Ex-Accounting Manager Charged with Embezzling $36 Million from a Company Client Has Been Extradited from Costa Rica
LOS ANGELES – A former accounting manager who is facing 10 wire fraud counts for allegedly embezzling more than $36 million from his employer’s client and then using the bulk of the ill-gotten funds to pay off tens of millions of dollars of his credit card debt has been extradited to the United States from Costa Rica.
Paul McDaniel, 42, a.k.a. “Edward Martin Karuku,” who resided in the City of Orange before fleeing to Costa Rica in early 2017, arrived this afternoon in Los Angeles after extradition proceedings in Costa Rica. McDaniel is scheduled to be arraigned Friday afternoon in United States District Court.
From July 2009 until December 2016, McDaniel allegedly embezzled the funds from Hypermedia Systems, Inc., a media technology services firm based in downtown Los Angeles. McDaniel was initially an independent contractor for and then an employee of E-Times Corp., a downtown Los Angeles-based professional services firm providing accounting assistance to Hypermedia Systems. McDaniel was assigned to work at Hypermedia as an accounting manager. As part of his job, he would request payments to be made from a Hypermedia account to pay purported Hypermedia vendors.
According to the indictment filed in September 2017, during the time he was working with Hypermedia McDaniel formed a Nevada corporation with a name similar to one of Hypermedia’s vendors and then opened a bank account – under which he had complete control – in that entity’s name. He then allegedly used his authority as Hypermedia’s accounting manager to approve and direct payments totaling more than $36 million to this bank account. To justify the payments, McDaniel allegedly created false and fictitious invoices on the letterhead of actual Hypermedia vendors, falsely stating that particular goods had been provided to the company. The fraudulent payments were wired to the McDaniel-controlled bank account.
McDaniel used the funds to pay off $23 million in credit card bills and transferred another $8 million to his personal bank accounts, according to the indictment. Investigators believe he spent additionally millions of dollars on miscellaneous expenses.
McDaniel was arrested in Costa Rica in 2017 pursuant to a provisional arrest warrant filed by the United States. He was held in custody during extradition proceedings.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Each of the 10 counts of wire fraud charges in the indictment carries a statutory maximum penalty of 20 years in federal prison.
This case was investigated by the Federal Bureau of Investigation. The United States Attorney’s Office extends its appreciation to the Costa Rican authorities who assisted in apprehending the defendant, and the Department of Justice Office of International Affairs for assisting with the extradition as well as the United States Department of State Diplomatic Security Service and the United States Marshals Service for their assistance in this matter.
This case is being prosecuted by Assistant United States Attorney Poonam G. Kumar of the Major Frauds Section.