The three people have been indicted in U.S. District Court for allegedly stealing $800,000 from the W.K. Kellogg Foundation headquartered in Battle Creek.
"We are glad we were able to charge them," Assistant U. S. Attorney Timothy Verhey said from his office in Grand Rapids Friday. "This is a serious charge."
Verhey said Nehemiah Muzamhindo, 44, of Kentwood and Tichaona Machamire, 37, of Berrien Springs allegedly established shell businesses similar to companies already dealing with the foundation.
Then the third person, Sabina Brand, 37, employed by the foundation in South Africa, approved fraudulent invoices and funneled the money to the two men. They in turn sent some of the stolen money to accounts held by Brand.
The indictment alleges that the shell business were created solely to receive payment from fraudulent invoices submitted to the foundation and the invoices were created to represent work for the foundation’s charitable activities in Africa.
Brand, fired by the foundation, remains in South Africa and United States authorities are seeking her extradition, although Verhey said she may face charges there before being sent to the United States.
The fraud was uncovered in January 2008 after federal authorities found evidence while investigating the two men for passport fraud.
"It was kind of an accident," Verhey said. "We did a search warrant on a case that Muzamhindo was supplying false passports and we found bank records. We didn’t know what the connection was to the foundation and they told us they didn’t know what it was."
Verhey said the fraud began in May 2006 and lasted until about May 2008. The case was dormant until after the fraudulent passport case was adjudicated. The indictment by a federal grand jury was issued July 15.
None of the money has been recovered. The loss represents a tiny fraction of the foundation’s assets, reported to by $5.5 billion in March.
If convicted of wire fraud and money laundering the three face up to 20 years in prison. Muzamhindo and Machamire, who have been in the United States a number of years as resident aliens, are scheduled to appear in court Wednesday for arraignment.
Officials at the foundation learned about the scheme in September 2008, according to Joanne Krell, vice president for communications.
"This has been very disturbing for the foundation," Krell said. "We take it seriously. We were surprised and surprised at the magnitude. This is unique in the history of the foundation."
Krell said the foundation is conducting their own investigation in conjunction with American and South African authorities but said the theft came despite an understanding of that "the challenges are greater where controls are not as robust as in more developed countries. But we have evaluators and auditors and we are not leaving things to chance. We are not just putting money out there and see what happens."
Krell said despite the loss of money, the foundation knows a need remains.
"The foundation has a strong track record of success and tight financial controls," she said.