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Fraud case rocks Lander, Catholic College

Wyoming Catholic College, located in downtown Lander fired Paul McCown, its chief financial officer, after he was accused of defrauding an investment firm out of $15 million. (Matthew Copeland / WyoFile)

September 7, 2021 by Ben Gose and Rone Tempest, WyoFile

When Paul McCown came to Lander from Michigan in 2018 to take over the finances of tiny Wyoming Catholic College, he quickly made a strong impression. He served on the town planning commission, became treasurer of the Lander Economic Development Association and told some he planned to run for the seat of longtime Wyoming State Sen. Cale Case (R-Lander).

Many were impressed with his fresh ideas and unbridled enthusiasm about the future of the ambitious young college, as well as his vision of the business potential of his new hometown.

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“He was just an outstanding CFO,” said David Kellogg, chairman of the college’s board. “He really understood the numbers, and presented them well to the board. He did a great job.”

His star burned brightest earlier this year when the 35-year-old Michigan native seemed to not only have the college’s finances in fine form — thanks largely to an anonymous $10 million donation — but also bragged that his personal wealth had soared from a side gig for which demand had exploded virtually overnight. He had toyed with distilling huckleberry gin in late 2019, but after COVID-19 struck, his business, McCown Enterprises, pivoted to hand sanitizer. Before long, McCown was boasting to Lander friends of multimillion-dollar deals to supply NFL stadiums and international airports, they said. 

His former landlord said her mouth dropped open when she learned McCown had purchased Kellogg’s sprawling ranch house in the Lander foothills in September 2020. McCown, his wife Jacinta, and their four children had rented a 5-bedroom, $1,200-a-month apartment, carved out of a former Assembly of God church building, during their first two years in Lander. There were few signs of affluence then; the landlord had seen all the mattresses on the floor and McCown was once so delinquent in paying a gas bill that it flipped back to her, she said.

Yet it quickly became clear that McCown was just getting started when he bought Kellogg’s house. He told friends he had taken a private jet to California, where he claimed to be considering a $3-million second home.

McCown may have made his biggest splash in March 2021 when he and Lander banker Kendall Hayford appeared before a group of civic boosters to propose an all-day summer street party for 10,000 people in Lander, with top music stars as entertainment. He mentioned Grammy-award-winning country and western singer Kacey Musgraves as an example of the kind of performer he was seeking for the blowout party.

He emailed the nonprofit Lander Ambassadors Inc. members that he had a big-time donor who had promised to spend at least $500,000 on the event, and said he was optimistic he could get the donor to “stretch that to $1 million.” 

Some of those who attended the meeting were dubious. “He wanted the Ambassadors to help produce it,” said Case , who was present. “He said he had a mysterious, anonymous donor who was going to make this happen. A lot of us thought this was really weird.”

What McCown did not tell the community organization was that he was already in deep trouble and that his life, his business and his work would soon be unraveling in ways that would shake the Lander business community, greatly embarrass the Catholic College and suspend the college’s ambitious plans to expand its downtown Lander campus.

Civil and criminal suits

According to allegations in a civil lawsuit and sworn testimony from an FBI agent, McCown carried out an escalating series of frauds, starting with applications for huge state and federal grants and loans during the first year of the pandemic, and culminating in an audacious scam this May, in which he persuaded a New York investment firm to advance him $15 million against his fictitious $750 million fortune.

“This is the story of a complex, calculated, methodical and fraudulent scheme,” the lawsuit, Ria R Squared v. Paul D. McCown and McCown Enterprises, LLC, reads, “orchestrated by an individual holding a trusted and respected position with the Wyoming Catholic College, to defraud R Squared out of the sum of $15 million.”

Locals believe the McCown case may go down as Lander’s biggest fraud ever, topping the painful memories many long-time residents still have of the prior benchmark — the 1980s failure of the John Vidakovich-led Yellowstone State Bank, for which Vidakovich was sentenced to four years in prison.

On top of the contested $15 million loan, McCown is in trouble with the feds. According to testimony from FBI Special Agent Jennifer McGrath, McCown’s fate is now in the hands of a federal grand jury in Casper, where he is under investigation for multiple counts of mail fraud, wire fraud, bank fraud, money laundering and “unlawful financial transaction” related to nearly $2 million dollars in COVID-19 relief grants and Paycheck Protection Program loans he obtained for McCown Enterprises. 

