Fraud factor: How a con man stole millions in a payroll-lending scheme to buy Bentleys, plastic surgery and a cafe

By Lukas I. Alpert

Mickey Lee Wagner found a loophole in how factoring companies work and used it to steal $5 million. After he was indicted, the feds say he did it again. Now he's going to prison.

They didn't factor fraud into the accounting.

A career con man exploited a loophole in the system used by short-term lenders to front money to small businesses to help them cover payroll - stealing $5 million which he then spent on fancy cars, facelifts and even a cafe, prosecutors say.

Mickey Lee Wagner, 57, of Atlanta, created a fake billing scheme which he used to scam lending outfits known as factoring companies out of millions, prosecutors said.

"Wagner took great measures to create the fraudulent billing scheme to use these companies like his personal ATM," said Keri Farley, the FBI's special agent in charge in Atlanta "His actions not only harmed businesses, but also the victims of his identity theft."

On Wednesday, Wagner - who was also known as Clifton Leigh Wagner Martin, Leigh Wagner, Michy Wagner, Lee Wagner and Dr. Leigh - was sentenced to seven years and 10 months in prison after pleading guilty earlier this year.

A message left with Wagner's attorney wasn't immediately returned.

Wagner had initially been indicted on the charges in Atlanta in 2022 but then went on the lam before being caught a year later in Kansas City, Mo. In the interim, prosecutors say Wagner bilked another factoring company in Minnesota out of $750,000 using the same scam.

Wagner has had several fraud convictions in the past and previously served time in federal prison following a 2001 fraud conviction in Missouri.

According to court filings, Wagner started his latest fraud by opening a personnel company in 2018 called Right Step Staffing, which purportedly provided temporary employees to other businesses.

He then entered into a contract with a factoring company based in Fort Lauderdale, Fla. called Prosperity Funding, Inc.

Factoring companies work by buying outstanding invoices from small-and-medium-sized businesses to help solve cash flow issues. Prosecutors said that temporary worker companies often use these services to help smooth over gaps between when they receive money from the companies they provide employees to and when they actually need to make their own payroll.

The factoring companies front the money to the employment company and then later collect the payment from the other business. The factoring company takes a fee for this service.

Prosecutors said Wagner soon began submitting invoices to Prosperity claiming he had contracts to provide temporary workers to companies like supermarket giant Kroger Co. (KR), logistics firm Materials in Motion, battery maker Duracell and consumer product manufacturer, the Clorox Company (CLX).

But the documents were a fraud, prosecutors said, as Right Step Staffing had no such deals with any of the companies. As part of the scam, Wagner submitted payroll information for purported employees by using stolen identities, prosecutors said.

Over the course of seven months, prosecutors say Wagner submitted $6 million worth of phony invoices. Based on the fraudulent documents, Prosperity paid him $5 million before discovering the fraud.

Prosecutors say Wagner used the money to buy a fleet of luxury cars including a $350,000 Bentley Flying Spur, several properties, plastic surgery, a cafe and tickets on a Royal Caribbean (RCL) cruise.

Since the fraud, Prosperity has been acquired and is no longer a standalone company.

-Lukas I. Alpert

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-18-24 1429ET

Copyright (c) 2024 Dow Jones & Company, Inc.