Ilene Farley, CEO of a Georgia-based daycare business, was sentenced to prison and ordered to pay more than $1.3 million in restitution this week for conducting a check kiting and tax scheme.
The 62-year-old Farley, 62, of Stone Mountain, was sentenced to serve 37 months in prison to be followed by three years of supervised release and ordered to pay $514,240.89 in restitution to Bank of America and $844,091.77 in restitution to the IRS by U.S. District Marc T. Treadwell on April 12 after she previously pleaded guilty to bank fraud and failure to pay over trust fund taxes on Nov. 16. 2022.
According to court documents, Farley was the President and Chief Executive Officer (CEO) of Tender Years Learning Corporation (TYLC). TYLC operated several daycare centers within the Middle District of Georgia and elsewhere in the state of Georgia and had a registered office at 1010 N. Houston Road, Warner Robins, Georgia. Farley handled its financial affairs. The business had several bank accounts, including with Bank of America and Citizens Trust Bank.
When a customer presents a check for deposit into an account, it can take anywhere from 24 hours to seven days for the check to clear. The time between presentment and clearing of a check is called the “float.” The term “check kiting” refers to a form of check fraud which involves taking advantage of the float—the time between presentment of a check and the actual receipt of funds—to make use of non-existent funds in a checking or other bank account. The purpose of check kiting is to falsely inflate the balance of a checking account to allow written checks that would otherwise bounce to clear.
From April 2018 until July 2019, Farley executed a check kiting scheme using the TYLC bank accounts with Bank of America and Citizens Trust Bank, sending more than $75,000,000 to banks which were unfunded amounts and were the equivalent of obtaining money from banks without secured loans. All told, 19 checks bounced during the scheme in the amount of $2,202,162.41. Bank of America ended up with a loss of $514,240.89.
In addition, Farley was required to collect, account for and pay so-called “trust fund taxes” for TYLC’s employees, which includes Social Security, Medicare and federal income taxes. Employers are required to remit these withheld trust fund taxes to the IRS on a quarterly basis. Between 2015 and 2019, Farley failed to pay the IRS $844,091.77 of the TYLC employees’ trust fund taxes which had been withheld from the employees’ paychecks. Through her guilty plea, Farley admitted that she knowingly carried out a scheme to defraud Bank of America and Citizens Trust Bank; in addition, she admitted that she did not pay her employee trust fund taxes.