Accounts Deceivable Podcast Series: Season 1, Episode 3 - Pilot Scheme

---

Speaker 1

We have been stealing money. I have been stealing, I've been running a scam. She says, what do you mean, what do you mean a scam? I go, I've been stealing money. Donnie's company is fake. We've been stealing money. I think they've uncovered and I don't know what's gonna happen, Terry, but I'm pretty certain it's not going to be good.

Speaker 2

Welcome to season one of Accounts Deceivable, a podcast about a growing category of white collar crime, invoice fraud, and the devastating impact it has on people, companies, and communities. In this episode, we meet Vernon Beck, a former pilot who embezzled $13,500,000 from a Texas petrochemicals company.

A seemingly foolproof scheme led two friends into an opulent life of yachts, Harley Davidsons, and diamond necklaces. And then everything started to fall apart.

It was a hot summer day in late July two thousand and eight. Vernon and Donnie were stood on the bridge of the 56 foot boat when Donnie's phone rang.

The caller? Texas Petrochemical, Vernon's employer. The reason?

An auditor had uncovered years of fake invoices paid to Donnie's Shell company.

In that instant, the pair knew their scam was up.

Speaker 1

My world is crashing in on me. This is the end.

This is it. It cannot get any worse. Oh, but it could.

Speaker 2

Born and raised in a small fishing town called Port Lavaca on the coast of Texas, Vernon Beck grew up as the second youngest of four brothers and sisters raised in a loving and religious household, a world away from the life of crime.

Speaker 1

We were always in church. Every time the doors were open, didn't matter.

If church was going on, we were there.

Speaker 2

By the time Vernon was 15, he stopped going to church and started to rebel. He grew out his hair, started going to drive in theaters with his friends, and drinking. His parents weren't happy, but reasoned he was old enough to make his own decisions. At 18, Vernon left high school and quickly decided college wasn't for him. He enlisted in the military, and as a talented musician, was awarded a spot playing trumpet in the army band.

Speaker 1

We were a marching band. We did we did a lot of dance band stuff, but I loved all of the Sousa marches. Just absolutely loved it. It makes the hair on my arms stand up to play that kind of stuff.

Speaker 2

In 1977, Vernon left the army and began working at a steel mill in Seguin. There, he met high school senior Terry and immediately fell head over heels.

Speaker 3

He came to the office for something and he just he made me laugh.

And he asked me out, and I said, Well, just call me sometime. And he did, and my mother answered the phone and said, Don't call my daughter again.

Speaker 2

Not one for following the rules, Vernon continued to pursue Terry for twelve months, and eventually she agreed to go on a date with him on the weekend of Independence Day 1978. Three months later, they were married.

Speaker 1

She was my number one fan, okay? And she pushed me. And when I say pushed me, she pushed me to be able to do what she knew I was capable of doing. I didn't see it.

Speaker 2

With a young family to support, Vernon decided to go back into the military, but with his sights set on a bigger prize, joining the Air Force as a fighter pilot. He knew it was a long shot, but towards the end of his training, his colonel pulled him into an empty room in the mess. He figured he was in trouble.

Speaker 1

I still remember this like yesterday, I sat down and he'll hold this letter, he's a full colonel, a bird colonel. He says, Beck, I don't know who you think you are, but I've got a letter right here that says you're going to pilot training. And man, I could have started crying, I was so excited. How did that happen?

And so then he had a big smile on his face and I stood up and I was just going to shake his hand, but he hugged me. He got with a big old fatherly bear hug. And so I couldn't wait to tell Terry about it. And so the rest is kind of history.

I got selected and within, gosh, within, like, six weeks, we had left Alabama.

Speaker 2

Vernon joined the Air Force Bombers Unit as a pilot. He loved the buzz of flying f fifteens and completing barrel rolls at supersonic speeds, but despite the adrenaline rush, he started to resent the time away from his family.

Speaker 1

So the reason I stopped flying was very easy. You know, the age of the kids, I was missing too many tee ball games. I was missing too many dance recitals. And so we just decided based on the age, if I was gonna leave and get into the corporate life, now would be a good time to do it.

