Tri-State accountant to serve 6 months for role in theft

According to a Philadelphia Inquirer report, Kelley also was fined $10,000 for forging Tri-State's financial statements.

Kelley, the owner of Meridian Accounting Service Corp. in South Philadelphia, pleaded guilty in September to creating fake annual reports for Tri-State, which used the documents to get a contract with First Union National Bank. (See related story Accountant is latest to be charged in Tri-State case)

"Any individual walking into his office should know that before them sits a convicted felon," Assistant U.S. Attorney Norv McAndrew said at Kelley's Dec. 5 sentencing. "Mr. Kelley is a repeat offender. He will not rehabilitate. He will only get smarter."

In 1988, Kelley was sentenced to five years of probation for embezzling a client's IRS tax refund, according to the Inquirer. The day after he was sentenced for that crime, he was arrested for falsifying his corporate tax returns. He then served six months at the federal prison in Allenwood, Pa.

At an earlier hearing, a magistrate judge wondered how Kelley, who has declared bankruptcy several times, could afford a $413,200 home.

"I have come to the conclusion Mr. Kelley is a thoroughly dishonest person and a danger to the public," U.S. District Judge Garrett E. Brown said at the sentencing. "I think he deserves every minute of the six months."

Federal prosecutors had sought a sentence of up to 27 months and a $40,000 fine for Kelley. But Brown declined to take into account Kelley's criminal history because the offenses had occurred more than 10 years ago.

Upon release, Kelley will begin five years of probation in a halfway house.

"I am responsible for my actions," Kelley said in a brief statement. "I am honestly and truthfully sorry I ever became involved with Tri-State."

Officers of the company, based in Hammonton, have been convicted of embezzling millions of dollars intended to replenish 3,000 ATMs in the Northeast. Employees are also believed to have stolen millions in cash left in ATMs.

(See related stories Tri-State principal pleads guilty to money laundering, tax evasion; Former Tri-State Armored Services CEO held on money laundering, bank fraud charges; More details emerge in Tri-State case; Another former Tri-State official pleads guilty to fraud charges)

Kelley was paid $1,000 to convert -- on paper -- the company's losses to gains in order to secure the First Union contract. He admitted turning a $1.67 million operating loss in 1999 into a $379,609 profit. He also made it seem as though the company had earned $3,215 the year before, when it had actually lost more than $700,000.

First Union, now Wachovia, said Tri-State had stolen $606,000, a relatively small amount compared with losses reported by other former Tri-State customers.

Court documents filed since Tri-State declared bankruptcy in March 2001 show a $33 million gap between what banks and other customers say they are owed and how much has been recovered. Summit Bank alone said at one point it was missing $25 million.