The three now face charges of mail fraud and conspiracy to commit mail fraud, the New Orleans Times-Picayune reports. The charges are a result of an FBI investigation that began in May 2002.
The indictment states that Dermody, Veselik and Augustyn devised a scheme to divert money from employee retirement accounts in unauthorized investments “for their own personal benefit,” according to the news report. The three knowingly transferred money from the retirement plan to a Hilltopper Enterprises account, controlled by Dermody and Veselik, to use for unauthorized transactions and personal use, according to the charges.
In addition, the indictment alleges that the three backdated contract documents to make it appear that they had properly disclosed all relevant information about their companies and bank accounts, and that they had prior authorization to conduct the transactions. Specifically, the grand jury charges that Dermody furnished a false balance sheet to show that his company, Emerald Investments, had sufficient assets to cover possible losses, and the three created a new investment contract in April 2001, and backdated it to August 2000, to make it seem they had properly disclosed Hilltopper as the company authorized to make investment transactions. The agreement was mailed to the school board.
Dermody is also accused of lying about his credentials as a properly licensed securities dealer for two years in order to obtain the investment management contract from the school board.
In 2002, NASD Regulation Inc. imposed a $200,000 fine against Tower Square Securities, for which Dermody was a registered representative, as well as an order to make $4.3 million in restitution to the Jefferson Parish Public School System’s Employees Deferred Compensation plan (See NASD Gains Pension Fund Restitution ).