Speaker 2

After a brief stint as a commercial pilot for United, Vernon got a job on land at Texas Petrochemicals as a buyer working in the procurement department. He was promoted to marine manager, then transportation manager, and finally appointed a vice president and director of transportation supply and logistics, a big role with big responsibilities.

Speaker 1

Since I was handling transportation and general supply chain, I didn't spend much time in the corporate office. I was out at various plant sites and I had a, my main office was at the largest manufacturing facility in Houston.

And every week there would be at least one, maybe two meetings, I'd have to drive across town corporate, and I would be there. So it was I was out and about a lot. Got to play a lot of golf. Yep. It was a lot of golf.

Speaker 2

After a series of promotions, things were going really well for Vernon and Terry. But that wasn't the story for Vernon's best man and closest friend, Donnie. Donnie was going through a difficult time.

Speaker 1

I had a good friend who was I've known him since I was 14, and he didn't live very far from me. And I played golf with him and we would visit with him and his family and they'd come over to our house and I knew everything about his life. He was going through an issue. He worked at a mechanic shop and the owner of that company told him that when he retired, he was gonna sell it to this, to my friend. And, that changed. Something happened in the owner's life with his own son. He was having problems and he had to go back on his word.

Speaker 2

Donnie feared what the owner's son would be like to work with and refused to accept the new deal. Vernon encouraged his friend to open his own mechanic shop. That way, he'd never have to rely on an owner and their false promises again. Vernon even offered to help Donnie get started by giving him a loan, but Donnie wouldn't take the money. Then Donnie asked Vernon for a favor.

Speaker 1

One time, he asked me. He said, couldn't you hire me at your company? And I said, really, it'd be hard for me to do that because I hire engineers, I hire professionals, I hire degreed people. I just can't see a fit. And I'm not over the area where you would be able to work. I don't think I could help you with that.

Speaker 2

But that wasn't the end of it. Over the next few months, Donnie would go over to Vernon's house, depressed and cash-strapped, panicking about how he was going to pay the rent. Until one day, he arrived on the doorstep armed with wine, cigars, and a plan.

Speaker 1

And so he asked me, he finally came to the point, he says, you know, is there any way you could, I could have a company and you could pay me for work even if I don't do it?

And that's when the light went on above my head. I said, Of course I could do that.

Speaker 2

In a minute, we'll hear how Vernon and Donnie's plan turned into luxury yachts, expensive motorbikes, and a fateful encounter on Galveston Bay. But before then, a word from our sponsors, Medius.

Speaker 4

Invoice fraud is costing businesses billions of every year. As cyber attacks grow in sophistication, more and more companies are accidentally paying out thousands, even millions, in bogus invoices. Medius is an accounts payable software platform that enables finance professionals to combat invoice scams by protecting the integrity of their supplier data, auditing the invoice process in real time, and monitoring for insider fraud. For more information or a demo, www.medius.com.

Speaker 2

At Texas Petrochemicals, Vernon was in charge of determining which companies the business had contracts with. Ultimately, he was the final stamp of approval on all invoices. It would be easy, he thought to himself, to slip some fake invoices through without anybody noticing.

Speaker 1

I thought I was so smart that here I can help him and I know I'll get away with it because there are no checks and balances for what I do. No one has ever come into my office and said, Bernie, you approved this invoice for ABC company here. So that's why I tell people I was literally the fox guarding the hen.

Speaker 2

According to Shannon Kreps, an expert in invoice fraud at accounts payable software platform Medius, this kind of approval setup should be a major red flag for any company.

Speaker 5

At Medius, we actually believe in what we call the four eyes principle. So you should always have two sets of eyes on everything that occurs. Even in a technology system, you need something that will help alert you to anomalies that will happen. There's also a big thing about separation of duties. You shouldn't just have one person who's able to set up a supplier, put an invoice in the system, and pay that invoice. That's just a big no-no.

Speaker 2

Donnie and Vernon started off by creating a fake company called Houston Tankering and Survey, or HTS for short, which purported to do tankering work when a new ship came in.

Speaker 1

Tankering would be when a vessel comes in and you've got people there to help pump the product off or pump the product on and quantify it when you do. How much is coming off? How much is going on? What type is it?

