A former compliance officer with the National Labor Relations Board pleaded guilty Monday to federal charges of stealing more than $400,000 from the agency.
Hector Martinez, 53, of Pico Rivera, California, appeared in federal court in the District of Columbia on charges of wire fraud and aggravated identity theft.
Under federal sentencing guidelines, he faces a likely range of 33 to 41 months in prison for wire fraud and an additional mandatory two-year prison term for aggravated identity theft.
He agreed as part of his plea to pay about $434,000 in restitution to the NLRB.
Sentencing is set for November 6.
The National Labor Relations Board or NLRB is an independent federal agency. Among other things, it acts to prevent and remedy unfair labor practices committed by private sector employers and unions.
Martinez served as a compliance officer at the NLRB’s Region 21 office in downtown Los Angeles — a position of “public trust,” according to the DOJ.
He had access to a confidential law enforcement database.
He stole from the NLRB from December 2010 through October 2015, when he was placed on administrative leave. He was later fired.
His responsibilities included disbursing back pay to victims of discrimination (called “discriminatees” by the NLRB) in the Los Angeles area.
Martinez created fictitious discriminatees in real cases in which back pay was owed. He invented names for the discriminatees and paired the fabricated names with real Social Security numbers for other people. Then he created fictitious amounts of back pay and diverted this money to his own personal bank accounts.
Martinez stole the money due to legitimate discriminatees, who received nothing, or he skimmed money from legitimate discriminatees, reducing the amount paid to them.
He diverted back pay that nine employers paid to the NLRB and that should have gone to victims.
The NLRB has since “engaged in remedial efforts,” the DOJ said Monday.
The one-count criminal information in USA v. Hector “Sonny” Martinez is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog.
Just a note of caution. When we hear the words “compliance officer” we tend to think of this the way it is used in the private sector. In that context, a “compliance officer” who does something wrong is an eye-catching, “man bites dog” story. A compliance officer in this context is someone who helps ensure an organization and its people follow the law and act ethically. In government, however, the term is sometimes more tied to an agency’s policing and enforcement activities, and is not an internal compliance & ethics function.
So while there can certainly be real compliance & ethics officers who do wrong, based on the limited description available about this case it does not appear the perpetrator was what we would usually consider to be a “compliance officer.”
What surprises me most, if you can believe it, was the lack of controls, namely Segregation of Duties by the NLRB. Why would a Compliance Officer be given responsibility for disbursing back pay to victims of discrimination? Compliance Officers should not have or accept operational duties and must not be able to perform any ERP related transactions, save those reserved for most managers such as completing an expense reimbursement request, or requisitioning (ONLY) of supplies, services, and hiring, based on hierarchy of approval limits. Compliance and Internal Audit should Not have any operational or financial duties, as it's their job to provide assurance of effectiveness and integrity in these activities.
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