisonment in the state prison for not more than fifteen years, or in the house of correction for not more than two and one half years, or by a fine of not more than five thousand dollars, or both. "

 Mr. Markland alleges that Juan Martinez extorted money from the company by threatening to expose Chris Green and his activities related to the theft and fraud.

Defendant Martinez used his relationship with Mr. Markland to develop trust and entice Mr. Markland to execute on the merger.

Defendant Martinez demanded payments from Mr. Green.

Defendant Martinez accepted payments from the accounts of Centro and/or ProHCM.

The Defendants actions contributed to the losses by ProHCM for which Mr. Markland is being uniquely sued. 

The Law

Massachusetts General Laws Chapter 266 Section 60, makes it is a criminal offense to receive, to aid or to assist in the concealment of, or to buy, stolen property.

1. That the defendant bought, received, aided, or assisted in the concealment of stolen property (stolen “goods.”)

2. That the goods were in fact stolen.

3. That the defendant knew that the goods were stolen.

Furthermore, the defendant may be convicted of this offense if even at the time he or she received the stolen property, did not know that it was stolen, but subsequently learned that the property was stolen and still decided to keep it and deprive the owner of it. If the property value exceeds $1200, the defendant faced a term in a house of correction of not more than 2 ½ years or in state prison for not more than 5 years.

Overview of the Complaint

I alleged in the complaint that Mr. Green withdrew $100,000 from ProHCM banks and made a payment to an individual he owed money to. This was one of the events that disclosed the Ponzi Scheme. In an Exhibit provided it shows withdrawals by Chris Green of $100,000. Mr. Markland suspects that a payment was made to the individual he owed. Mr. Markland says he informed the individual he was in position of stolen funds and that individual had not returned those funds.