Embezzling Millions, Extortion, Tax Fraud, Stealing Trade Secrets: SOMD Officials Named In Federal Complaint

LEONARDTOWN, Md. – A complaint recently filed in the United States District Court of Maryland has named the Chief Judge of the St. Mary’s County Orphans Court, a St. Mary’s County Deputy States Attorney, a Maryland State Trooper, among several other notable Defendants, and is alleging the loss of hundreds of millions in lost revenue from an eCommerce business that was built off years of stolen trade secrets and intellectual property.

The complaint is brought by the Annapolis-based Compass Marketing against seven defendants. Honorable Judge Michael White, his son (a Maryland State Trooper) George White, and St. Mary’s County Deputy States Attorney Daniel White have all been named as defendants in the suit being brought by Michael and Daniel’s brother, Compass Marketing CEO John White.

In addition to the White family, former Maryland Governor Robert Ehrlich’s Chief of Staff James “Chip” DiPaula, Anne Arundel County resident Patrick Miller, Flywheel LLC, and U.K.-based business, Ascential, have also been named as defendants.

Compass says in the complaint that they are seeking “redress for extensive, pervasive, wrongful, and actionable misconduct committed by each of the named defendants, including years of covert trade secret theft, that has inflicted grievous financial harm” to the company.

The complaint goes on to detail how DiPaula and Miller, both of which were former executives at Compass, were trusted with running the eCommerce arm of the company. The pair were operating with what the filing called “Compass’s most sensitive trade secret information and proprietary business know-how.” They would go on to allegedly embezzle money through Compass executives Daniel and Michael White to launch a competing business known as Flywheel.

Those four mentioned would then allegedly conspire to hide their “actionable misconduct,” which would lead to additional impacts to Compass.

After competing with Compass for a few years, Flywheel would be acquired by the United Kingdom company Ascential for approximately $400 million. The complaint alleges that Ascential should have known the origins of how the company came to be and may have disregarded facts by focusing on potential financial outcomes.

“Ascential rewarded the theft and misconduct by paying up to $400 million to acquire Flywheel, with an upfront payment of $60 million and the possibility of as much as an additional $340 million based on contingencies tied to aggressive growth performance metrics,” the complaint says. “The structure and payment terms of the Ascential acquisition of Flywheel created a strong financial incentive and motive for Flywheel to continue its fraudulent concealment and its poaching of Compass clients.”

Back on October 25, 2018, five days before the public announcement that Flywheel would sell to Ascential, Michael White allegedly sent out a company email “disparaging [CEO] John White.” On November 23, 2018, John White fired Daniel and Michael and allowed them to remain on the Compass Board of Directors with a minority ownership stake in the business. The two would later be removed from the Board in February of 2019 after a special meeting. Their termination and removal would be followed by Compass conducting a criminal investigation into their behavior.

Through that investigation by a forensic fraud examiner and a criminal investigator, 14 years of “substantial mail and wire fraud, money laundering, embezzlement, and attempted extortion” were allegedly perpetrated by Daniel and Michael.

Since 2008, the two St. Mary’s County officials allegedly “knowingly engaged in a pattern of egregious behavior,” including: 

• Fraudulently representing their ownership interests in Compass 
• Stealing money for fraudulent severance payments to DiPaula and Miller, which were later used to operate Flywheel
• Laundering money to their unauthorized bank accounts
• Embezzling pension fund benefits to three unauthorized employees
• Embezzling unwarranted “tax checks” 
• Fraudulently claiming they issued loans to Compass to get reimbursement checks 
• Filing lawsuits with the U.S. Department of Labor to cause financial harm and reputational damage

“It is clear from the schemes discovered and detailed below that Daniel and Michael exploited Compass and used Company funds to finance a life of luxury for themselves and their immediate family members,” the complaint says. “Daniel and Michael repeatedly violated their fiduciary duties to Compass and elevated their own wants and conveniences above what was in the best interest of Compass, its clients, and its many employees. After Compass removed Daniel and Michael as directors and employees, Daniel and Michael orchestrated a far-reaching cover-up of their wrongdoing, and they set out on a revenge campaign intended to destroy the Company and punish their brother John for removing them from Compass.”

Additionally, since April of 2019, George and Michael White have allegedly locked Compass out of the domain address “compassmarketinginc.com,” holding business accounts and records hostage. The complaint lists George’s demand for a raise, additional benefits, and severance as the reason for the “IT Lockout” and has claimed he is committing extortion.

The complaint lists out 23 separate charges and is seeking a trial by jury for damages laid out. The complaint was submitted by Steven A. Luxton, Esq. of Morgan, Lewis & Bockius LLP.

Read the full complaint below:

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