Stephen Kohout, Wire Fraud and Money Laundering, Virginia 2014

NORFOLK, Va. – A Williamsburg man pleaded guilty to wire fraud and concealment money laundering charges in a federal court yesterday.

Stephen Kohout, 56, was charged with thirteen counts of wire fraud and eight counts of concealment money laundering in a criminal indictment returned on March 11, 2014.

Kohout, who was given power of attorney by his parents, R. K. and J.K., on July 15, 2003, began handling their financial affairs in 2006. His parents had assets in excess of $1 million held in bank and investment accounts to which Kohout had gained full access and control.

By 2007, his parents had lost the medical capacity to make financial decisions, and Kohout assumed full control over their assets. R. K. died in July 2011, leaving his entire estate to his wife J.K., who currently resides at a nursing home in Tyrone, Pennsylvania.

Kohout formed two business entities, ITM Traders, LLC and Nychi, Inc., and opened bank accounts for each of the companies. He transferred $55,000 from his parents’ bank account into his account with ITM Traders, LLC, and subsequent transfers were made between the ITM Traders, LLC account and the Nychi, Inc. account to support his trading activities.

Kohout did not return any gains made from these trades to his parents’ accounts. Instead, from 2008 through July 2011, Kohout wired approximately $465,000 from his parents’ investment account to his parents’ bank trust accounts. He then misappropriated money from the bank trust accounts in the amount of $386,000 by writing 86 checks, all but one of which were transferred to an account in Kohout’s name.

Kohout spent the misappropriated money on his personal living expenses, repayment of personal loans, credit card bills, and dining, entertainment, and retail expenditures. In addition to the disbursements Kohout made for his day trading and personal expenses, from 2007 through 2011, Kohout made various disbursements from his parents’ accounts in the form of gifts, loans to his siblings, and for the medical care and living expenses of his parents.

Around December 2012, the nursing home caring for J.K. threatened eviction proceedings against her due to her account being in financial arrears. In January 2013, Kohout filed for bankruptcy, and despite admitting that he acted contrary to his fiduciary duty and misappropriated his parents’ assets, he did not reveal the full extent of his misappropriation.

This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service. Assistant U.S. Attorney Brian Samuels is prosecuting the case on behalf of the United States.

Kohout faces a maximum penalty of 20 years in prison on the wire fraud charge and a $250,000 fine, and a maximum penalty of 20 years in prison on the money laundering charge and a fine of $500,000 when he is sentenced on July 10, 2014, in Norfolk.

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