Justin Herdman, United States Attorney for the Northern District of Ohio, announced today that a federal grand jury sitting in Cleveland has returned a eighteen-count indictment charging Joseph A. Cipolletti, age 45, of Hudson, with wire fraud, money laundering, bank fraud, and making a false statement under oath.
“This defendant is accused of embezzling thousands of dollars from hardworking Northeast Ohio families, intended to provide their children and students with meaningful educational experiences, for his own personal use – such as buying vehicles and backyard renovations,” said U.S. Attorney Justin Herdman. “As a result of the defendant’s alleged actions, his place of business was forced into bankruptcy, and our community’s schoolchildren were deprived of invaluable experiences and memories.”
“The fraud perpetrated by Mr. Cipolletti stole money from hardworking families and school districts. The scheme deprived students of annual trips that have become a tradition and provide a lifetime of memories,” said FBI Special Agent in Charge Eric B. Smith. “Great work by partner agencies including the Summit County Prosecutor’s Office, the Geauga County Prosecutor’s Office, and Ohio BCI, laid the initial groundwork for the FBI and the USAO to obtain this federal indictment. We will continue to work with partners throughout Northeast Ohio to seek justice for the communities we serve.”
“When these families paid for a trip, fraud wasn’t on the itinerary,” said Ohio Attorney General Dave Yost. “This business owner didn’t keep his word, so now his next destination will be the courthouse.”
“This individual is a typical con man,” said Cuyahoga County Prosecutor Michael O’Malley. “He took money from parents and never intended on fulfilling his obligations.”
“Thank you to U.S. Attorney Justin Herdman and his office and the FBI for their thorough investigation,” said Summit County Prosecutor Sherri Bevan Walsh. “My office began an investigation into this conduct over two years ago. My hope is those responsible for taking money from local families and depriving students of a once-in-a-lifetime trip will be held accountable.”
According to the indictment, Cipolletti was employed as Vice President of Discovery Tours, Inc., a business located in Mayfield Village, Ohio, that offered educational trips for grade school and high school students to destinations such as Washington, D.C., Chicago, Illinois, New York City, New York, Columbus, Ohio, and Gettysburg, Pennsylvania. These trips took place via coach bus and included transportation, hotel accommodations, meals, sightseeing admissions, and security. The defendant’s responsibilities included managing the organization’s finances, cash withdrawals, general ledger entries, accounts payable, accounts receivable, payroll, taxes and the defendant had signature authority on the business bank accounts.
According to court documents, from June 2014 to May 2018, the defendant is alleged to have devised a scheme to divert payments intended for these trips for personal use. The defendant defrauded parents, other student trip purchasers, and embezzled funds meant for school trips on items such as home renovations and personal vehicles. Overall, the defendant is alleged to have embezzled approximately $609,942 from his place of business.
The defendant allegedly took many actions to further his scheme, including making multiple false entries in the Discovery Tours general ledger claiming embezzled funds were trip-related expenses, forging an email to a hotel vendor claiming that the business suffered a loss of $236,022.27 due to a hacked account, paying vendors for previous student trips with deposits from future trips, and obtaining high-out interest loans to conceal his actions. The high interest on these loans ultimately led to Discovery Tours eventual bankruptcy filing.
In one instance, according to the indictment, on or about May 19, 2016, a hotel vendor sent the defendant an email stating that payment for a previous school trip had not been made and was overdue. The hotel vendor informed the defendant that because of this delay in payment, the business would be required to prepay for future events. The hotel vendor advised the defendant that payment in full for the hotel accommodations was not received by a specific time and date, then the next student group would not be permitted to check-in.
On or about May 21, 2016, knowing that his organization’s business account did not have sufficient funds, the defendant issued five checks totaling $72,540, payable to the hotel, and had an employee travel in interstate commerce from Ohio to Virginia to hand deliver the checks to the hotel. All the checks were returned for insufficient funds.
That indictment states that as a result of the defendant’s actions, on May 7, 2018, Discovery Tours abruptly ended operations and filed for bankruptcy in United States Bankruptcy Court for the Northern District of Ohio. Student trips to Washington, D.C. were cancelled for dozens of schools across Ohio and more than 5,000 families lost the money they had previously paid for trip fees.
Furthermore, on December 10, 2018, in the United States Bankruptcy Court for the Northern District of Ohio, the defendant is alleged to have knowingly made statements under oath in and in relation to his organization’s bankruptcy status. The defendant claimed that he did not owe his business any money, when in fact, and as he then knew, the defendant embezzled $609,942 from his place of business and made false entries in the general ledger.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
If convicted, the defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.
The investigation was conducted by the Cleveland Division of the FBI and Akron Resident Agency. The U.S. Attorney’s Office for the Northern District of Ohio would like to acknowledge and thank the Ohio Bureau of Criminal Investigations and the Summit County, Geauga County, and Cuyahoga County Prosecutor Officesfor their cooperation with this matter. This case is being prosecuted by Assistant U.S. Attorney Brian McDonough.