How a quiet bank executive built lavish life on stolen money

Published June 13, 2010 at 5:50 a.m.
Scott Welch accumulated. He bought golf carts and landscaped extravagantly and turned a modest ranch house into a striking estate. He had a log cabin playhouse built for his children and a pier built for his speedboat. And all of it was not terribly notable for a Wachovia executive in the midst of the Charlotte banking boom.

Welch himself seemed unremarkable - quiet and well-liked by most neighbors and colleagues, a family man who took his children to sporting events around Mooresville and beauty pageants in North Carolina. What was extraordinary, however, is how he financed this lifestyle.

For eight years, until he was laid off in 2008, Welch planned and executed an embezzlement scheme that defrauded Wachovia of $11.2 million, according to documents filed by the U.S. Attorney's Office last month. Welch, who had no formal college education, was helped by a Charlotte-area landscaper, a firefighter, a home remodeler and a forklift salesman.

The defendants - Welch, John Cousar Jr., Delmar Dove, Jerry Little and Robert Otto - each could face 30 years or more in prison and $1 million-plus in fines. Welch, Cousar and Dove are scheduled to enter guilty pleas this week in U.S. District Court.

Welch, through his attorney, Andrew Murray, declined to comment on the case.

"Scott feels very remorseful and extreme embarrassment for the pain he has caused his family," said Murray, a candidate for Mecklenburg County district attorney.

Welch's co-defendants, through their attorneys, independently told a common story: Welch, when he was a vice president in Wachovia's Distribution Utility Center, approached them with an opportunity to make extra money by submitting invoices to the Charlotte bank for work done for Welch personally - or work not done at all. Sometimes, according to attorneys and court records, Welch received goods or services billed to the bank. Sometimes, the co-defendants gave him kickbacks for phantom invoices.

Ultimately, a handful of transactions turned into dozens.

"It goes from, we'll just do it a few times to let's do it over and over, and you know what you're doing is wrong," said Deke Falls, attorney for Cousar, a former Charlotte firefighter. "It's the same thing with the rest of these guys."

But, according to attorneys and court records, only one man had the job and the drive to make the scheme happen.

Family man

Scott Welch loved to landscape. Neighbors say the Welches had new palm trees delivered every year, and county records show there used to be a large lighthouse statue in their backyard. Welch had Dove build stone walls, do irrigation work, and even add brick tiling to the doghouse.

Welch also had an apparent taste for sporty cars. Neighbors say he was constantly buying new vehicles, and the family recently had five cars registered with the state, including a 2008 Hummer and a 1969 Volkswagen roadster.

Overall, the government says that Welch defrauded Wachovia of $11.2 million. About $4 million went to his co-conspirators, according to estimates based on prosecutors' claims. The rest went to Scott Welch.

His wife, Amy, never knew, his attorney says.

Neighbors say the Welches were quiet and friendly, although one, Frank DeFelice, has had a long-running feud with Welch. The two men regularly complained to the county about each other: Welch said DeFelice didn't have proper permits for his sheds and other buildings, and DeFelice complained about "big loud parties" and yapping dogs at the Welches', according to county records.

At work and in social circles, people say Welch was amiable and that his employees liked him.

"He is always on top of his financials and would often ask me about expenses before I had even looked at them," a financial analyst at Wachovia wrote in Welch's online resume in May 2007, one of many glowing recommendations from colleagues. "He is very aware of all expenses that impact him, and will point out anything that looks unusual to him."

Friends say his life revolved around his family. He and Amy have four kids - a high schooler, a younger son and daughter, and an adult daughter with severe learning disabilities. The Welches entered their youngest daughter in beauty contests, and took out an ad in Lake Norman Magazine last year when the 5-year-old won a state pageant.

Crista Witherspoon, a family friend, said Welch always makes sure that her 5-year-old son, who has cerebral palsy, feels included.

"I explicitly trust them with my children," Witherspoon added. "My husband and I have never questioned that in any way, shape or form."

Welch donated to Republican causes, and on his Twitter account, he described himself as "Christian, Business Leader / Consultant..." His interests, according to the users he followed, ranged from Clemson sports to a vampire-themed TV show. He also posted links to stories about Wachovia misdeeds, including one headlined: "Wachovia Admits It Laundered Millions in Mexican Drug Cash."

$77,000 playhouse

Murray, Welch's attorney, declined to say if Welch began his invoice scheme because of financial difficulties, but as Welch moved up at the bank, life got more comfortable.

In 1998, he bought waterfront property on Lake Norman. The one-story house was modest for a family of six, but he soon was building and landscaping extensively on the property.

