Some of the founders of Flying Ace Farm Distillery and Brewery and Droumavalla Farm events venue have been indicted by a federal grand jury in Texas in an alleged multi-million-dollar fraud scheme.
Edward Walsh Vaughan, of Droumavalla, and Hadi Akkad, of Flying Ace Farm, were indicted on charges of conspiracy to commit wire fraud and money laundering. According to the indictment, the Justice Department will seek criminal forfeiture, meaning properties they purchased during that time—including Droumavalla—could be seized.
According to the U.S. Department of Justice and Eastern District of Texas U.S. Attorney Brit Featherston, Vaughan and Akkad were among the executives and company leaders at Electronic Transactions Systems Corporation, which is alleged to have defrauded approximately 7,000 merchant clients out of millions of dollars.
Also indicted were Jill Hall Mandichak, 43, of Virginia who owns a Loudoun-based photography business; Sean Lynch, 50, of Virginia; Katherine Nguyen, 38, of North Carolina; and Gina Ellingsen, 43, of Minnesota. They were charged with conspiracy to commit wire fraud.
According to the Department of Justice, ETS was a card processing company, facilitating credit card transactions between banks and the businesses accepting the credit card for payment. They provided equipment, software and services. Their clients included government municipalities, private businesses, and charity organizations throughout the country.
Federal prosecutors allege that between 2012 and 2019, at the direction of ETS President Ed Vaughan, the defendants defrauded ETS merchant clients by disguising a portion of their processing fees for thousands of clients. Akkad was executive vice president.
According to the indictment, ETS told merchant clients that they were using a kind of pass-through pricing, where merchants are changed a standard interchange fee set by the credit card companies, plus an ETS markup. ETS then added an additional, hidden markup to the interchange fees. Nearly 87 million credit card transactions were affected.
One such client was the City of Sherman, TX, where the case is being prosecuted. It is being investigated by the FBI’s Washington Field Office and prosecuted by assistant U.S. attorneys in the Eastern District of Texas.
Prosecutors say Vaughan and Akkad used that scheme to enrich themselves with multimillion-dollar bonuses, luxury vehicles, private aircraft and high-end real estate purchases. ETS was sold in 2018, with Vaughan receiving approximately $107 million, and Akkad receiving approximately $33 million.
Court documents filed by the Justice Department also say that Vaughan brandished a gun at a process server attempting to serve him, and that he faces allegations of harassment, intimidation, and sexual assault from eight potential witnesses in the case, including two of his co-defendants.
According to a motion seeking to prevent his pretrial release, one former executive said Vaughan kept a handgun in his office and used steroids. Another said they saw a hole he punched in his office wall after an argument, and another said, “the company was run on fear and the reason people stayed was because they were overpaid.” Prosecutors also say law enforcement identified eight potential victims of sexual assault or harassment, seven of them employees, one of them the wife of an employee and two of them now co-defendants.
If convicted, the defendants each face up to 30 years in federal prison, along with fines up to twice the money they gained through those offenses. The justice department is also seeking forfeiture of Droumavalla Farm along with two properties near Leesburg and properties in Reston; Pebble Beach, CA; Malibu, CA; and Washington, DC.
Loudoun Now has reached out to Vaughan, Akkad and their attorneys for comment.