Six-Year Prison Sentence for Ex-CEO Kennon Whaley in Alabama, Gambled Away $100K in Insurance Funds
Posted on: August 14, 2016, 03:00h.
Last updated on: October 12, 2016, 08:39h.
Former Alabama steel magnate Kennon Whaley is headed to prison. This week, the Auburn resident was sentenced to 72 months in federal prison, after he was convicted in May for using an insurance payment to pay down over $100,000 in gambling debts.
Whaley was once the CEO of Southeastern Stud & Components, a Montgomery-based manufacturer of light gauge steel framing products. Founded in 1999, the company generated $34 million in revenues in 2005 and employed 125 full-time workers.
But following the economic collapse in 2007, Whaley filed for Chapter 11 bankruptcy protection in 2009. He received $260,000 in insurance claims, but instead of using it to aid in his business’ transition, Whaley went on a gambling binge.
The now 51-year-old visited the Wynn casino in Las Vegas, where he racked up a debt of $100,000. After using the insurance money to pay off Wynn, Whaley returned to Vegas again, where he incurred another $20,000 loss.
Chapter 11 provides companies protection from creditors, but the bankrupt business must disclose all financial transactions. Not surprisingly, Whaley failed to adhere to that condition.
“At that time, Southeastern Stud was still in bankruptcy and approximately 70 percent of its employees had lost their jobs,” the United States Attorney’s Office for the Middle District of Alabama said in a release.
Paper Trail Proves Guilt
Whaley’s attorney said during his trial that he was an “absentee owner” that wasn’t aware of the company’s downturn. But when the going got tough, Whaley got going with risky maneuvers.
According to court records, Whaley instructed an employee to falsify documents in an attempt to conceal where the insurance payments disappeared to.
“That’s the textbook definition of bankruptcy fraud,” Assistant US Attorney Brandon Essig said.
While the Wynn likely wined and dined Whaley on his two high-roller visits, the Strip resort cooperated with authorities to detail Whaley’s criminal activity. Records from the casino laid out his four-day jaunt to Sin City and show a man living the VIP lifestyle while his company was riddled in debt.
The US Great Recession that lasted from 2007 through 2009 presented a difficult economy for businesses across the country. The odds were stacked against many small and medium-sized companies, but Whaley went to Vegas and found even worse odds for his money.
Ironically, Whaley writes on his LinkedIn profile summary, “HARD WORK WINS.
In Good Bad Company
Whaley isn’t the first person to hit the casino floor with illicit funds of late, of course.
A year ago, former Oklahoma State Senator Rick Brinkley (R-District 34) was convicted of swindling $1.8 million from the Eastern Oklahoma Better Business Bureau to support his gambling habit.
And just last month, financial scam artist Andrew Caspersen pled guilty to using a Ponzi scheme to swindle $38 million from investors to fund his gambling addiction.
“I did all this knowing it was wrong. Virtually all the money I fraudulently obtained and more than $20 million of my own money was gambled away,” Caspersen admitted at his sentencing.
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