It was a lush lifestyle for a man who grew up outside of Hickory and joined the Air Force after graduating from East Lincoln High. He was stationed in a supply squadron at Shaw Air Force Base in South Carolina for a few years, then got a civilian job in a First Union warehouse. He met Amy Owens, his future wife, when she was working at Harris Teeter.

Welch advanced to a fairly low-profile executive job at the bank, which later became Wachovia. But he had access to huge amounts of money, because one of his responsibilities at the distribution center was to approve the invoices submitted by contractors.

In 2000, remodeler Otto was doing work at Welch's house, including building a log-cabin playhouse for the kids worth $77,000, according to county records. That first year Otto submitted more than $600,000 in false invoices, prosecutors say.

Over seven years, Otto billed Wachovia for at least $2.6 million worth of remodeling and additions done for Welch and Welch's relatives, prosecutors say.

The co-defendants all knew Welch through work that their businesses had done for him or Wachovia. They didn't know each other, according to their attorneys. None has a criminal record, and only one was in financial straits before the fraud started. None say they are blameless, but they all paint Welch as the mastermind.

"This thing originated with Scott Welch," said Falls, the attorney for firefighter Cousar. "...He says, 'Hey, I know a way you guys can make some extra money, and I'll tell you exactly what to do, and I'll take care of it.'"

After he got the fraud rolling with his home renovations, Welch approached Cousar with a slightly different idea. He asked Cousar, who owned an office supply business on the side, to bill Wachovia for "moving services" that were never performed.

From 2001 to 2008, Cousar billed Wachovia for $5.9 million, according to the charges, and gave about half the money back to Welch.

"Once the door opened, it got thrown wide open by Welch, who wanted them to bill more and more," said Falls.

Said Murray: "In all of these it took two to tango in order for these false invoices to be generated and cleared."

In 2002, Welch approached Little, who owned a forklift company that had done some business with Wachovia. Welch had a new idea. He asked Little to start buying lawn mowers, golf carts, TVs, jet skis, gas grills and jewelry, and have them delivered to Welch's house. The bills went to Wachovia for "forklift rentals," prosecutors say.

Little's lawyer, Larry Hewitt, said Little believed the purchases were for Wachovia. He said Little viewed the offer as a business opportunity, because he could make a profit on marking up the items 10 percent or 15 percent, as is normal.

"Unfortunately he went about it the wrong way by providing these false invoices," Hewitt said. But, he adds, "He was just following Mr. Welch's instructions. That was his downfall."

From 2002 to 2008, Little billed Wachovia for $1.5 million in purchases for Welch.

Last, in 2005, Welch went to Dove, his landscaper for about a decade. Dove was struggling: He was in danger of losing his house, and he owed thousands to the IRS.

Welch had Dove start billing Wachovia for the landscaping work at his house, said Jake Sussman, Dove's lawyer. The two got extra money by also billing the bank for "delivery services" that were never provided, prosecutors say.

Welch was laid off from Wachovia during recession cutbacks in fall 2008. Shortly after, a Wachovia official discovered an irregularity with invoices submitted under Welch's watch.

'Dealing with the enormity'

The U.S. Postal Inspection Service, the IRS, and the N.C. State Bureau of Investigation are continuing to investigate the case. Documents filed Friday indicate more people could be charged.

Attorneys for all the defendants say their clients have cooperated fully and are remorseful. None of the co-defendants is working regularly.

"There's not really much business opportunity for him," said Sussman of Dove. "He's dealing with the enormity of what he's facing." Consumer complaints against his landscaping business have earned it an F rating with the Better Business Bureau.

Cousar, who resigned from the Charlotte Fire Department after charges were filed against him, has heart problems compounded by stress and depression, said Falls, his attorney.

Dwayne Owens, Welch's father-in-law, said Welch continues to apologize to his family. The couple's youngest children haven't been told of the crimes, but their high schooler has. "He's kind of quiet," said Owens, "but he knows what's going on."

Welch's now-vacant waterfront house is being forfeited to the government. There are cobwebs inside the mailbox. In April, someone broke into the dwelling and stole copper wiring, according to the Iredell County Sheriff's Department.

The family is also surrendering cars, Murray said, and Welch has moved his family to his mother-in-law's house, on a quiet Mooresville street.

"You couldn't ask for a better neighbor," said Machael Stephenson, who lives on an adjoining property. "He cuts my grass and takes my trash out."

Welch's mother-in-law has moved out of the home, and family members have converted the garage and dining room into bedrooms for Welch's children. When not looking for a job, he does extensive work around the yard, including planting new palm trees. Landscaping, said his attorney, is therapeutic.

Gary L. Wright and Maria David contributed.

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