Stuart Hamilton, owner of recycler Quality Checked Plastics Inc., said he was trying to help a family friend get on his feet after a prison term when he hired Steven Lind as a bookkeeper in 1991.
At first it worked well - Lind was well-liked and eventually was named president of the small PET and high density polyethylene recycling firm in Paynesville, Minn.
But not long after, prosecutors said, the former North Dakota banker orchestrated a six-year plan to take more than $200,000 from Quality, actions that ultimately put the company in bankruptcy.
Lind was charged Sept. 5 in U.S. District Court in Minneapolis with embezzling $15,400 from the company's pension fund, fraudulently obtaining more than $200,000 in money and property from Quality and not paying the company's federal taxes, diverting the money for personal benefit.
Lind, who served 11/2 years in federal prison in the early 1990s for bank fraud, is free on bond pending a Nov. 18 trial. His Minneapolis-based lawyer, William Orth, said he is studying the case.
``Is the missing money because there was a fraudulent criminal act or was it bad business decisions that occasioned the loss?'' Orth said. ``The government is arguing the first. I'm going to make a decision next week as to whether we are going to argue the second.''
Orth said he is reviewing a government offer to settle the case for a four-year prison term.
Prosecutors say that between 1994 and 2000, Lind paid himself more than the company's board authorized, fraudulently used company credit cards to make personal purchases, wrote himself checks from Quality and neglected to pay the firm's federal taxes.
He was able to cover the losses by fraudulently convincing the company's owners and financial institutions to put more money into the business, the indictment alleges.
The 18-count indictment does not say why Lind allegedly took the money, but it does say that he had a civil judgment of $444,000 levied against him in 1990. Orth said that civil judgment is related to Lind's prison term for bank embezzlement, but he said prosecutors are not alleging there is a connection.
The U.S. attorney's office in Minneapolis declined to comment.
Lind pleaded guilty in 1990 to embezzlement of bank deposits in North Dakota and filing a false income tax return, according to court records, and served time in a Duluth, Minn., federal prison. According to court records, he was ordered to pay $225,000 in restitution.
Hamilton, who acknowledges that he was not watching the business as closely as he should have, said Lind performed well and built up trust when he first worked there. Lind was very likable, and their families were close, Hamilton said.
Plus, Hamilton said, he did not see the bank fraud conviction as all that significant.
``I didn't figure he was supposed to be in prison in the first place,'' Hamilton said. ``It was a time of the savings and loan problems. ... It was a minor thing and they threw the book at him, for political reasons.
``If you knew the people and knew the family, you wouldn't believe otherwise,'' Hamilton said.
But, according to prosecutors, that trust was misplaced.
Hamilton said he and his partners ultimately grew suspicious, and found problems when they took a look at the books in February 2000. Lind quickly left for Ohio, and the company turned records over to police, who took time to build their case, Hamilton said.
Quality filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in May 2000, but emerged in September of that year and since has paid its creditors about 80 cents for every dollar of debt, Hamilton said. The company also is paying off back taxes of more than $180,000.
However, the firm has regained customers, and its business of producing recycled PET and HDPE flake is doing fairly well, Hamilton said. The company, which employs 15, is adding a second sorting line at a facility in St. Cloud, Minn., and plans to add five employees when that line opens, said Hamilton.
Hamilton, who said Quality's ``real, true future is about three to four years off,'' said he still struggles with feelings of misplaced trust he put in Lind.
``He manipulated people. It came back to haunt me,'' Hamilton said. ``I see the person and I see the face, and I can't put the action and the person together.''