Plea deal in fraud case provides restitution to Clabber Girl

August 27, 2011

A high-living Manhattan businesswoman accused of an audacious fraud that cost some of central Indiana’s marquee companies millions of dollars has cut a deal with prosecutors that would ensure she spends no more than 31 months in prison.

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Under the deal, which must by approved by Indianapolis federal Judge Jane Magnus-Stinson, Dina Wein Reis would pay $7 million in restitution and fines—with $180,000 going to Terre Haute-based Clabber Girl Corp., the Hulman-George-owned baking powder firm.

The settlement agreement doesn’t name Clabber Girl, referring instead to “Corporate Victim #1.” But documents in the criminal case and in civil lawsuits brought by other alleged corporate victims across the country reveal the firm is Clabber Girl.

In October 2008, Wein Reis was arrested at her six-story Manhattan townhouse on charges she fooled consumer product giants—from Procter & Gamble to Unilever—into selling her products at huge discounts. In addition to Clabber Girl, central Indiana victims included Roche Diagnostics Corp. and DowBrands, according to court records.

Prosecutors charge that Wein Reis and co-conspirators told the companies they would donate the goods to not-for-profits for promotional purposes or would use them in boxes of free samples to be handed out at schools, military bases and other hard-to-reach markets.

If the sampling program proved successful, the firms were told, the products would gain access to these elusive markets through Wein Reis’ “National Distribution Program,” according to the investigation led by the Indianapolis office of the FBI.

“The defendants strongly implied to the executives that if their companies did business with Reis, their companies’ products would enjoy the almost exclusive presence in Reis’ supposed vast network of retail outlets,” according to the seven-count indictment unsealed three years ago.

In fact, however, there was no National Distribution Program, and Wein Reis and her associates instead sold the goods to wholesalers and retailers for a large profit, prosecutors charged.

Indianapolis-based Roche Diagnostics alleged in a 2007 lawsuit that Wein Reis bilked it out of $10 million in diabetes-testing equipment. Court records show that another Indianapolis firm, DowBrands, maker of Saran Wrap and other household products, became entangled with Wein Reis before its $1.2 billion sale to Wisconsin-based S.C. Johnson & Son Inc. in 1998.

Clabber Girl President Gary Morris did not return calls. Under the plea agreement, an unnamed firm based in Kansas City, Mo., would receive $500,000 in restitution. Three other unnamed individuals would get the bulk of the money, nearly $5 million.

The nine-page agreement doesn’t mention Roche. The company settled its lawsuit against Wein Reis in late 2007, but terms were not disclosed.

Daring tactics

Affidavits and other filings in that case provide a window into the daring tactics prosecutors say Wein Reis and her associates used to get a foot in the door with marketing executives at some of the nation’s largest companies. Typically, the first contact came from someone who claimed to be an executive recruiter expressing interest in hiring the executive at a multimillion-dollar salary.

That’s how Wein Reis got the attention of Donald Dumoulin, then a Roche senior vice president, who said in an affidavit that he was contacted in December 2005 about becoming CEO of private company based in New York City with 60 subsidiaries.

The pitch was for him to replace Wein Reis, who he was told had amassed great wealth and now wanted to focus full time on her global philanthropic efforts. When he flew to New York in March 2006 for an interview, he met a maze of executives who raved about her, including a man who claimed to be CFO who said she had a net worth topping $2.5 billion.

On his way out of Wein Reis’ home, Dumoulin met a woman who identified herself as the curator of the Whitney Museum of Art in New York City. She pointed at three works of art and claimed they were worth $25 million apiece.

“As a non-expert in art valuation, I had no reason to disbelieve her,” Dumoulin said in his affidavit.

That June, Wein Reis suggested he “check out” the organization by having Roche participate in its promotional distribution program. “I told her I would arrange for Roche Diagnostics to participate in its distribution opportunity if it were good for Roche Diagnostics and that participating in the program would have nothing to do with the CEO position she was proposing for me,” he said in the affidavit.

Meanwhile, Wein Reis continued to push her job overtures. In a July phone call, she said she “wanted to give me a big hug” and looked forward to their “being a permanent couple.”

The next month, Dumoulin told Wein Reis he had unfinished business at Roche and had decided to stay there. She expressed regret but continued to press for Roche to participate in the promotional program.

Roche finally jumped aboard in September 2006, believing participation would pave the way for it to gain access to independent pharmacies that were poised to place $35 million in orders with Roche.

The sales never materialized, and company officials, some of whom had been leery of the deal from the start, let Dumoulin go. In his affidavit, Dumoulin acknowledged missing warning signs. For example, he knew the woman only as “Dee,” and in all the time he dealt with her he never learned her last name.

Striking deals

Wein Reis, now 47, was among six people indicted in the scheme three years ago. Four worked with her and a fifth served as a paid reference, court records allege.

She agreed to plead guilty to a single felony charge of conspiracy to commit wire fraud. The maximum of 31 months in prison Wein Reis faces is substantially less than the decade or more she might have served if prosecutors had pressed ahead with their original case and prevailed. Three other defendants also agreed to plead guilty and likely will face no more than 10 months in prison each.

The U.S. Attorney’s Office in Indianapolis wouldn’t comment on why it agreed to the deal. However, court records suggest it would have been a messy case to argue before a jury. Some of the executives who said they were duped misled their own employers about their pursuit of a job or seemed to look the other way because they were hell-bent on moving product.

It also doesn’t appear Wein Reis has anywhere near the wealth available for restitution she appeared to when prosecutors brought their case. Back then, estimates were her net worth topped $100 million.

Wein Reis has many belongings but not a lot of money, said Winfield Ong, an assistant U.S. attorney. The plea agreement gives her one year to come up with the restitution. After that she would be sentenced.

“She had a lot of valuable stuff,” Ong said. “She obviously is going to have to sell a lot of that.”•

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