|Chicago Metallic Corporation files racketeering suit against Cozzi family members
Chicago Metallic Corporation (CMC) and its subsidiary, Chicago Finished Metals (CFM) have filed a lawsuit against Frank J. Cozzi, Gregory P. Cozzi and Terri Cozzi-Freeman.
The defendants are charged with violations of the racketeering and corrupt organizations act (RICO), common law fraud and bribery. CFM is seeking compensatory damages, triple the amount of compensatory damages, costs including reasonable attorneys’ fees and further relief the court deems just.
At the time of the alleged improprieties, Frank was president, Greg was vice president of industrial sales, and Cozzi-Freeman was supervisor of accounts payable of Metal Management’s Midwest division (MTLM-Midwest). All three were removed from their positions in January, 2004.
After the Cozzi family members were forced out, substantial sums of cash were found in a safe in Cozzi-Freeman’s office. Documents in the safe also raised concerns about the Cozzis’ business practices while at MTLM-Midwest.
New management at MTLM-Midwest conducted an audit which revealed that accounts payable staff cut multiple checks, each less than ten-thousand dollars, in an apparent attempt to avoid the federal cash reporting requirements when these checks were cashed at currency exchanges.
MTLM reported these potential violations to the United States Department of Justice. It also notified CFM that it had discovered fraudulent payments made to apparently fictitious persons for scrap metal taken from CFM. MTLM reported to CFM that there was a fraudulent transfer of 2.8 million pounds of scrap metal.
Court documents state that the defendants and a CFM employee formed a conspiracy to defraud CFM of monies due for scrap metal shipments. As part of the scheme, Greg Cozzi induced Tim Eischen, then traffic manager and warehouse supervisor at CFM, to participate in the conspiracy. Part of Eischen’s job at CFM was to report how much scrap was hauled away. His role in the conspiracy was to underreport that amount.
To underreport the scrap, Eischen would falsify bills of lading, fail to document entire shipments, or destroy existing documentation for entire shipments of scrap metal.
Each month, Eischen called Greg Cozzi and told him what he believed was the quantity of scrap metal underreported, and Cozzi would personally pay Eischen in cash.
Greg Cozzi, with the assistance of Terri Cozzi-Freeman, would adjust MTLM’s records to underreport the amounts of scrap metal taken from CFM.
MTLM-Midwest employees including Greg Cozzi and Terri Cozzi-Freeman issued checks to fictitious individuals as purported payment for the unreported scrap metal from CFM. The checks were cashed at a currency exchange, and the cash was allegedly used to finance the conspiracy, to pay Eischen, and for the defendants’ personal use.
After being removed from his position at MTLM-Midwest, Greg Cozzi told Eischen not to discuss the conspiracy with anyone. Eischen continued to underreport the scrap metal, and in May, 2004, he received a check in the amount of $7,900.23 and was told to cash the check at a specific currency exchange. In June, 2004, Eischen was given a check in the amount of $3,726.70. He was then told that he would no longer be paid for underreporting scrap metal.
While Frank Cozzi’s specific actions are not detailed in the suit, he is said to have closely supervised Greg Cozzi and Terri Cozzi-Freeman, worked in close proximity to the accounts payable department, and frequently signed checks to suppliers, including checks that were later cashed at the currency exchange.
Albert Cozzi was not named in the suit.
When asked for his comment, Albert Cozzi said, “I never heard of the customer until the charges were alleged.” He also noted that Frank Cozzi had already made a similar statement. Others involved in the case either declined to comment or could not be reached.
Albert noted that he would be willing to make comments regarding another case, if it was settled by press time. In that suit, MTLM filed a complaint against Albert, Frank and Greg Cozzi seeking damages from Frank and Greg for “designing, implementing, and maintaining cash payment practices that violated company policy and potentially federal law,” according to SEC filings. The complaint also alleged that the defendants breached the non-competition and non-solicitation provisions of their separation and release agreements.
The Cozzis moved to dismiss the complaint or compel arbitration, and also filed a counterclaim seeking recovery of unpaid employee severance payments of approximately $1.2 million. As of press time, the suit had gone into arbitration, but has not been settled.