LAWFUEL – Law News, Law Jobs Network – Two former executives of an advertising placement agency have been sentenced to federal prison for stealing tens of millions of dollars from corporate clients such as Sears, Roebuck & Co. and Universal Studios, who paid their firm to place ads with broadcast media, including ABC, NBC and Warner Brothers.
Thomas Edward Rubin, the former chairman and CEO of Focus Media, Inc., a media placement agency once located in Santa Monica, was sentenced late Wednesday to 5½ years in prison. Rubin, 58, of Malibu, was convicted at trial earlier this year of 25 felony counts, including conspiracy, mail fraud, wire fraud, bankruptcy fraud and money laundering.
Focus Media’s chief financial officer, Thomas Patrick Sullivan, was sentenced yesterday evening to 3½ years in prison. Sullivan, 65, of Westlake Village, was found guilty by the same jury that convicted Rubin of 27 felony counts.
Also yesterday, United States District Judge Gary A. Feess sentenced the third defendant in the case, attorney Geoffrey C. Mousseau, to 21 months in prison. Mousseau, 46, of Glendale, was found guilty at trial of conspiring with Rubin and Sullivan to commit bankruptcy fraud, concealing $500,000 in assets in a bankruptcy proceeding, perjury and other bankruptcy fraud charges.
During the 4½-hour sentencing hearing, Judge Feess said the actions of the defendants were “deliberate and calculated.” While Focus Media was a successful company, Rubin, whose salary of up to $1 million a year “wasn’t enough,” “killed the goose that laid the golden egg.” As the three defendants pursued extensive litigation in civil and bankruptcy court, according to Judge Feess, they “saw the legal process as a means to effectuate their criminal conduct, not to seek justice.”
Focus Media’s principal business was buying advertising time on television and radio stations for clients, including Sears and Universal. For more than a decade, Focus Media was a successful firm, but many of its clients had left the firm by 1999. In addition to the loss of its client base, Rubin had taken $16 million out of the company in the form of shareholder loans between 1996 and 1999.
During a one-year period that began in November 1999, Rubin and Sullivan conspired to defraud Focus Media’s remaining corporate clients – Sears and Universal – as well as the media outlets from which the firm ordered advertising. The fraud consisted of simply taking the money paid by its advertising clients to pay the media outlets and using it for their own private purposes. Rubin and Sullivan collected funds to pay for advertising for the last quarter of 1999, misappropriated that money and never paid the media outlets who ran the ads. Even after Sears and Universal obtained court orders prohibiting Rubin and Sullivan from misappropriating their funds, the defendants continued to do so, paying themselves, their lawyers and Focus Media employees.
During the course of the year-long scheme, Focus Media received more than $50 million from clients, but no more than $10 million was paid to media outlets. Approximately $12 million out of the missing $40 million was used to pay Rubin’s personal liabilities.
On October 6, 2000, Focus Media was forced into bankruptcy by three unpaid media outlets, including ABC and NBC, which were hoping to preserve whatever assets were left in the firm. A bankruptcy court judge appointed a trustee to manage Focus Media’s finances and preserve its assets, but Mousseau joined a conspiracy with Rubin and Sullivan to pay Mousseau, and other law firms, with Focus Media funds without the knowledge of the trustee. As part of the scheme, Mousseau funneled approximately $500,000 into his attorney-client trust fund to pay his legal fees and to fund payments to other lawyers.
Judge Feess said yesterday that he would order the defendants to pay restitution to victims. The judge scheduled a hearing for January 29 to determine a specific amount of restitution.
This case was investigated jointly by the United States Postal Inspection Service and IRS Criminal Investigation Division, which received assistance from the Federal Bureau of Investigation.
CONTACT: Assistant United States Attorney Ranee A. Katzenstein
Assistant United States Attorney Paul G. Stern