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Mike Story indicted by grand jury
Published December 11, 2007
SEGUIN — A prominent Seguin businessman has been indicted on charges that could send him to prison for the rest of his life.
The Guadalupe County grand jury met in special session until after noon on Monday.
Afterward indictments were handed up against James Michael Story — known locally as Mike Story — for six counts of making false statements to obtain more than $200,000 in credit, one count of misapplying more than $200,000 to his own benefit and another of failing to deposit tens of thousands of dollars withheld from employees into their 401K retirement accounts.
If proved at trial, the first six allegations, technically called securing the execution of a document by deception, are first-degree felonies punishable by five to 99 years in state prison and a fine of up to $10,000.
Misapplication of more than $200,000 in money of fiduciary property is also a first-degree felony.
Misapplication of between $20,000 and $100,000 worth of money or property is a third-degree felony punishable by two to 10 years in prison and a $10,000 fine.
A warrant for Story’s arrest was issued shortly after 1 p.m. Monday.
An official with the Guadalupe County Jail said shortly before close of business Monday that Story had not been taken into custody.
Guadalupe County District Attorney Vicki Pattillo does not comment on ongoing criminal cases before they are adjudicated, and does not discuss any proceedings before the grand jury. Pattillo did not confirm or deny the indictment when reached Monday.
Texas Assistant Attorney General Harry White, seen in the Guadalupe County Courthouse on Monday, also offered no comment on reports that Story had been indicted. Tom Kelley, spokesman for Attorney General Greg Abbott, also declined comment Monday.
“There’s nothing we can say about this at this point,” Kelley said.
Court documents reveal Story, whose former Story Communications Seguin headquarters was raided by investigators for the attorney general in July, was indicted in connection with business dealings here in Seguin in which he allegedly lied to his bankers and deceived his employees and partners.
The indictment for lying to secure credit cites six specific incidents between Oct. 31, 2003, and Feb. 28, 2006, in which Story allegedly misled First Commercial Bank by inflating the value of money owed his corporation by his customers, known as “receivables.” The accounts receivable were used to secure a line of credit at the bank.
A second indictment, for misappropriating more than $200,000 from Seguin Media Group, indicates the money was moved from Seguin Media Group to two companies Story owned independent of the partnership or to his personal use.
The third-degree felony indictment alleges he misapplied money withheld for the 401K accounts of 19 employees between 2003-06.
Story owned Story Communications and Webstar Printing, and was a partner in the Seguin Media Group — owners of KWED.
Story Communications was bankrupted in 2006 and reportedly closed down this past summer. His printing facility was turned over to the Seguin Economic Development Corporation, which provided Story Communications with a $465,000 cash grant and a $1.1 million loan in 2001. Under terms of his agreement with Seguin, Story was supposed to have 140 employees making $4 million by August 2006.
In July 2006, the SEDC declared Story Communications in default on its economic development agreement.
The Chapter 7 bankruptcy filing listed assets of $2.3 million and debts of $4.3 million.
Allegations regarding Story and the demise of his businesses have circulated in Seguin for months.
Law enforcement officials familiar with the case say the attorney general’s office was called into the investigation early on because Seguin police had a conflict of interest investigating potential crimes that could involve city funds through the SEDC.
Then, the state investigation was reportedly delayed while Abbott’s office diverted investigation resources to a sexual abuse scandal in the Texas Youth Commission last year.
In July, investigators with the attorney general’s office searched the former Story Communications office on North Camp Street here in Seguin — a building which is about to become the new home of the Seguin Area Chamber of Commerce.
The affidavit seeking the warrant for that search was filed by Lt. Tom Loper of Abbott’s Criminal Investigations Division, which investigates money laundering, financial fraud and other white collar crimes.
During his investigation, Loper wrote that he’d interviewed former Story Communications employees along with employees of The Retirement Advantage, Guardian Pension Group, Paychex, the payroll company that handled Story Communications payroll accounts, as well as First Commercial Bank, and that the results of his investigation revealed that Story mishandled money withheld from employee’s paychecks to be credited to their 401K retirement program accounts and misled the bank in seeking a $700,000 line of credit.
In a 401K program, pre-tax funds are withheld from an employee’s paycheck to be deposited in a retirement account. By 2004, a former Story Communications employee told Loper the quarterly statements Guardian sent to the company were no longer being distributed to employees. In 2005, when the employee still could not get the records from her employer, she contacted The Retirement Advantage and Guardian Pension Group and got them.
“The statements showed inadequate or no deposits for numerous quarters during this period,” Loper wrote. “A review of the payrolls provided by Paychex shows that money had been withheld during this period from (the employee’s) paycheck for the 401K.”
In all, the document alleges, $25,500 was not deposited as required by federal laws.
The money allegedly misapplied from KWED/The Seguin Daily News, came after the purchase of the media property by SMG in 2001. Story, Loper wrote in the affidavit, owned more than 50 percent of SMG and was named general partner.
Under terms of the partnership, Loper wrote, Story was not allowed to engage in any acts that would ... “make it impossible to carry on the ordinary business of (SMG) or to possess property of (SMG) or assign the (SMG’s) rights in specific property for other than partnership purposes.”
During the time Story and Story Media were general partner in the operation, Loper alleged, the contents of KWED’s bank account ... “were regularly moved to either a Story Communications or a Webstar account with no benefit accruing to KWED.”
Loper said the transactions were not in keeping with the agreement between the partners.
“These transactions were in contravention of the partnership agreement because they both left KWED financially vulnerable and used partnership assets for other than partnership purposes by sustaining Story Communications and Webstar,” Loper wrote.
Review of bank statements showed “extensive and constant transferring of funds between the SMG accounts and those accounts under the control of James Michael Story,” Loper wrote in the affidavit.
“However, it was found that the total volume of transfers from the Seguin Media Group accounts to the Story Communications and Webstar accounts exceeded the volume of transfers from the Story Communications and Webstar accounts to the SMG accounts by $866,979.79.”
According to financial ledger documents for 2005 and 2006 provided to investigators by KWED, Story Communications owed KWED $210,634.70 for those years.
Loper said he hoped his search of Story’s office would reveal similar ledgers for 2004 that were not available from KWED.
Officials have not released a list of what, if anything, was removed from Story’s business in the search. The warrant authorized investigators to seek computer and business records.
The third allegation Loper makes against Story is that his employees at his direction falsified “accounts receivable” documents which were intended to secure a revolving $700,000 line of credit through First Commercial Bank.
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