Schuette secures conviction of former CEO, bookkeeper

LANSING - Michigan Attorney General Bill Schuette announced Jerry Stage, 67, of New Hudson, and George Bauer, 55, of Commerce Township pleaded guilty as charged to embezzling for decades from a Southeast Michigan non-profit.  

 
Stage pleaded guilty as charged before the Honorable David Groner to one count each of Embezzlement Over $100,000 and Conspiracy to Embezzle over $100,000, both felonies punishable by up to 20 years in prison. Bauer pleaded guilty as charged before the Honorable Megan Brennan to one count of Conspiracy to Embezzle $50,000 to $100,000, a 15-year felony. Both defendants together must repay $2.6 million per a joint restitution order. 
 
Stage, former CEO of the Compensation Advisory Organization of Michigan (CAOM), embezzled approximately $2.6 million from the company during an eleven-year period, conspiring with CAOM bookkeeper, George Bauer, to cover up his tracks. The inquiry into allegations of embezzlement was initiated after then OFIR Commissioner, now current DIFS Director, Kevin Clinton referred the matter to the Michigan Attorney General's Office for an investigation. 
 
"No company should have to operate under the fear its top executives are using corporate funds for personal financial gain," said Schuette. "There are consequences to breaking the law, and we will continue to aggressively weed out corruption wherever we find it." 
 
"Special thanks to our partners at the Attorney General's office for their prompt action in this matter," said DIFS Director Clinton.  "The staff at the Department of Insurance and Financial Services will continue to protect consumers and fight against fraud in the insurance industry." 
 
Stage was employed as CEO of CAOM from 1993 until his retirement in July 2012. CAOM is a non-profit corporation providing administrative and customer service support for the Michigan Workers' Compensation Placement Facility. It collects data from member insurers licensed to sell workers' compensation insurance in Michigan and is not associated with state government. 
 
As CEO, Stage had the authority to issue checks, but company policy required two signatures on any check over $1,000. To evade that requirement, Stage wrote checks to himself for $995 over a 14 year period, totaling approximately $1 million. Stage was also issued a company credit card to pay for business-related incidentals that he used for personal expenses. 
 
Following Stage's 2012 retirement, CAOM undertook a review of expenditures to assess the company's financial health. Upon the discovery of a number of financial reporting irregularities, the company consequently retained Plante Moran to conduct an official audit. Plante Moran discovered Stage had embezzled approximately $2.6 million. Stage paid Bauer to help him cut checks to himself, paying Bauer for his silence. Plante Moran alerted OFIR with their concerns of embezzlement and OFIR referred the case to the Department of Attorney General for further investigation. Attorney General Investigators confirmed Plante Moran's findings. 
 
Stage submitted false or inflated expense reports for events including: week-long family vacations at Disney World, tuition, wedding expenses, pet care and family dinners. By using this scheme, Stage embezzled approximately $1.4 million. This conduct was not discovered during annual audits because as CEO, Stage did not have to submit documentation of his expenses, as other employees were required to do. The false expense reports were submitted to cover the amount of funds Stage was siphoning from the company. 
 
The rest of the embezzled funds came from Stage inflating his own pay raises and bonuses, totaling to approximately $200,000. 
 
Stage's sentencing is set for September 10, 2013 at Wayne County's Third Circuit Court. Bauer's sentencing will be on June 26, 2013 before Wayne County's Third Circuit Court.

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