| Five members of a Jackson County family have been accused of cheating the government out of $9 million by illegally funneling proceeds from three family-run businesses into their own pockets and spending lavishly on race cars and show horses, say federal prosecutors.
The Charleston Gazette is reporting that a 33-page indictment unsealed this week, says defendants conspired to divert the proceeds from three Sandyville businesses - Carl E. Smith Inc. (CESI), Carl E. Smith Petroleum Inc. and Carl E. Smith Real Estate Inc. - by claiming funds spent on personal purchases as business expenses.
Smith family members have been accused of funneling millions of other dollars from their outfits.
The Smith company has connections to Calhoun, related to drilling construction.
The Gazette says Eddie Burl Smith, 69, and his son Edward Michael Smith, 47, were taken into custody by U.S. Marshals and appeared yesterday before U.S. Magistrate Judge Mary Stanley.
Also in the indictment are Eddie Smith's brother, Donald Paul Smith; Donald's wife, Judith E. Smith; and their daughter, Jaclyn E. Smith.
The indictment says Donald Smith and his nephew used the money to indulge their respective hobbies of show horse breeding and car racing, according to Assistant U.S. Attorney Booth Goodwin.
Listed in the indictment:
- $350,000 for a horse named "Look Who's in Command" on June 1, 1998
- $100,000 on a horse barn in Sandyville in July and August 1998
- $200,000 on a horse named "This Is It" on Sept. 1, 1999
- $40,000 on a horse named "Spirits High Market" in March and April 2001
- $110,000 on a horse named "Pineapple Willy" on Jan. 1, 2002
Edward Michael Smith's indictment includes:
- $29,997 for a 1998 Chevrolet Camaro SS on June 30, 1998
- $104,279 for a Kenworth semi truck used to transport race cars on March 25, 1999
- $168,000 for a race car transporter between August 1999 and February 2000
The defendants filed a series of false personal tax returns that failed to report diverted funds as income.
The indictment says Eddie and Edward Smith also embezzled about $100,000 earmarked for CESI health care premiums and $562,000 from CESI pension funds, apparently funds that would have gone to employees.
The Carl Smith companies at one time had more than 1,000 employees, filed for bankruptcy.
Eddie and Edward Smith are also charged with money laundering for allegedly fraudulently transferring oil wells from Carl E. Smith Petroleum to SWS, then writing a series of checks totaling roughly $71,000 to "S&S Racing" from the SWS account between March 2006 and January 2007, according to the Charleston Gazette.
The indictment seeks to seize more than $1 million in cash and a vacation home in Michigan that Eddie Smith allegedly failed to list as an asset after he filed for bankruptcy in July 2005, says the paper.
In 2003, Fayette Circuit Judge John W. Hatcher ruled that Eddie, Edward and Donald Smith illegally depleted $21 million of assets of Carl E. Smith Real Estate Inc.
According to Hatcher's order, Eddie and Donald Smith admitted that they paid off inspectors from Texas-based Conoco Inc. (now ConocoPhillips), an oil and gas company that awarded Carl E. Smith Real Estate Inc. a $27 million contract to lay pipe in West Virginia and Virginia.
That report says in exchange for $1.05 million and several luxury vehicles, Conoco inspectors apparently agreed to add extra work to the contract.
"Obfuscation, greed, avarice [and] mean-spiritedness have collectively been an overpowering obstacle to the achievement of justice in this case," Hatcher commented at the time. "What a pitiful display of conduct for a family of privilege."
See Charleston Gazette for more details www.wvgazette.com
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