How do you measure it? What is the unit of measure? Is it gallons? Is it pounds?

Is it tons? Is it metric tons?

Speaker 2

Vernon and Donnie's plan was that HTS would submit invoices to Texas Petrochemicals for tankering services that were never actually delivered. Donnie would send across an invoice with a time chart, a report of work performed and billable hours completed, which would then flow through accounts payable right back onto Vernon's desk to sign off.

Speaker 1

We sat around and we, I had many invoices from other companies to use as guides as a template, and we built one together under the new name, and made it look official. And again, it was easy to do because I had so many different examples of what to do and how to include it and to make it look official, if you will.

Speaker 2

A week later, Vernon and Donnie sat together in Donnie's upstairs office. They had all the pieces of the puzzle ready to go. Now they just needed to test it. The first invoice they raised was for a measly $265 for tankering services performed by HTS.

Speaker 1

So we put it in the envelope, put postage on it, mailed it, and it went through the regular process. It would come into the regular mail to the company. When the mail person got it, they see what it is, it says accounts payable, it goes to accounting, accounting open it up and they use the big stamp, you know, whenever, when it was received. Received on such and such date, okay? They look at it and they say, Oh, it's a Marine.

Put it in the thing basket goes to Vernon Beck in transportation.

So the next day, whoever picks up the distribution, it comes up to my office and they put it in my basket. There it is. I'm looking at it.

And I remember thinking to myself, well, there's no turning back now.

Speaker 2

Vernon and Donnie's confidence grew, and the value of the invoices started to double, triple, and quadruple. The money they were funneling into their shell company spiraled into thousands, then tens of thousands.

Speaker 1

Then we started doing some other movements, some bigger barges and longer movements, say, from the river, the river being the Mississippi, into the Houston Ship Channel. So are longer. That that one trip might be $5,500, just that one trip.

Speaker 2

Shannon from Medius thinks this escalation should have triggered more scrutiny from management and the rest of the accounts payable function.

Speaker 5

At Medius, what we would start to understand is that those transaction values were growing over time, and that would seem anomalous to us that you're spending a certain amount with a supplier year on year that just is growing exponentially. I mean, he was able to steal close to $14,000,000 that way.

Speaker 2

For the next few years, Vernon and Donnie kept the scam going, invoicing the company weekly for fake tankering work and with the pair splitting the profits.

At its height, checks would be issued to HTS worth $62,000 per week.

Even without these fraudulent payments, as a director in Texas Petrochemicals, Vernon was already on a hefty annual salary and bonus. So what did he do with all the money?

Speaker 1

I had a couple of Harleys. I bought Terry quite a bit of jewelry, you know, diamond necklaces. She had a five carat diamond ring.

Speaker 2

He also decided to buy himself a boat, a $607,000 yacht. The pair enjoyed weekends together with friends on the boat and soon joined the yacht club. After a few years, Vernon traded up and bought himself a 56 foot carver. It was the fourth biggest boat in the marina.

Speaker 1

Now this boat had a bridge up on top, and even it was covered in plastic, so it was air conditioned. I had there were five air conditioning systems on this boat. So it was air conditioned or we could go down into the quarters and there was a wheelhouse inside there. You could drive, you could control the boat, all the instrumentation, everything that you could do from inside in case it was bad weather.

Speaker 2

Whilst Vernon was comfortable, more than comfortable, with the money he was making, he knew not to draw attention to the extra income. He kept his nose clean when it came to the IRS and made sure every dollar of the embezzled money had tax paid on it with 40% set aside.

Speaker 1

So we would set aside, let's say, $10,000. We set aside 4,000 of that, 40% for tax. That leaves 3,000 for him, 3,000 for me while I'm paying taxes on that 3,000. Okay? I'm not paying it every quarter, but I've gotta make sure that I'm prepared for those taxes. IRS doesn't care as long as you claim it because they want their peace. They're not gonna come look to me say, wait a minute, Vernon, we think you're giving us too much money.

Speaker 2

Vernon didn't need to explain his spending to his wife. She trusted him. He wasn't a liar or a cheat. She had never had any reason to doubt him before. But reflecting on this time, Vernon admits he didn't always treat Terry well.

