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Woman gets almost 4 years in prison for $5.5M embezzlement scheme

November 9, 2016

A federal judge on Tuesday sentenced an Indianapolis woman to just under four years in prison after she pleaded guilty to charges related to embezzling $5.5 million from a former employer.

Judge Jane Magnus-Stinson, of U.S. District Court for the Southern District of Indiana, ordered Kristi Suzanne Espiritu to serve 46 months in federal prison and two years of supervised release, as well as pay restitution to the two business owners the court considered victims of the scheme, or $2.74 million each.

The case stems from a six-year scheme in which prosecutors said Espiritu bought pricey personal items and six-figure trips with her personal credit card, then paid off those purchases with funds from the company, Indianapolis-based Network Storage Inc. Espiritu, 40, was an operations manager there from about 2004 to about 2014, and the scheme started in 2008.

"It's not as though you weren't making good money at NSI," Magnus-Stinson told Espiritu, noting that she was making more than $100,000 a year in 2012. 

"So I think about, when you put the $5.4 million back into the company, what it might have done and the success that it could have had," Magnus-Stinson said. "And the real sad part is, you would have shared in that success."

Espiritu, flanked by more than a dozen people outside the courtroom who appeared to be friends and family members, declined to comment. Her attorney, Jeffrey Baldwin, could not be located after the sentencing hearing and did not immediately reply to emailed requests for comment.

Assistant U.S. Attorney Tiffany Jacqueline McCormick said after the hearing, "I think it's a just sentence. We take these crimes very seriously and the court did as well."

Espiritu's sentence came in at the low end of the sentencing spectrum; the high end was 71 months. Magnus-Stinson said Espiritu's ability to pay full restitution is bleak, and her attorney noted that the only assets she had were articles of jewelry. In addition to having to pay 15 percent of her gross monthly income whenever she gains employment, the court ordered that Espiritu's 401(k) account be dispersed to the victims, NSI co-founders Merrick Mossman and Mark Graham.

Mossman and Graham each testified at the three-hour long hearing. They said they started NSI, a technology services company, in 2003 and hired Espiritu in 2004. She was primarily responsible for paying bills and managing the company's financial books while they oversaw sales and technology.

Espiritu could not sign checks—only Mossman and Graham could. But in 2009 she persuaded the owners to adopt online banking, Mossman said, allowing her to make financial transfers without their approval. "She plotted from the very beginning to steal from us," Mossman said.

Over the course of the scheme, prosecutors said, Espiritu bought hundreds of items, including jewelry, handbags and furnishings. For example, they said she spent about $191,600 between March 10, 2014, and April 10, 2014—including almost $48,000 at Distinctive Diamonds in one day and almost $50,000 at Saks Fifth Avenue over three weeks. She also spent $150,000 on personal travel expenditures in Chicago in one weekend, McCormick said.

Mossman said a cash crunch caused by the thefts forced them to sell the business to Michigan-based Data Strategy in October 2014. At that point, Data Strategy discovered Espiritu's improprieties, Graham said, and the money the owners received from the sale essentially went back to Data Strategy to cover the company's debts. "We have nothing to show for the business that we built for 11 years,” Graham said.

Espiritu repeatedly apologized for the acts, saying she "was an imperfect being" who "allowed my morals to be twisted." She described Graham's and Mossman's relationship as dysfunctional and the corporate demands as overbearing. She said she used her personal credit cards to pay for business expenses, and said she ultimately was the "fall guy" for a practice in which the owners and nearly a dozen other NSI employees used her credit cards to support the business.

"There came a point when the charges from the others became indecipherable," Espiritu said, later noting that she was occasionally given bonuses to keep quiet. "I should have known better, but the tease of the greater reward from being a team player overrode my internal barometer."

Espiritu told Magnus-Stinson that she's a mother of three, including a daughter with special needs, and that she's been undergoing therapy for two years for impulsive control disorder. She said she was compliant with federal authorities and that she had been working at another job to start repaying Mossman and Graham until a July 29 IBJ article led to her termination there.

Espiritu's remarks and arguments by her attorney aimed at lightening the sentence appeared to have little sway over the judge. Magnus-Stinson said that while Espiritu has no criminal history, her actions took place in the form of hundreds of transactions over a sustained period of time. Magnus-Stinson also questioned why Espiritu didn't think of family and friends while she engaged in the scheme, and why some of the closest people in her life didn't raise questions about the lavish lifestyle she was leading.

"I would also say, in terms of her character, I sense remorse and likely shame," Magnus-Stinson said before handing down the sentence. "But I'm also hearing blame today, blame on the victims, and there's just no place for it.

"Whether they were dysfunctional or whether they were demanding," she said, "it sounds to me like some of the motivation for this crime was self-help. You were paying yourself for what you thought you were entitled to for how you thought you were being treated."

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