Houghton Lake Accountant's $900K Fraud Highlights Michigan Problem Gambling
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Problem Gambling is gambling behavior, which causes disruptions in any major area of ones life: psychological, physical, social or vocational.
An accountant from Houghton Lake Heights, Michigan, has pleaded guilty to stealing about $900,000 from his clients.
The obvious question is, what did he do with the stolen money?
And, why would he need such vast sums?
The answer is obvious -- GAMBLING!
Although it apparently did not involve gambling in the state, the Houghton Lake incident raises questions about Michigan's (and especially Gov. Jennifer Granholm's) policy of expanding the number of casinos, without planning for the effects.
About 350,000 Michigan residents are addicted to gambling, according to state officials. The responsibility for dealing with compulsive gambling problems in Michigan was recently transferred from the Michigan Bureau of State Lottery to the Michigan Department of Community Health (MDCH). To address this responsibility, MDCH now maintains a 24-hour toll-free helpline, 1-800-270-7117, for people to call if they or someone they know has a gambling problem.
Neighborhood Service Organization, a Detroit-based crisis intervention organization under contract with MDCH, answers the helpline calls, coordinates the initial consultations with qualified counselors and oversees ongoing treatment of clients when necessary.
Current efforts to promote the toll-free helpline feature three new 60-second radio advertisements airing state-wide. There are new brochures, wallet cards and church bulletin inserts which address compulsive gambling issues and include the Gamblers Anonymous Twenty Questions. There are two new MDCH web sites dedicated to compulsive gambling: www.mdch.state.mi.us/ads/Gambling/ and www.teengambler.com which targets younger gamblers. There also are new billboards in vicinity of the Detroit casinos which state, "If you bet more than you can afford to lose, you've got a problem" and urge people to call the helpline.
But all those efforts do not address the basic problem: the state's advocacy for gambling as a revenue source. It's just bad policy, much like building prisons was considered "economic development" a couple of decades ago.
Problem gambling is more likely to affect individuals who live within 10 miles of a casino or in a disadvantaged neighborhood, according to research from the University at Buffalo's Research Institute on Addictions (RIA).
However, the accused accountant, Robert Denboer, Jr., did not live within 10 miles of a casino; the nearest casino to Houghton Lake is nearly 50 miles away, at Mt. Pleasant.
No, apparently Mr. Denboer was attracted to brighter lights than an Indian casino in Michigan that was only about an hour's drive from his home. He was a high roller at Las Vegas, about 1,400 miles away, according to information received by police from an informant.
The Houghton Lake Resorter weekly newspaper reported that the informant told police that Denboer "enjoyed a lavish lifestyle," bought several vehicles and was a high-stakes gambler on frequent trips to Las Vegas. It was not reported whether Denboer also visited casinos in Michigan.
Denboer Jr., age 33, will be sentenced in March and is likely to get at 41 to 51 months in federal prison for bilking clients out of more than $900,000.
Denboer Jr., owned Denboer Accountants, Inc., a tax preparation and accounting business in Houghton Lake. Court records indicate that after 2000, Denboer Jr. began siphoning money from the refund anticipation loans of his clients. He is accused of preparing two tax returns for clients, each with different refunds amounts. He would present the client with a copy of the return for the lesser amount, but file the return that brought a higher refund. He would then skim off the difference into his own account.
Denboer instructed his attorney to show tax agents copies of checks that he claimed to have sent to the affected clients, along with letters that admitted the fraud and explained that the checks were reimbursements. Eventually the IRS determined that the letters and checks were never mailed. Meanwhile, Denboer Jr. continued this practice in 2004, 2005, and 2006, eventually defrauding 67 clients, according to authorities.
Earlier this year, on April 23, an IRS press release revealed that Denboer was indicted on 16 counts of filing false 941 forms, which he signed under penalty of perjury, and 19 counts of money laundering, one count of making a false statement to IRS criminal investigation agents, and one count of forging an endorsement with intent to defraud. The press release was issued by the United States Attorney, Terrence Berg and IRS Special Agent in Charge, Maurice M. Aouate and FBI Agent in Charge, Andrew G. Arena.
