According to their plea agreements, Robert Fulton Rood and Nikolaos M. Hepler agreed to scheme to defraud Vienna-based Southern Management Corporation’s (SMC’s) employee pension plan, Southern Management Corporation Retirement Trust (SMCRT).
Rood presented loan application packages to and subsequently executed purchased agreements with SMC’s loan committee. SMCRT used funds to invest in these loans to borrowers. The borrowers would use loaned funds to purchase real estate, finance construction and make monthly interest payments. The loans were generally for one year. At the end of the loan period, the loans were to be repaid with funds ultimately paid to SMCRT.
Court papers said Rood and Hepler concealed the re-routing of funds due to SMCRT into accounts maintained by Rood. The men also misrepresented that certain loans were active, even when they were failed to settle or were paid off early. Rood directed co-conspirators Hepler and Lloyd Mallory Jr., a certified public accountant to create a false report regarding loan files intended to mislead SMCRT about the true status of their investment. The government asserts that SMCRT suffered a loss of $9,574,853 as a result of the conspiracy.
Rood and Hepler were charged on December 13, 2011, in a 16-count indictment of conspiracy to commit wire fraud and theft from the plan. Rood faces a maximum penalty of 20 years and Hepler a maximum penalty of five years in prison.