Michael and Daniel White.HOLLYWOOD, Md. (March 10, 2022)—Documents obtained by The County Times show that a St. Mary's prosecutor and Orphan's Court judge, Daniel and Michael White, who are defendants in a federal civil suit alleging fraud, embezzlement and theft of trade secrets against a marketing company that once employed them, are also named in a criminal complaint from the same company sent to county law enforcement authorities back in November.
Sources in county government with knowledge of the criminal complaint, which came months before a civil action filed by Compass Marketing, Inc. of Annapolis against Flywheel Digital, LLC, confirmed that the complaint was turned over to the Office of the Maryland State Prosecutor for further investigation.
The CEO of Compass Marketing, Inc. is John White, brother to both Daniel and Michael White.
Charlton Howard, III, Maryland State Prosecutor, said he could neither confirm nor deny any investigation of the criminal complaint.
St. Mary's County State's Attorney Richard Fritz said that he was aware of the criminal complaint, which had first been given to the St. Mary's County Sheriff's Office, and that it had been given to "an outside agency" for review.
"I'm conflicted out of it because one of my assistants is named in it," Fritz told The County Times.
Sheriff Timothy K. Cameron recently released a statement regarding the criminal complaint offered last year from Compass Marketing, Inc.
"On November 1st, 2021 a written complaint was received by the St. Mary's County Sheriff's Office from Compass Marketing Inc. alleging criminal activity took place within St. Mary's County by ex-employees of the company," Cameron's statement reads.
"States Attorney Richard Fritz was consulted who determined the complaint would be referred to the Office of the State Prosecutor for the State of Maryland.
"The Sheriff's Office is maintaining an open criminal case file on the matter in order to collect relative materials received by outside sources. However, there are no investigative efforts being made at this time by members of the Sheriff's Office."
The criminal complaint obtained by The County Times from sources close to the matter alleges that both Daniel and Michael White embezzled money from the company while employees there—and maintaining positions on the board of directors for the company—that was eventually used to start the competing Flywheel Digital, LLC organization.
Daniel White was defiant in refuting the allegations against him in a statement to The County Times.
"I assume that my brother told the sheriff the same lies that he wrote in his civil suit," Daniel White wrote. "They are the same false allegations that he has been repeating ever since the SEC began a securities fraud investigation involving his other business three years ago.
"They will be addressed in the proper forum."
"In May 2019 Compass Marketing set out to conduct a widespread internal fraud investigation," the complaint to St. Mary's law officers reads. "Upon issuing subpoenas, and a decision by the court in Arlington, Va. regarding the White's personal bank documents… the internal investigation findings have concluded that two individuals, Michael and Daniel White, starting in 2008 and continuing through 2021 conspired to embezzle Compass Marketing Inc. of more than $5.8 million.
"The embezzlement included multiple illegal bank accounts opened in Compass Marketing's name and spanned over 12 years including while the brothers were employed by the state."
Daniel White is currently employed as a Deputy State's Attorney in St. Mary's while Michael White is running for reelection as an Orphan's Court Judge.
The civil suit filed against Michael and Daniel White in the U.S. District Court in Greenbelt makes similar accusations but names several other defendants, to include Michael White's son George White, a Maryland State Trooper.
According to the lawsuit, the plaintiff alleges that the defendants used these ill-gotten funds and trade secrets to build up the opposing ecommerce business and sell it to a concern in the United Kingdom for $400 million.
Though the case has been filed in federal court, it is a civil case and not a criminal matter.
According to the legal brief filed Feb. 14, Compass is a marketing company founded in 1998 "prior to the rise of e-commerce platforms that fundamentally changed the way consumers interact with and purchase retail goods."
In 2011 it hired James DiPaula and Patrick Miller, also named as defendants, to run its e-commerce team, the lawsuit claims, and they became "trusted executives."
Compass did not know that DiPaula and Miller had launched Flywheel in 2014 and then subsequently resigned, taking much of the ecommerce talent with them who had been working for Compass, the lawsuit stated.
This was done using embezzled funds, the lawsuit alleges, and "trade secret information and proprietary business know how that rightfully belonged to Compass following more than a decade of intensive and expensive research and development."
Those embezzled funds were originally procured by Daniel White and Michael White, the law suit alleges, while all the defendants named in the suit concealed the alleged behavior so well that Compass personnel did not learn of it until 2020.
Before being dismissed by Compass, Daniel White served as the company's legal counsel, the lawsuit states, while Michael White was Vice President of Operations and Comptroller of Compass.
Both men owned 150 shares of Compass, legal documents state, or a 16.6 percent share of the company.
For more local stories from the County Times newspapers, visit https://countytimes.somd.com or find a copy on local news stands.