Businessman is held in $13.4M fraud case

December 15, 2006

A federal judge set bail at $5 million yesterday for a West Windsor businessman who, authorities allege, defrauded the government by diverting $13.4 million of payroll taxes and worker compensation premiums into his own bank account.

Allen Hilly, 44, a native of Iraq who is living legally in the U.S., operated a number of companies hired by small- to mid-sized businesses looking to outsource human resource and administrative functions, federal authorities said.

Between February and November of this year, Hilly allegedly collected employment taxes weekly from more than 100 clients, but ordered the money transferred to his own account rather than to the Internal Revenue Service, according to a criminal complaint filed by the FBI in U.S. District Court in Newark. He is charged with money laundering and wire fraud.

The complaint identifies Hilly as managing partner of Professional Employer's Holding LLC, which operates a number of subsidiaries in various states. According to the complaint, Hily told employees he intended to "blow up" the subsidiaries and restructure or close them by the end of the year.

The complaint also states Hilly is the sole signatory on the Bank of America account found to contain the $13.4 million. It was held in the name of Leading Edge Holdings Corp., a company described as a "shell company that is the alter ego for Allen Hilly."

Hilly was arrested at his Mercer County home late Wednesday. The FBI learned he was preparing to leave the country after being advised by his bank that authorities had seized his money, a law enforcement source said.

Yesterday, Hilly made a first appearance before U.S. Magistrate Judge Claire Cecchi in Newark. A meek-looking figure in business attire, he sat quietly at a table as his attorney and the government's attorney sparred over everything from his citizenship status to his character.

Assistant U.S. Attorney Marion Percell termed Hilly a serious flight risk because he is facing a maximum prison term of 20 years on each of the 158 counts with which he is charged.

She told the judge Hilly had been evasive and untruthful in interviews, claiming vaguely to have been born in the "Mideast," to be earning an annual salary of $60,000 and to be possessing only $15,000 in assets.

Hilly drives a 2006 Porsche Cayenne which, "I'm told costs more than his alleged salary," Percell said. He is also a permanent resident of the U.S., not a citizen, she said.

The government has "very powerful" evidence that Hilly had committed "an extremely large fraud," Percell said. The evidence includes copies of e-mails Hilly sent employees in which he "repeatedly ordered" them not to channel money to the government, she said.

"By Jan. 31, every employee of these companies will receive a W2 saying 'zero dollars' were withheld," she said. "So it's not surprising ... that, yesterday morning, he told his employees this was it, fire all the employees, we're shutting down."

Percell also told the judge Hilly had "talked about" investing the seized money in businesses in England, New Zealand and the Cayman Islands.

Kevin Marino, the attorney representing Hilly, attacked Percell for painting his client as a "notorious, horrible flight risk."

Hilly is a law-abiding, naturalized U.S. citizen who has lived with his wife in the same house for 13 years and has an 8-year-old son who attends the Far Hills Country Day School.

"Allen Hilly is an entrepreneur," Marino said. "Does he represent a flight risk? He does not."

Marino told the court he has known Hilly personally for 18 months, as he represented him in "commercial litigation." Later, outside court, he declined to characterize the nature of the litigation.

"It may seem strange he doesn't know exactly where he was born. He told them 'Mideast,'" Marino said. But in reality, many children of emigrant parents are not sure of their birthplace, he said.

"This is an offensive proceeding, because it's cavalier," Marino said. "He's never been in trouble before. He should be set free."

But the judge approved the request, calling Hilly a serious flight risk. She also ordered Hilly and his wife, Rosa, to surrender their passports.

A preliminary hearing in the case has not yet been scheduled.

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