WyoFile made several unsuccessful attempts via telephone and email to reach McCown for comment. McCown’s attorney, Jason Tangeman of Laramie, said his client did not want to be interviewed at this time. However, the seriousness with which McCown takes the federal investigation was clear from his response to the complaint in the Ria R Squared civil case, in which he asserted his “privilege against self-incrimination as provided by the Fifth Amendment of the United States Constitution” 105 times. In support of this argument, Tangeman attached the affidavit of the FBI agent McGrath, listing the crimes before the federal grand jury. 

As part of the federal probe, the FBI seized three of McCown’s Lander bank accounts and subpoenaed Google, Inc., to supply emails and “subscriber information” associated with McCown’s email accounts.

A web advertisement for Sweetwater Spirits hand sanitizer. (Screen shot)

In his application for a $1.1 million federal PPP loan, which he received in February 2021, McCown claimed to have 81 employees, averaging $65,185 in wages. Six months earlier, in his application for a $15,385 PPP loan, he had claimed to have 12 employees. However, it is unclear whether McCown Enterprises ever had more than a handful of part-time employees — if any at all. McCown himself admitted that his boutique Lander Distilling (later renamed Sweetwater Spirits) never produced a single bottle of gin. On social media sites, McCown posed with bottles of what he claimed was hand sanitizer, but there is no evidence that he ever had any major contracts to sell it.

In all, McCown Enterprise received federal coronavirus relief aid totaling $1,957,246. This compares to $1,292,151 in federal aid received by Wyoming Catholic College, where McCown served as chief financial officer, including a $739,000 PPP loan (since forgiven), and grants worth $460,815 and $92,236. (WyoFile also received a $60,878 PPP loan, since forgiven, based on its then five full-time employees.)

The criminal statutes listed on June 16 by the FBI agent before U.S. Magistrate Kelly Rankin carry maximum penalties ranging from 10 to 30 years in prison and fines of $10,000 to $1 million. If convicted, McCown could face decades in federal custody.

The clues

The first sign that there were problems with McCown Enterprises came this February when an audit conducted for the Wyoming Business Council, a state agency that administered federal COVID-relief programs and gave McCown three grants in 2020, declared that McCown had failed to provide proof of the revenue that he claimed his company had earned.

Josh Dorrell, CEO of the Wyoming Business Council (Wyoming Business Council)

According to documents obtained by WyoFile, the Wyoming Business Council on Feb. 9 demanded that McCown return all of the $841,863 that he had received. The business council had been alerted to possible problems at McCown by at least five anonymous tipsters in Lander who had seen the stipends on a public list.

“As a community member,” one person told the WBC, “I do not believe that previous business history would allow such a large amount of relief funding.”

Josh Dorrell, the business council’s chief executive officer, said the money recovered from McCown can be reallocated as long as it is spent by the end of this year. Since Wyoming has no corporate income tax, Dorrell said, its system for gathering information about businesses is less coordinated than in other states. The business council tried to piece together information it obtained from the Secretary of State’s office and the Department of Workforce Services before approving grants, but it had to weigh the risk of fraud against the need to act quickly to help Wyoming companies.

“It’s like stacking Swiss cheese,” Dorrell said of the due diligence process. “If you stack enough slices, you patch up the holes. Unfortunately some alleged criminals seemed to be able to find ways through.”

The payback requirement from the business council may have motivated McCown to attempt what is alleged to be his biggest and boldest scam — obtaining the $15 million loan from the New York firm Ria R Squared.

In 2020, McCown had been introduced to the investment firm by Jonathan Tonkowich, Wyoming Catholic College’s vice president of operations, according to the civil lawsuit filed by Ria R Squared. When McCown first reached out, he told the firm that the college had a big gift coming into its endowment and would need the services of an asset manager. But in March 2021 — shortly after the Business Council demanded McCown return the funds — he started spinning a different story to David Kang, the investment company’s chief executive.

According to the lawsuit, McCown told Kang that he had suddenly come into substantial personal wealth and needed investment advice. In the weeks of paperwork that followed, McCown allegedly forged documents to suggest that his net worth was $750 million. He is accused of impersonating Kendall Hayford (his companion in planning the huge Lander party and a real banker at Wyoming Community Bank in Lander), as he strung Kang and others along in pursuit of his real goal — a large advance from Ria R Squared.

