An organization hires a certified public accountant as its first line of defense against being sued or ripped off. Salvatore Armao and Karen Auer, respectively, the founder-managing partner and a principal officer of the Garden City (Nassau County), L.I.-based accounting firm Armao LLP, apparently forgot their mission. On June 1, the U.S. Justice Department announced that the pair had been charged in Manhattan federal court with aiding and abetting the embezzlement of over $100,000 from a benefit plan of an unspecified union. Each surrendered to authorities that morning. The actions follow an investigation by the U.S. Labor Department’s Office of Inspector General and Employee Benefits Security Administration, with assistance from the FBI and the Justice Department’s Labor-Management Racketeering Unit.
According to federal prosecutors, Salvatore Armao, 64, a resident of Queens, N.Y., and Karen Auer, 47, a resident of Bethpage, N.Y., had the wrong kind of loyalty to a client. From roughly 2010 through 2014, the pair allegedly covered for the president of an unnamed labor union who had used his role as a trustee of a welfare benefit plan to divert plan funds to personal uses that included spa treatments, a gym membership, a car, medical expenses, retail purchases, credit card payments and ATM withdrawals. All told, the thefts added up to more than $100,000.
During this period, Armao LLP served as accountant-auditor for the union and related benefit fund. To conceal the thefts, defendants Armao and Auer allegedly logged embezzled money as “loans” for the respective durations of about five years and one year. The pair also provided false information about the disappearance of the funds in forms filed with the Department of Labor. In an interview with DOL investigators, Armao admitted that he had been aware that the unnamed union president-trustee had used benefit plan assets to pay for unauthorized expenses. And during her interview with the DOL, Auer lied about a false statement that she and her partner filed with the department. Eventually, they would be charged with one count each of aiding and abetting embezzlement, making false statements, and conspiracy to make false statements. Additionally, Auer was charged with making false statements to a federal agent. U.S. Attorney Geoffrey Berman summed up: “Accountants and auditors like Armao and Auer are supposed to serve as safeguards against labor fraud, not facilitate it.”