Three former leaders of Sommet Group, whose name once adorned Nashville's downtown arena, were indicted Thursday in federal court on 15 criminal counts, including wire fraud, conspiracy, theft from an ERISA plan, and money laundering charges.
Sommet co-founder and CEO Brian Whitfield, his wife and Vice President of Payroll Marsha Whitfield, and co-founder D. Edwin Todd are being asked to forfeit at least $20 million worth of property. That amount, according to the indictment, “represents proceeds of the offenses described above.”
The conspiracy charges stems from allegations that Sommet officials defrauded their clients, employees and the Internal Revenue Service. According to the indictment, Sommet hired “tax specialists” to handle filings for its clients and the company. But the Whitfields then allegedly both prepared and submitted the final filings illegally.
Among the allegations in the indictment:
• The Whitfields committed wire fraud, including stealing from an employee pension plan, to pay $254,535 toward their arena naming-rights obligations. They also rerouted more than $400,000 for a houseboat and the construction of a pool and other renovations at their home.
• The Whitfields failed to report the full amount of gross wages Sommet paid on behalf of its clients. For instance, from the fourth quarter of 2008 to the first three months of 2010, Sommet paid $83 million in wages to Sommet employees and clients, but reported paying only $4 million.
• Over that same period of time, Sommet remitted $1.23 million in taxes but they had a tax liability of more than $20 million.
• Marsha Whitfield allegedly “took steps to conceal the fraud” by assuring payroll department employees that she and her husband “would take care of it.”
Brian Whitfield deflected inquiries by government agencies and clients regarding late payments and nonpayments of taxes.
In addition to the tax conspiracy, the Whitfields also are being accused of misconduct related to the health care and 401(k) plans that were used to lure clients. Employee and employer retirement plan contributions totaling $44,000 were allegdly used for Sommet's payroll and for the Whitfields' personal benefit. Brian Whitfield also stands accused of intentionally offering below-market health insurance rates that couldn't cover employees' claims. Sommet still owes $3.8 million in outstanding medical and prescription drug claims from insurance companies Health First and HCH.
The Whitfields and Sommet shot to local prominence in 2007 — first by sponsoring the Predators’ playoff run, then by signing a naming-rights deal for what had been the Gaylord Entertainment Center. But trouble surfaced two years later: In November 2009, the Predators sued Sommet and the Whitfields, saying they were behind on payments to the arena.
Seven months after that suit was filed — the dispute was settled in early 2010 — federal agents raided Sommet’s offices as part of their investigation into a raft of dodgy dealings.
Later that year, bankruptcy trustee Sam Crocker sought to have both Sommet and the Whitfields declared bankrupt and said the business became their “alter egos” and served as “instrumentalities to commit a massive fraud against Sommet’s clients, customers and creditors.”
Before Thursday’s indictment, the last major piece of action in this case was a raid on the Whitfields’ home by U.S. Marshals in February of last year.
POSTDATA: WARRANTY DEEDS