Students mill between Wyoming Catholic College buildings in downtown Lander Sept. 3, 2021. (Katie Klingsporn/WyoFile)

On May 5, according to court documents, McCown texted Kang to ask if his firm could provide a bridge loan of $10 million, to help cover a $26 million invoice that McCown Enterprises owed a supplier — more than the $16 million McCown claimed he had in his business account.

“Would it be at all possible to float the difference (~10) on a short term loan?” McCown wrote Kang. “I was planning to have everything funded by now, but as we know, Wyoming [Community] Bank is taking its sweet time.” McCown later bumped up the request to $15 million.

Wyoming bankers said Ria R Squared’s due diligence before transferring the $15 million was woefully inadequate. Like most small banks in the state, Wyoming Community Bank has nowhere near enough statutory capital to accept or transfer $750 million, the personal fortune McCown claimed to have deposited in the bank.

The one step the investment company took to independently confirm Kendall Hayford’s existence was to call the bank. The call went to Hayford’s voicemail which, in the caller’s mind at least, confirmed Hayford’s existence and his position. According to the complaint, after he heard the voicemail, Hayford called McCown to ask about the investment firm. The banker said McCown told him he had “no idea” why they were calling. McCown then quickly resumed using the fake email address that he had employed to impersonate the banker throughout the scam.

“One of my colleagues mentioned you got their voicemail,” he wrote to the investment firm. “The best number to reach me is 307-310-5096. Talk soon, Kendall.”

That was good enough for Ria R Squared. The next day, May 11, they executed the $15 million transfer to McCown’s account.

Following the money

Wyoming Catholic College board Chairman Kellogg said McCown’s performance slipped in his third and final year, and it’s easy to imagine that May 11 was not a productive work day for Paul McCown. Sen. Case pictures McCown sitting in his Wyoming Catholic College office, obsessively updating his online account at Wyoming Community Bank: Click…click…click…click…boom! The $15 million appears.

Sen. Cale Case (R-Lander) (Wyoming Legislature)

McCown wasted no time, the lawsuit claims. He immediately sent $10.5 million to a Goldman Sachs account set up in his and his wife Jacinta’s name, $10 million of which was subsequently transferred to Wyoming Catholic College as an anonymous donation. Most of the remaining $5 million, according to the lawsuit, was distributed to Tonkowich ($750,000); McCown’s father, Phillip McCown, Sr. ($375,000); a Michigan company, Trolan LLC, set up on McCown’s behalf by businessman Doug Tietz ($550,000); McCown’s brother-in-law and sister-in-law, Paul and Clair Alarcon ($750,000); and to the Wyoming Business Council to meet its payback demands ($841,863). According to the lawsuit, that left $933,137 of the money Ria R Squared transferred to McCown Enterprises still “unaccounted for.”

The money sent to Trolan and the involvement of Tietz are significant. In the summer of 2020, McCown hired Tietz’s firm, Great Dane Marketing Services, operating out of Tietz’s home in Troy, Michigan, to do a study of the college. Wyoming Catholic College Spokesperson Joseph Susanka confirmed that Tietz “has been a contracted consultant with Wyoming Catholic College since the spring of 2020, working primarily on recruitment and advancement marketing and publications.” Susanka said the college had no knowledge of the $550,000 that McCown had transferred to Trolan LLC from the $15 million Ria R Squared loan.

When the Tietz hire first surfaced in 2020, it puzzled some college staffers and at least one member of the college board of directors, who wondered why a Michigan firm was needed to do what had been previously done in-house, or which could have been better handled by local companies.

“I just thought,” said one person familiar with the Tietz situation, “What the hell are we doing going to some yahoo from Michigan when there’s lots of local talent in Wyoming?”

WyoFile made repeated unsuccessful attempts via voicemail to contact Tietz — who, like McCown, is a former member of the Troy city council — and his wife Amy Tietz, both listed as administrators of Trolan LLC.

Also unclear is what happened to the $15,385 and $1.1 million loans that McCown obtained through the federal PPP loan program. One of the accounts at Wyoming Community Bank that the feds seized in June was reported by FBI agent McGrath to contain $700,856.26.

