Opinion ID: 4200472
Heading Depth: 3
Heading Rank: 2

Heading: Forensic Audit and Federal Investigation

Text: ThermoEnergy enlisted certified public accountant Jeffrey Roberts to conduct a forensic audit investigation. On June 26, 2009, Roberts interviewed Melton. Melton told Roberts he had filed ThermoEnergy’s payroll taxes “just maybe a month -4- or two after their actual due dates.” Melton informed Roberts that ThermoEnergy had a cash flow problem, and ThermoEnergy “had been dancing around it for years with the IRS and they didn’t keep the notices they were sending.” Roberts asked why Melton could not find documentation indicating the taxes had been filed with the IRS, and Melton speculated the forms had been misplaced because ThermoEnergy had recently moved office locations. Roberts also asked Melton about money Melton had taken from ThermoEnergy, such as checks Melton wrote made payable to cash, personal charges Melton made to his company credit card, and extensive travel charged to ThermoEnergy. Melton claimed he had paid for company expenses out of his own pocket, and the disbursements to himself were reimbursements for those charges, but Melton did not provide receipts or documentation of those alleged business-related expenses paid by him personally. In February 2011, the Federal Bureau of Investigation (FBI) received information prompting an investigation into Melton. In January and October 2012, FBI Special Agent Shaun Roth and IRS Special Agent Erica Williams conducted interviews with Melton. Melton alleged he had spent $800,000 of his own money to pay for ThermoEnergy-related expenses, and ThermoEnergy still owed him approximately $150,000 in reimbursement for those expenses. Melton said he would provide receipts and documentation of his expenses, but never did. As for the payroll tax liability, Melton alleged Cossey, Cline, and a member of the ThermoEnergy board knew payroll taxes were not being paid. During the first interview, Melton claimed he had met with a representative from the IRS at the federal building in Little Rock, but during his second interview he admitted this was untrue, and he had never spoken with anyone from the IRS. When the agents confronted Melton with the memorandum he had sent Barron stating he had been negotiating with the IRS, Melton admitted he created the document so Barron could complete his audit. Melton also told the agents that the Forms 940 and 941 he had given Barron were printed on forms created in 2009 only because he had not saved -5- the originals. The agents inquired about entries made into ThermoEnergy’s ledgers so it appeared as if ThermoEnergy had made payroll tax payments, but Melton stated he could not recall making such entries.