LAWFUEL – Press Release Service – A federal jury in Los Angeles has convicted two former executives of an advertising placement agency on various fraud and money laundering charges 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 chairman and CEO of Focus Media, Inc., a media placement agency once located in Santa Monica, was found guilty yesterday afternoon of 25 felony counts, including conspiracy, mail fraud, wire fraud, bankruptcy fraud and money laundering. Rubin, a 58-year-old Malibu resident, faces a potential sentence of several hundred years in federal prison when he is sentenced on October 23.
The same jury that convicted Rubin also determined that Focus Media’s chief financial officer, Thomas Patrick Sullivan, was guilty of 27 counts that virtually overlapped those against Rubin. Sullivan, a 64-year-old Westlake Village resident, also faces a lengthy prison term when he is sentenced on October 23 by United States District Judge Gary A. Feess.
The third defendant in the case, attorney Geoffrey C. Mousseau, was found guilty of conspiracy, two counts of concealing a total of $500,000 in assets in a bankruptcy proceeding, one count of aiding and abetting the making of a false declaration in a bankruptcy proceeding, one count of perjury in a deposition in a bankruptcy proceeding, and one count of willfully withholding books and records in a bankruptcy proceeding. Mousseau, a 45-year-old resident of Glendale, California, is also scheduled to be sentenced by Judge Feess on October 23.
Focus Media’s principal business was buying advertising time on television and radio stations for clients, including Sears and Universal, which by the second half of 1999 were the firm’s two largest remaining clients. For more than a decade, Focus Media was a successful firm, but its fortunes changed in 1999, when it started losing most of its client base. Complicating the matter was the fact that Rubin had taken $16 million out of the company in the form of shareholder loans between 1996 and 1999.
During an approximately one-year period that started in November 1999, Rubin and Sullivan conspired to defraud Focus’ remaining corporate clients, Sears and Universal, as well as the media outlets from which it ordered advertising, by simply taking the money remitted 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 collected in excess of $45 million from clients, with no more than $10 million being paid to media outlets. A large portion of the missing funds – approximately $12 million – was used to pay Rubin’s tax liability after Focus Media forgave the millions of dollars in loans he had received over the preceding four years.
On October 6, 2000, Focus Media was forced into bankruptcy by three of the unpaid media outlets, including ABC and NBC, which were hoping to preserve whatever assets were left in the firm. A bankruptcy court judge soon after appointed an interim 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.
Rubin is due back in court at 9:30 a.m. tomorrow for a hearing to determine wheter he should be detained as a result of Monday’s convictions.
This case was investigated jointly by the United States Postal Inspection Service and IRS Criminal Investigation, which received assistance from the Federal Bureau of Investigation.
CONTACT: Assistant United States Attorney Paul G. Stern
Assistant United States Attorney Ranee A. Katzenstein