Essential oils, greedy insiders and a $20M scheme
This started out to be another look at criminal audacity and corruption — a $20 million fraud scheme that lasted nearly a decade before federal investigators put an end to it. But, digging into the facts, I found myself distracted by a shiny object, to wit: The victim of said scheme, a family-owned Harford County company with a global business in essential oils.
We’ll get to the scheme in a moment. First, about that company, Citrus and Allied Essences, located in Belcamp, northeast of Baltimore, in an industrial park off Route 40. Citrus and Allied has been quietly — meaning, with virtually no attention from mainstream media — and successfully producing the ingredients that flavor foods and create fragrances for 90 years.
The company distills the essential oils from plants — orange, lemon, lime, grapefruit, tangerine and clementine as well as peppermint and spearmint — and from spices. It manufactures “natural aroma chemicals” and just a few years ago launched a line of botanical extracts manufactured in Mexico.
The company’s founders were New Yorkers, Charles Pisano and his wife, Josephine. Charles Pisano was an essential oil chemist who worked for a drug company before starting the family business in 1933.
At the 1939 World’s Fair in New York, themed “the world of tomorrow,” Pisano demonstrated something called a “glass vacuum distillation column.” According to the company’s online history, Pisano’s device could “fractionate the components of essential oils, which made it possible to concentrate oils with minimal loss of flavor character.”
By the 1940s, Pisano was producing essential oils in New York and the Dominican Republic.
The Pisanos’ son, Richard, took over the company after Charles Pisano died of a heart attack at age 69 in 1970.
The company operated out of Queens for many years, but, as it grew, the owners looked for a larger space. In 1990, Citrus and Allied landed in Belcamp, in a 34,000-square-foot warehouse and manufacturing plant. The company built a lime oil processing facility in Mexico and opened sales offices in Hong Kong and Shanghai. It had a reach, both exporting and importing products, across continents.
Citrus and Allied is now in its fourth generation as a family business, and its Belcamp operation has grown to 90,000square feet, according to the company’s website.
I did not know any of this, never heard of the company, until I came across its name in a federal court document.
Which gets us to the unfortunate corruption story, brought to us by Martin Clarke and Harry Gruber, assistant U.S. Attorneys.
According to the federal indictment against him, Elliot Kleinman of Bel Air was a Citrus and Allied executive for many years. He was involved in the purchase of something essential to the company’s essential oils business — large plastic and metal drums for shipping products. That might explain why, in a resume posted to his LinkedIn page, Kleinman described himself as an “industry expert in stowage.”
The same resume referred to his experience in “loss control.” Oh, irony, here is thy sting!
According to the U.S. Attorney’s Office in Baltimore, Kleinman and another employee, 53-year-old Eugene DiNoto, used their management positions to carry out a fraudulent billing scheme: They got kickbacks from various vendors who sold Citrus and Allied 55-gallon drums.
The feds say Kleinman and DiNoto had an arrangement with a 78-year-old New Jersey guy named Tony Urcioli, president of Tunnel, Barrel & Drum Co. Inc., to invoice Citrus and Allied for far more drums than it received.
In December 2013, the kickback scheme expanded to include Hartford Fibre Drum, another Jersey company that supplied 55-gallon drums to Citrus and Allied.
It was classic purchasing fraud, with phony invoices. Not exactly a sophisticated crime.
Last week, I noticed that a 55-year-old guy named Kevin Lawson pleaded guilty to three bank robberies in Baltimore. I guess he missed the memo about how bank robberies have gone out of style. They are old school and no longer worth the fuss and the risk of a prison sentence.
Generally speaking, I see white-collar crimes like those described in the Kleinman-Urcioli-DiNoto case as similarly old school. Whenever I read federal indictments like these, I wonder how, in the digital age, the defendants thought they would never get caught. Given the amount of financial data available to employers, accountants and federal investigators, kickback schemes should be much easier to detect than in the old days.
And yet this Harford County scam went on for eight years.
“Between January 2012 and January 31, 2020, Urcioli falsely invoiced [Citrus and Allied] a total of $20,300,757 and Kleinman’s share of the kickbacks was approximately $2,307,121,” the U.S. Attorney’s Office says.
In the end, everyone involved pleaded guilty.
A judge sentenced Elliot Kleinman to 42 months in federal prison, followed by three years of supervised release, for conspiracy to commit wire fraud and tax evasion.
(I wondered how the Pisano family at Citrus and Allied felt about that sentence, but my phone call and email to the company went unanswered.)
The older guy, Urcioli, admitted to taking part in the scheme and awaits sentencing. Same with Eugene DiNoto.
DiNoto’s brother, Bob, who apparently went into the wholesale drum business just to take part in the kickback scheme, pleaded guilty and got a year in prison. I meant to mention Bob earlier but, sorry, I got so caught up in the essential oils part of this story that I forgot about him.