By Hayley M. Cook
July 17, 2014
By Hayley M. Cook
WILLIAMSON - Two Holden men face up to five years in prison each after pleading guilty Wednesday to structuring a transaction in order to evade federal reporting requirements.
Stephen B. Herndon, 37, and Scott Ellis, 44, also admitted to paying hundreds of thousands of dollars in kickbacks to the general manager of Arch Coal’s Mountain Laurel mining complex, located in Logan County. The men entered their pleas before U.S. District Judge Thomas E. Johnston.
Ellis admitted that he owned Tri-State Mine Service Inc., which was a vendor at Mountain Laurel that performed rebuilds. Ellis gave Herndon a half-interest in Tri-State in approximately March 2011, after Herndon left his position at Mountain Laurel as the warehouse manager.To ensure that Tri-State received rebuild work from Mountain Laurel, Ellis, later joined by Herndon, participated in a bid-rigging scheme where, in exchange for a guaranteed winning bid on certain jobs, vendors had to pay cash kickbacks to a person identified in other court documents as David Runyon.
Ellis initially delivered the cash to Herndon, while he worked at Mountain Laurel, or Runyon. Herndon admitted that while he was the warehouse manager at Mountain Laurel, from approximately 2006 through March 2011, he served as a facilitator of kickback payments by vendors at Mountain Laurel to Runyon.
To generate the necessary cash, Ellis, later joined by Herndon, structured cash withdrawals from various personal and business accounts in amounts of $10,000 or less. They conducted the cash withdrawals in that manner to avoid triggering the bank’s obligation to file a currency transaction report with the Internal Revenue Service, had they withdrawn cash in sums greater than $10,000.
Between early 2009 and approximately March 2011, Ellis structured approximately $163,521.25 in cash transactions. Ellis estimates that almost all of those funds were used to pay cash kickbacks to Runyon, and that he paid approximately $187,000 in cash kickbacks during that time.
Between April 1, 2011, and last Sept. 30, Herndon and Ellis, working together, structured approximately $183,853. They estimate that they used almost all of those funds to pay cash kickbacks to Runyon and that they paid approximately $237,000 in cash kickbacks during that period.
Ellis has agreed to forfeit $215,355.85 and Herndon has agreed to forfeit $132,000 to the United States, representing a portion of the funds involved in, and traceable to, the structuring scheme.
Ellis and Herndon are scheduled to be sentenced Oct. 27, in Charleston.
These charges stem from an investigation being conducted by the FBI, IRS Criminal Investigation, United States Postal Inspection Service, and the West Virginia State Police. Assistant U.S. Attorney Meredith George Thomas is in charge of the prosecutions.