A former America Online executive pleaded guilty yesterday in Alexandria federal court to defrauding the Dulles-based Internet company of $100,000 through a phony contract for an outside consultant who did no work and then shared the fees with him, prosecutors said.
The guilty plea of Ruben Moreno Jr., 36, culminated a two-year investigation into the theft at AOL. The company that received most of the money was controlled by Moreno and another former AOL executive. Moreno was an AOL vice president for human resources and supervised a staff of 15 until he was fired in October 2003.
Moreno and the other former executive, Gregory Horton, earlier defrauded Florida-based AutoNation Inc. of about $1.5 million through a similar scheme, prosecutors said. Horton, AOL's executive vice president for human resources, was that company's highest-ranking human resources official until he was fired in August 2003. He pleaded guilty to wire fraud in January.
Moreno pleaded guilty to conspiracy to commit wire fraud. He and Horton each face up to 20 years in prison. Although yesterday's plea involved only AOL, the acknowledgment by the men that they also defrauded AutoNation could increase their punishment, law enforcement officials said. AutoNation owns and manages more than 200 auto dealerships across the country.
"These defendants were serial scam artists who ripped off major companies from the inside,'' said Paul J. McNulty, the U.S. attorney in Alexandria.
Law enforcement sources said the investigation is continuing, though Horton and Moreno were considered the major players in the scheme.
Moreno, of Knoxville, Tenn., had been cooperating with prosecutors for more than a year, sources familiar with the case said.
Moreno's attorney, Philip T. Inglima, declined to comment after yesterday's hearing. An attorney for Horton, 38, of Weston, Fla., did not return telephone calls.
An AOL spokesman, Nicholas Graham, said the company is "obviously pleased with this outcome." He said AOL's "internal controls quickly uncovered this scheme" and enabled the company to turn the matter over to the U.S. attorney's office. The criminal investigation began in October 2003.
A civil lawsuit that AOL filed in 2003 against Horton and Moreno in Loudoun County Circuit Court is pending, Graham said.
After arriving at AOL in November 2002, court documents say, Horton soon arranged the hiring of a human resources consultant for $100,000 to survey AOL's call-center employees. But the survey already had been conducted in-house, documents said.
Court documents did not identify the human resources consultant, but AOL's civil lawsuit said it was Pinebrook Consulting Inc., an Arizona company specializing in human resources management.
After the consultant received the $100,000 for the nonexistent work, Horton had the money sent to another company that he controlled, court documents say. Soon after, Horton had $85,000 of the money sent to HRC Realty, a company he co-owned with Moreno.
Moreno, whom AOL hired in February 2003 based in part on Horton's recommendation, admitted in his plea that he helped cover up the scheme after AOL officials became suspicious.
The consultant eventually repaid the $100,000 to AOL, law enforcement officials said. But AutoNation, where Horton and Moreno worked before coming to AOL, never recovered the $1.5 million.
Moreno and Horton could be ordered to repay that company. Horton is scheduled to be sentenced April 19, and Moreno on June 24.