Speaker 1

Makoto and I were very careful to never let Terry and Renee know what was going on because we know they wouldn't have approved of it.

But my fear was, and I've told her this, my fear was that even if we would have told her and they would have said no, I don't think I would have stopped at this point.

I don't think I would have allowed her to make me stop.

Speaker 2

One Sunday in July 2008, Donnie, Vernon, and their wives were enjoying an afternoon on the yacht when suddenly everything changed.

Speaker 1

Donnie's up on the bridge with me and the phone rings and he goes, uh-oh, and I look over at it like this at the caller ID and it says Texas Petrochemicals. And I said, don't answer it. And so he clicks it off like they go to voicemail. Why would they be calling him? Why would they be calling him on a weekend?

And I knew we had an audit going on, but I didn't know it was get it was going south yet.

Speaker 2

Vernon immediately felt sick. He strongly suspected the call was connected to the audit taking place back in the office and that things might be about to turn very, very ugly. With their wives downstairs, both men tried to keep calm, but in that moment, they knew that their world of yachts, Harleys, and diamond necklaces was in serious jeopardy.

Speaker 1

I knew in my heart that that auditor is checking on this because it doesn't look right.

Because I've never had that happen before in seven and a half years. So he's checking on it. I knew his background. I'd ask him.

I needed to know what my adversary was gonna be when we started every single audit.

Speaker 2

Unlike the majority of auditors he had charmed, dodged, and bullied over the years, this guy had a deep knowledge of the marine transportation industry.

Speaker 1

So I knew ahead of time what it was gonna be like or what it could possibly do, and and it just turned out that he was one of those, he's gonna check on stuff.

Speaker 2

As he made his way into the office on Monday morning, Vernon hoped that he was wrong, that he was overreacting, that there was a simple explanation for the Sunday phone call. When he arrived in the building, these hopes evaporated. The auditor was onto him.

Speaker 1

I went in Monday and I saw, went to his cubicle and I saw his laptop and it said things to do and it says check on HTS.

And that's when I called Donnie said we gotta stop the invoices right now. Not that that's gonna help, but let's just stop it. Let's stop the bleeding.

Speaker 2

Vernon knew he would have to come clean to his wife that night before she found out from somebody else. He spoke to Donnie first, who was reluctant to tell his partner but came round to it, knowing it was just a matter of time.

Speaker 1

So I went upstairs, and it was about 10:30 at night, I remember, and I woke her up and I told her, So I need to tell you something. Donnie's company is fake. We've been stealing money. I think they've uncovered it.

And I don't know what's gonna happen, Terry, but I'm pretty certain it's not going to be good. And as I tell people, you could see that in her face. The color went out of it. She sat up in bed and it was almost like she was, oh no, you know, she didn't know what to do.

She didn't know what to say. It was almost like she was reaching for something, but she was literally out of her element. She had no idea what to think, what to do.

And I know she felt betrayed.

I'd lied to her. How long has this been going? And I told her, no more lies. I've got I'm telling you everything right now.

And I did. And I don't think we slept that night.

Speaker 2

After telling Terry, Vernon knew his next and best option was to come clean to an attorney so that they could start working on his case before he was arrested for the crime.

Speaker 1

Once we knew this was coming, we did have a friend of the family who was an attorney and I went to see him.

And I sat in his office, I says, I've got to tell you what's been going on. And I tell him everything and I tell him the whole truth. And I am just sobbing like a child, So ashamed and so scared and not knowing what's gonna happen. I'm telling him everything.

And I remember at the end of my story and I'm sitting there and he keeps handing me Kleenex and he finishes and he goes, well, I've got good news for you. Man, finally, you've got good news. What? And he goes, this crime does not carry the death penalty.

And I looked at him and I wanted to slap him. I wanted to come across at, what? That's good news?

I probably could have figured that much out on my own. What do you mean?

It does carry a fine up to twenty five years each each count.

And I knew by this time that there were gonna be several counts. I didn't know how many, but I knew that wasn't gonna be good.

Speaker 2

Two days after he missed the call from his boat, Vernon was called into an early morning meeting. He drank his coffee, checked some emails, went to the bathroom, and tried to take his mind off what was waiting for him. That was when he spotted the vice president of HR.