Cutting ties

The college placed McCown on administrative leave in early June, after being contacted by attorneys for Ria R Squared. When the investment firm officially filed its lawsuit in late June, McCown resigned from the college.

He continues to live in Lander, and former associates said they are amazed by McCown’s untroubled demeanor in the face of his serious legal and financial challenges. “He still goes to church, and the guys at the college don’t know whether to say ‘Hi’ or not,” one associate said.

Hayford the banker said he was completely deceived by his former friend and had no knowledge of the fraud McCown allegedly perpetrated in his name.

Hayford told WyoFile he’d been instructed by attorneys not to discuss the case, but he acknowledged some frustration in watching McCown calmly engage in his daily routine, including a regular session at the gym across from Wyoming Community Bank.

After parting ways with McCown, the college engaged the Lander accounting firm Fagnant, Lewis & Brinda to conduct a review of its finances. (Fagnant, Lewis & Brinda has also served as WyoFile’s auditor.) In a statement, the college said the audit found no problems aside from the alleged fraudulent donation by McCown. The college declined to share the report with WyoFile.

“To experience such a profound breach of trust by a leader of our institution has been both embarrassing and painful for Wyoming Catholic College,” the school wrote on July 7. “However, the college found no additional financial irregularities, and the Wyoming Catholic College has neither been sued nor is a defendant to the suit.”

Numerous troubling questions, however, remain unanswered.

Tonkowich, the college’s vice president of operations, who received $750,000 from McCown, was also briefly placed on administrative leave after the civil lawsuit was filed, but is now back at work full time. He told other college officials that McCown led him to believe that the transfer of $750,000 was related to Tonkowich’s small ownership stake in McCown Enterprises, they said. 

Tonkowich declined to be interviewed, but shared a similar account in an email to WyoFile, stating that he was “unaware of the fraud” and that he was told by McCown that the “distribution [was] consistent with the 5% ownership stake I had in McCown Enterprises.” Tonkowich said he is working with Ria R Squared’s lawyers to return the money.

A college employee who asked to remain anonymous said that for the time being, Tonkowich is not allowed to handle any financial transactions for the college. Tonkowich remains president of the board at the Lander Chamber of Commerce, whose executive director, Owen Sweeney, also worked for nearly five years at Wyoming Catholic College. Sweeney did not return phone calls from WyoFile.

Wyoming Catholic College President Glenn Arbery (Wyoming Catholic College website)

The day after its press release about the fraud, college President Glenn C. Arbery, a classical scholar, invoked “Dante’s Inferno” to describe the situation at the college. He explained that the college intended to return the $10 million even though it had already spent some money on expansion plans that the huge gift had momentarily made possible. The college employee who asked to remain anonymous told WyoFile that the school had incurred $200,000 in new architectural and engineering costs for work that cannot currently move forward.

“Many people, by no means exclusively those of us at WCC,” Arbery wrote on July 8, “have been deeply hurt, both personally and professionally, by the fraudulent activity allegedly committed by Mr. McCown. As of today, the money is in the process of being returned, and we have revised our plans to begin the renovation of the Baldwin building—a project that had generated great excitement in our community and the city of Lander and was slated to begin as early as next month. We had already incurred expenses, especially for architectural plans, but—thanks be to God—we had not yet committed ourselves to a construction project.”

Town and gown

Even as many small private colleges struggle with declines in traditional-student enrollment, Wyoming Catholic College has beaten the odds and appears to be stronger than ever in its 16-year existence. Only a few years ago, college board chair Kellogg said, he was involved in weekly meetings where “we would wonder on Wednesday if we were going to have to close this thing on Friday.”

Recent tax returns — albeit ones signed by Paul McCown — show increasing tuition revenue and growing donations (although nothing like the $10 million gift the college thought it had, which would have matched the college’s total fundraising from all sources for the past four years). 

Wyoming Catholic College has managed to expand by pushing an “authentically Catholic” narrative that occasionally gains national media attention, and by promoting its incomparable surroundings — every freshman starts with a 21-day wilderness expedition in the Wind River Mountains. This fall’s freshman class, with 68 students, is the largest ever.

