Two Minnesota-Based Executives Plead Guilty to Orchestrating Multimillion Dollar Accounts Receivable Factoring Scheme
ST PAUL, Minn. – Two medical services company executives have pleaded guilty to orchestrating an accounts receivable factoring fraud scheme, announced U.S. Attorney Andrew M. Luger.
According to court documents, Khemwattie Singh, 53, was the chief executive officer of Global Medical Services, a Minnesota-based healthcare solutions company. Neeraj Chepuri, 55, was the chief medical officer of Global Medical Services. Between June and October 2018, Singh, Chepuri, and others entered into factoring contracts with MD Capital Solutions, a Florida-based investment company, to purchase the accounts receivable of Global Medical Services and Minnesota International Medicine for more than $2.6 million. Factoring is a form of short-term financing in which a business sells its accounts receivable to a third-party at a discount.
According to court documents and their admissions in court, Singh and Chepuri defrauded MD Capital Solutions by failing to pay over the receivables as they were collected and falsely represented to MD Capital Solutions that no funds had been received. Instead, Singh and Chepuri pocketed the money, wiring more than $5 million overseas.
In addition, Singh was responsible for complying with all federal tax laws pertaining to Global Medical Services as the Chief Executive Officer, including the requirement that the business would withhold federal income taxes and Social Security and Medicare (“FICA”) taxes from employees’ pay and report and pay over the withheld amounts to the Internal Revenue Service. Beginning in approximately 2018, Singh willfully failed to file quarterly payroll tax returns or pay over the withheld amounts and the employer’s contribution to FICA.
Singh and Chepuri each pleaded guilty to one count of wire fraud on December 29, 2023, in U.S. District Court before Chief Judge Patrick J. Schiltz. Singh also pleaded guilty to one count of willful failure to account for and pay over payroll taxes for withholding federal taxes from employee payroll and not reporting or paying the withholdings to the IRS. The plea agreements include restitution to the U.S. Small Business Administration for a fraudulent Paycheck Protection Loan obtained by the defendants for the company they operated. Sentencing hearings are scheduled for May 7, 2024 (Singh) and May 9, 2024 (Chepuri).
This case is the result of an investigation conducted by the FBI, the Minnesota Commerce Fraud Bureau, and the IRS.
Assistant U.S. Attorneys Robert M. Lewis and Chelsea A. Walcker are prosecuting the case.