HOUSTON (CN) - Two sisters were federally charged with defrauding home décor retailer Garden Ridge of more than $2 million with phony customer injury claims.
Sandra Johnson, 47, surrendered to federal agents Monday.
Johnson's sister Natalie Jeng, 41, turned herself in Friday and posted bail that day after her arraignment before a federal magistrate judge, the U.S. Attorney's Office said in a statement.
Both women live in Katy, a Houston suburb.
Garden Ridge owns a chain of 65 stores in 21 states.
Johnson's job was to review claims by Garden Ridge customers who alleged they were injured in its stores, commonly called "slip-and-fall" claims, prosecutors said.
Johnson also had authority to order settlement payments for the claims.
The scheme came to light after Garden Ridge confronted Johnson about misusing her company credit card and she immediately resigned, according to a charging document
filed by IRS agent Ronald Simpson.
"Subsequent investigation of numerous 'slip and fall' type claims handled and approved by Johnson revealed that company files were largely devoid of any type of documentation normally associated with the claim review and approval process," the affidavit states.
"Further investigation including review of Johnson's company computer and social media Internet sites, revealed personal relationships between Johnson and some of the allegedly injured claimaints.
"In all Garden Ridge identified 26 claims involving $2,063,436.00 in settlement payments which it believed to be fraudulent."
Jeng played a key role in the fraud as she was employed by Hammerman & Gainer Inc., an administrator Garden Ridge hired to review its customer injury claims, and was in charge of Garden Ridge's account, Simpson says in his statement.
The document includes an account of Simpson's interview of D.F., a friend of Jeng's whom Jeng allegedly recruited to join the fraud.
D.F. said that after she confided in Jeng that she was on the verge of losing her home to foreclosure, Jeng told her that if she "was willing to make up a story about how she was injured in a Garden Ridge store and fill out some paperwork" she would get a settlement from Garden Ridge, according to the affidavit.
D.F. then went to Jeng's office at Hammerman & Gainer and filled out some paperwork with false information under Jeng's direction, according to the affidavit.
"Jeng entered the information into her computer at Hammerman & Gainer, and also made a phone call to Sandra Johnson," D.F. relates in the affidavit.
A few days later a $47,000 payment from Garden Ridge showed up in D.F.'s bank account. She withdrew all of it except her $10,000 share, then met Johnson and Jeng at a restaurant and gave the $37,000 cash to Jeng who passed it to Johnson, the affidavit states.
"Johnson counted the cash and told [D.F.] not to tell anyone about the transaction, unless her favorite color was orange. [D.F.] was able to identify both Jeng and Johnson from separate photo spreads as the women she met with at the restaurant," the charging document states.
D.F.'s story was corroborated by records obtained from Hammerman & Gainer and her banking records, Simpson says in the statement.
Two other women were charged as co-conspirators: Darlene Drummer, 42, of Fresno, Texas and Niesha Hall, 35, of Houston.
Drummer was arrested Thursday and Hall has a warrant out for her arrest but was not yet in custody as of Monday, prosecutors said.
Johnson was charged with wire fraud and money laundering. Jeng, Drummer and Hall were charged with conspiracy to launder money.
If convicted, they each face up to 20 years in federal prison.
According to the affidavit, Johnson concealed her criminal past to get hired by Garden Ridge.
She pleaded guilty to mail fraud and conspiracy to commit money laundering in 2007. In her plea deal Johnson admitted that while employed as a claims adjuster for The Hartford Insurance Company she had Hartford pay more than $1.7 million for phony claims to Houston medical clinics in return for kickbacks, according to the affidavit.
She was sentenced to a year and a day in federal prison and ordered to pay The Hartford $1.7 million in restitution.
Because she was indicted in that case as Sandra Washington Johnson, Garden Ridge did not did not find out about it.