SAN FRANCISCO (CN) - The 9th Circuit upheld the convictions of two top executives of the Focus Media ad-placement agency, who collected millions from advertisers and used the money to take care of personal taxes, a corporate credit account and bankruptcy lawyers instead of paying off media creditors such as Universal Studios, NBC and Warner Bros.
Thomas Sullivan and Thomas Rubin were the CEO and CFO, respectively, of the Santa Monica-based ad agency. Focus billed advertisers for placing commercials on television and radio, then paid the media stations with its clients' money.
Business thrived until 1999, when Focus lost three of its four biggest accounts: 20th Century Fox, DreamWorks and Universal Studios.
But Focus kept collecting money from advertisers after it stopped paying media stations for the commercials. The company retained $23 million of the $34 million Sears Roebuck paid to cover fourth-quarter advertising costs.
When Sullivan and Rubin began transferring Focus' private funds to their personal accounts, Sears got an injunction to stop Focus from spending the money. Despite the court order, the executives transferred more than $16 million to Thom Rubin & Associates, most of which was used to pay Rubin's personal taxes and to pay off $250,000 of corporate credit-card debt. Rubin also received more than $18 million in cash from Focus in 2000.
Focus' growing list of creditors filed an involuntary bankruptcy petition against Focus to recover their money. Rubin hired Geoffrey Mousseau, an attorney with no bankruptcy experience, to represent him personally. The company hired the firm Stutman, Treister & Glatt, which refused to accept payment from Focus' funds.
But in October 2000, Sullivan transferred about $1.2 million from Focus accounts to himself, Rubin, Mousseau and Rubin's corporate credit card. He also dumped $500,000 into Mousseau's client trust account, which he used to pay Stutman's retainer. Stutman found out and dropped Focus as a client.
Rubin and Sullivan were convicted on a number of charges, including conspiracy, mail fraud, wire fraud and money laundering. Mousseau was convicted on five counts of bankruptcy fraud. They appealed, claiming the jury lacked sufficient evidence to convict them.
The appellate court, however, concluded that the government had "introduced ample evidence" of the defendants' illegal activities.
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