Lockport Union-Sun & Journal Online

January 16, 2014

Middleport woman pleads guilty to federal charges

By HOWARD BALABAN howard.balaban@lockportjournal.com
Lockport Union-Sun & Journal

Lockport Union-Sun & Journal — BUFFALO — A Middleport woman appeared in U.S. District Court Wednesday to enter into a plea deal regarding two federal fraud charges.

Linda Rakonczay, the former payroll coordinator at Medina Memorial Hospital pleaded guilty to the charges of both wire fraud and tax fraud, both felonies.

In the early part of 2013, Rakonczay had a suit filed against her claiming that more than $400,000 in payroll funds had been misappropriated during her time as an employee at what is now Orleans Community Health (OCH). At that time last year, Rakonczay denied the allegations.

It can now be confirmed that a federal investigation took place in the months that followed, and that investigation included the U.S. Attorney’s Office in Buffalo and the Federal Bureau of Investigation.

The guilty plea included language calling for Rakonczay to reimburse OCH and to pay the back taxes on the embezzled funds. Combined the amount is nearly $600,000.

Chief U.S. District Judge William M. Skretny presided over the case, which was heard at the Robert H. Jackson U.S. Courthouse. 

The plea agreement included a segment in which Rakonczay waived her right to an indictment by a jury by accepting the deal.

The facts of the case, as outlined in the deal, stated that Rakonczay worked for OCH from 1990 to 2012 and that between 2001 and 2012 she “knowingly and willfully prepared and submitted ACH batch reports to OCH’s bank, instructing the bank to electronically transfer money from their corporate bank account to her personal bank accounts. These electronic transfers into the defendant’s account were not authorized by OCH and were done without OCH’s knowledge or consent.”

Over that period of time, $499,563 was moved from one account to the other. According to the facts stated in the agreement, in order to cover up the money leaving OCH, Rakonczay “increased the amount expensed to OCH’s healthcare insurance account by the amount that she stole.” Furthermore, she did not pay herself during the months of the hospital’s annual audit.

The second charge Rakonczay pled guilty to — tax fraud — could only include the years 2007 to 2012 because of the statute of limitations in such cases. Based on the income from the embezzled hospital funds during that time ($375,000) Rakonczay also now owes the Internal Revenue Service $93,999 in back taxes.

As Skretny went over the plea with Rakonczay, her attorney Jon Louis Wilson and Assistant U.S. Attorney Trini E. Ross, also discussed some factors that will go into her sentencing. There are guidelines to follow, he said, and based on her criminal history those guidelines recommend a jail term of 30 to 37 months, a fine of $6,000 to $60,000 and a one to three year period of supervised release. He added that they are guidelines, and when sentencing happens the years and fines in question could be either higher or lower. Skretny did note, however, that he will look at all facts of the case to come up with a sentence that is “fair, just and reasonable…but not unnecessary.”

Sentencing is scheduled for May 5 at 9 a.m.

As for the restitution Rakonczay has been ordered to pay — totaling $593,563 — it will begin with forfeiture of assets, which include several vehicles and some financial accounts. They will be taken by U.S. Marshalls and go to a federal auction. The money garnered from the sale of the vehicles will go toward paying back OCH and the IRS.

After the proceedings, Wilson said several proposals were exchanged with the U.S. Attorney’s Office once it brought the charges.

The plea agreement that was ultimately signed on Wednesday is the final draft that came from several different versions the two parties traded with each other. Every time a new agreement was discussed, he conferred with Rakonczay. 

Wilson noted, “It’s an unfortunate predicament and we tried to get the best outcome for all parties.”

Ross, who is the chief of the Fraud and Corruption Section in the Western District of New York, Buffalo Office, said the U.S. Attorney’s Office took its time to conduct a full and thorough investigation to “fulfill our obligation” before filing any charges. 

“We developed the tax fraud case and sured up the wire fraud case,” she said, noting the FBI was helpful in the cause.

Ross noted that given the amount of money in question the time it took for the case to see a court room was relatively short.

“Most cases concerning a period of time this long and an amount this large normally take about two to two and a half years,” she said.