Time was up.

And I go up there and

Speaker 1

I look in John's office and say, hey John.

He goes, hey, come on in Vernon. And so he gets up and he's got a little doorway that goes to his personal conference room on the other side.

So, I walk behind him and he goes in and he goes, No, come on in. So I go in there and there's a table.

Like the size of those two tables there, you know, two large tables.

And our vice president of HR is sitting in one chair already. John sits down here and he says, here, sit down across from him. I sit down from across from him. And the vice president of HR looks at me and immediately she says, she says, Vernon, we've lost confidence in your ability to run the department, and effective immediately, you are terminated.

Speaker 2

The minute she said the word terminated, two FBI agents walked in and arrested him. His pockets were emptied, his wedding ring was confiscated, and his Lexus was driven by one of the agents back to his home.

After that, he was taken to the federal detention Center. At the police station, Vernon and Donnie admitted everything and agreed to fully cooperate with the police investigation. By the time they were caught, the men had embezzled over $13,000,000 from Texas petrochemicals.

In November 2008, after pleading guilty, he was sentenced to four years in prison without the possibility of parole on two counts of mail and wire fraud. Donnie was sentenced to three years and two months.

Speaker 1

Well, I always tell people this, which is true.

See, I wish I could tell them that I needed to get this money because I was battling a drug problem or I was battling an alcohol problem or gambling or something. I wish, but I can't. I can't. There there's nothing that would ever justify it. And even if I did have a problem like that, even that wouldn't justify it.

Speaker 2

In prison, Vernon had a difficult time at first. Other inmates saw a 50 year old white male and wrongly assumed he had been found guilty of a sex crime.

Speaker 1

When I got to the camp, everybody saw me. They immediately thought I was a sex offender. But there's a tremendous system within every prison, whether you're at a camp or a main prison. They have a communication system, they get people on the outside.

Before long, within a week, I'm sitting in one of the TV rooms or one of the guys there that says, that's a pretty good report. Here, take a look at this. He throws it at me, it's about this thick, and it's my whole case, everything about me. They printed it off the internet.

See, they had already asked me many times, what are you here for? I go, man, it's a white collar crime, you know, embezzlement. Yeah. Yeah.

Right. Yeah. Right. Nobody would have anything to do with me for that whole week or two weeks, whatever it was, until they got the word and it came in, and then suddenly I was okay.

Speaker 2

Terry supported him throughout.

That gave Vernon the strength to finish his sentence. He studied toward a doctor of divinity degree and was let out with just three classes left to go.

Speaker 1

So once prison was over and I came back, was a person that knew me in my former life, knew that I'd changed, and he offered me an opportunity.

And he sent me to school to become a geothermal designer.

And so I designed geothermal systems, heating and cooling systems for both residential and commercial applications.

And he gave me that opportunity. So I would do anything for him, you know, anything to help the business.

And I became, you know, pretty good at it. And so that's what I've been doing since 2011.

And so that's how I've built that debt. Of course, at the time when we gave everything back and all that stolen money now was gone, Terry, who didn't work, went back to her practice, practicing dental hygiene.

And so, thank goodness we had her to rely on, Thank goodness.

Speaker 2

Today, Vernon and Terry are active at the Monument Baptist Church in Deer Park, where Vernon is a director and Sunday school teacher. Vernon told us that learning from his experience and working towards forgiving himself has completely changed his life, values, and relationship with his wife. However, despite his rehabilitation over the last fifteen years, Vernon still lives with the shame of his crimes every day.

Speaker 1

Have I forgiven myself?

I want to say yes, but I think in some ways, not all the way.

So I live with that.

And I just ask for strength all the time.

I think one of these days I may get there. I think I will. I'm not there yet. Nobody can be more ashamed of themselves as I am for what I did.

Even the FBI noted it. What's wrong with you? What kind of a defect do you have? How could you abuse that position of trust?

Think of your family. How could you do that to Terry? I'm constantly bombarded with that.

Speaker 2

For more chilling stories from victims and fraudsters alike, check out the Accounts Deceivable podcast on Apple, Spotify, or wherever else you get your audio fix.