As the college has grown, it has purchased an increasing number of buildings in downtown Lander. “We plan to continue to grow in the coming years, so a physical plant that will support such growth is an obvious necessity,” said Susanka, the college’s vice president for advancement.

The corner of 3rd and Main streets in Lander is increasingly dominated by Wyoming Catholic College enterprises. (Matthew Copeland / WyoFile)

Recently unveiled plans for gaining control of a large block of real estate in the heart of Lander’s retail area around 3rd and Main streets have caused concern on two fronts. Would the increasing presence of nonprofit businesses — the tax-exempt National Outdoor Leadership School is another large employer and real-estate owner — undermine the property tax base that the city and county need? And would the amount of retail space in this vibrant area of downtown shrink radically if the college converted most of its acquisitions to administrative and classroom space?

At a community meeting this spring, college officials and their architects briefed the public about what the school could do if it were able to acquire additional buildings in the area — including some that weren’t currently up for sale. Some property owners with viable businesses in the targeted area  were “aghast at seeing the college discuss how those properties could be repurposed,” said Missy White, a Lander City Council member who also runs a management-consulting business.

The college’s expansion ambitions come at a time when broader questions are being asked about its hiring and financial-oversight procedures.

Shortly after McCown resigned, the college parted ways with Kyle Clement, its director of horsemanship. Multiple sources told WyoFile that Clement was dismissed because of irregularities in the bills he submitted to the college — all of which were approved by McCown. These sources told WyoFile that the Clement irregularities were discovered in the audit by Fagnant, Lewis & Brinda — despite the college’s initial claim that the audit had come back clean aside from McCown’s alleged fraud.

Multiple sources said McCown didn’t closely scrutinize Clement’s submissions, even when others in the accounting office suggested that the bills were inflated.

In 2013, Houston cardiologist David Blackwood and his wife, Sharon, successfully sued Clement and his wife, Valerie, and their Rimrock Land & Cattle Co., accusing the Clements of defrauding them in a cattle operation in Brazoria County. A civil court jury awarded the Blackwoods $747,505 in damages, which was confirmed on appeal.

In a telephone interview with WyoFile, Kyle Clement vehemently denied any inappropriate dealings with the college and claimed that in job interviews with Arbery, Tonkowich and McCown, he had made the college aware of his past troubles in Texas.

“They sought me out for the job,” Clement said. “I told them, ‘Look, boys, you need to know something first.’” He said Tonkowich followed up with phone calls to lawyers in Texas and, fully aware of the Blackwood case, hired him anyway.

He said that disputes over billing with the college have been resolved, and that his problems with the school owe to differences he has with two board members whom he declined to name for the record.

“I can tell you one thing,” he said. “There’s more two-legged wolves in this place than I could ever have imagined.”

Accountability

Observers suspect a combination of factors may be contributing to the college’s troubled record in hiring and overseeing employees. First, WCC faces the same challenge many businesses in Wyoming encounter: the applicant pool of trained and experienced professionals is often shallow. On top of that, a former top officer at the college said the school’s brand of “conservative Catholicism” tends to engender faith in new hires, rather than the healthy skepticism that is sometimes needed.

“It can be a little cultish, and there can be a little bit of a suspension of disbelief…” the former officer said. “I think there was a lot of that going on with Paul… he came in, he’s perceived as a savior, and a lot of people just were looking the other way.”

Aside from Arbery, who many praise for his moral and academic leadership, the college is led by a relatively young group of administrators, many of whom, like McCown, are graduates of Thomas Aquinas College in California. Tonkowich, Susanka and Kyle Washut, the dean of students, are also Aquinas grads.

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Some people within the college and in the city of Lander wonder if the perceived “insular” nature of the leadership team, and an associated lack of transparency may have played a role in allowing the McCown imbroglio to occur. 

An increasing number of Lander residents are calling on the college to release more information so that the college and Lander can move forward.

“I do not think we are close to finding out the depth of this story and the connections and damage within the community,” Sen. Case said.

As for McCown, plenty of questions remain about what he hoped to achieve through an alleged escalating fraud spree that included some confounding moments — such as immediately donating a huge chunk of the funds he obtained.

“What was he thinking? That’s the $64,000 question,” Kellogg said. “Nobody has any idea. I can personally understand embezzling $15 million, but I can’t understand and have no idea what he was thinking when he donated $10 million to the college.”