PEWAUKEE, Wis. -- Roundy's here said last week its former director of taxes has been arrested and charged with mail fraud and money laundering.
The company said David D. Zurcher is accused of embezzling $1.7 million over the past nine years. It also said there will be no impact on Roundy's financial statements or any tax liabilities.
Gerald A. Lestina, president and chief executive officer, told SN he could not comment on the matter, explaining the company's executives are under a gag order that prohibits them from talking about the case.
SN tried to contact Zurcher at his home last week; however, Zurcher hung up without comment.
Zurcher left his post at Roundy's on July 26. None of the parties contacted would indicate the circumstances under which he left.
The U.S. Attorney's office for the eastern district of Wisconsin said last week a criminal complaint was filed against Zurcher on Sept. 18 and he was arrested the following day by the Federal Bureau of Investigation. He was subsequently arraigned in U.S. District Court in Milwaukee and released on a $200,000 signature bond, Steven M. Biskupic, assistant U.S. attorney for the criminal division, told SN.
According to Biskupic, the complaint is being forwarded to the grand jury to determine if Zurcher will be indicted. He said the grand jury is scheduled to decide whether to indict Zurcher by Oct. 9, the date for a hearing before Magistrate Judge Patricia Gorence.
If Zurcher is indicted, a trial will be scheduled, Biskupic said, with Zurcher facing up to 25 years in prison and $750,000 in fines if convicted. If he is not indicted, the parties involved will convene a status conference to determine any further proceedings, he said.
Biskupic said federal authorities have obtained a judicial order freezing $900,000 in stocks and securities Zurcher owns "so the money will be there if he is convicted." A hearing to determine if the freeze should be extended was scheduled for late last week, Biskupic noted.
According to the criminal complaint, Zurcher "knowingly embezzled $1.7 million from Roundy's through a scheme to defraud, executed through use of the U.S. Postal Service ... and knowingly engaged in financial transactions, using proceedings of the mail fraud scheme, knowing the transaction was designed, at least in part, to conceal the nature, location and source of the proceeds of the mail fraud scheme."
Attached to the complaint was an affidavit from Terry Sparacino, a special agent assigned to the FBI's Milwaukee office, who said he had interviewed officials at Roundy's and reviewed financial records. "Based on that investigation, I believe that probable cause exists that ... Zurcher ... embezzled approximately $1.7 million through a scheme to defraud," Sparacino said. "Furthermore, that scheme was executed through the use of the U.S. Postal Service ... and ... thereafter proceeds were laundered.
"I also believe that probable cause exists that cash and financial records relating to that fraud are located within the residence currently occupied by Zurcher."
According to Sparacino's affidavit, Zurcher was hired by Roundy's in 1985 and had served, since February 1992, as director of taxes, a position from which he supervised the company's various tax obligations.
One of the consultants Roundy's used to help coordinate its tax obligations was PMS, an Arlington, Texas-based company that prepares paperwork and services in connection with certain tax credits, Sparacino said in the affidavit. "Zurcher, in his duties as director of taxes, had authority to approve payments for PMS expenses," he pointed out.
"After Zurcher left Roundy's, company officials discovered that certain Roundy's checks had been issued to PMS but that no legitimate expenses were associated with the particular disbursements. Moreover, instead of the checks being mailed directly to PMS in Arlington, Zurcher directed that the checks be given directly to him.
"Thereafter, those checks were deposited into an account at M&I Bank under the name, 'Protective Maintenance Services, doing business as PMS.' That account was under the name of ... a former custodian at Roundy's. Bank records relating to that account were found among Zurcher's papers after he left Roundy's."
In one incident cited in the affidavit, "Zurcher sent a 'check request form' to the accounts payable department at Roundy's [last Dec. 13]. The form requested a check to PMS in the amount of $23,040 but gave instructions that the check should be returned 'to the attention of Dave Zurcher.' Thereafter, that check was deposited into the M&I account ... Roundy's officials were unable to determine legitimate expenses associated with this payment."
The affidavit said the PMS account at M&I bank listed a post office box in Waukesha as its address.
"Disbursements from that account show proceeds went to Zurcher and persons associated with him," Sparacino said. "One particular entity receiving disbursements was SADFIL Investments" -- a company he said has a bank account at Waukesha State Bank and lists David Zurcher as president, with an address at another post office box in Waukesha.
"By utilizing post office boxes, Zurcher assured that correspondences relating to the suspect transactions were not directly linked to his home address," Sparacino said.
He also said financial records reviewed to date "show a flow of money through multiple financial accounts. For example ... money from Roundy's was deposited to the PMS account at M&I bank. Thereafter money from the PMS account was moved to the SADFIL Investments account at Waukesha State Bank. From there, money went to an account at IMC Trading in Valencia, Calif."
The complaint said additional records obtained from the Roundy's computer that was used by Zurcher "include a spreadsheet of investments for 'Zurcher' and 'Katie' (believed to be a daughter). The amount associated with Zurcher's name, as of June 8, 2001, was $659,251.31."