As president of a separate company known as Payroll Specialists, Denboer Jr. prepared and filed inaccurate quarterly withholding forms 941, for various clients, showing taxes due of over $688,000. The indictment alleges that the 941s listed tax deposits which were never actually paid to the IRS. Instead, Denboer Jr. transferred more than $268,000 of the withheld taxes into accounts under his control.
In addition, he is accused of applying for and receiving a business line of credit under the name of Robert Denboer Sr. and forging a treasury check for $7,500.
Regarding the Denboer case, Special Agent-in-Charge Aouate said in a statement, "An accountant should be a client's first resource against fraud. "IRS Criminal Investigation will vigorously investigate those individuals who used this trust to financially hurt and take advantage of unsuspecting taxpayers."
Denboer Jr., has pleaded guilty to willfully filing false tax returns and wire fraud. He will be sentenced on March 10th in Bay City U.S. District Court by Judge Thomas L. Ludington.
The social costs of casinos, and the encouragement of gambling, have to be paid for through casino revenues or tax dollars. And, Michigan has foolishly "negotiated" deals that bring in only about 12 percent of revenue from slot machines. Other states garner a much greater percentage of revenues from gambling. One example is Pennsylvania that takes 25 percent.
A casino within 10 miles of home has a significant effect on problem gambling and is associated with a 90 percent increase in the odds of being a pathological or problem gambler, said John W. Welte, Ph.D., principal investigator on a study.
The likely reason for the increase, he added, is that the availability of an attractive gambling opportunity can lead to gambling pathology in some people who otherwise would not develop it.
The study, involving a national telephone survey of 2,631 U.S. adults, was reported in a recent issue of Journal of Gambling Studies.
While geographic location nearly doubled the risk, Welte stressed the importance of placing the study results in perspective.
"Individual traits have a stronger relationship to gambling pathology than geographic factors," he added. "For example, in another analysis of this survey that previously was reported, we found that problem drinkers had 23 times the odds of having a gambling problem than individuals who did not have a drinking problem."
According to Welte, "Gambling behavior and problem gambling behaviors are multi-faceted. Social and environmental influences on gambling behavior and pathology are interesting in themselves. They have a special relevance to public policy debates.
"Because localities can control the location and density of gambling opportunities, such as casinos or lottery outlets, policy makers have some influence over the rates of problem gambling in our society."
Welte said respondents living in disadvantaged neighborhoods reported much higher rates of problem gambling than those who do not live in disadvantaged neighborhoods. Ten percent of those who live in the most disadvantaged neighborhoods are problem gamblers as compared to about one percent of those who live in the least disadvantaged neighborhoods.
"We know that this is not simply an effect of poverty at the individual level," explained Welte, a senior scientist at RIA and a research associate professor in the Department of Social and Preventive Medicine in the University of Buffalo (NY) School of Public Health and Health Professions. "Acceptance of gambling by family and friends, unrealistic expectations from gambling combined with a financial desperation, might be the explanation."
Past-year gambling was more common in states with two or more forms of legal gambling, and the average number of times gambled per year also was higher in those states with more forms of legal gambling. In fact, the odds of gambling for study respondents during the past year increased by 17 percent for every additional form of legal gambling in their state.
For the purposes of this study, levels of gambling behavior were labeled as "any gambling in the past year," "frequent gambling" (defined as gambling 104 or more times in the past year), and "problem gambling" (manifesting problem gambling symptoms such as preoccupation with gambling and needing to gamble with increasing amounts of money to get the same excitement).
The other researchers involved in the study were Grace M. Barnes, Ph.D., senior research scientist with RIA and adjunct associate professor in the Department of Sociology in the UB College of Arts and Sciences; William F. Wieczorek, Ph.D., director of the Center for Health and Social Research at Buffalo State College, and Marie O. Tidwell, Ph.D., project director on the study.
Funding for the study was provided by a $1.2 million grant from the National Institute on Alcohol Abuse and Alcoholism.
The main point of this study, and the Denboer case, is that gambling is not the economic development panacea it was cracked up to be. The costs of gambling far outweigh the revenues gained, and it is time the state took steps to control this outrage.
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