Former Cystic Fibrosis Foundation Employee Sentenced To 10 Months

A Rockville, Md., man was sentenced to 10 months in prison and three years of supervised release for his role in a scheme involving stolen IT equipment and fraudulent invoicing during his tenure at the Cystic Fibrosis Foundation (CFF).

Lowell Meredith Sherman, 51, also was ordered to pay $200,000 in restitution, according to a spokesman for the U.S. District Attorney’s Office for Maryland. He was sentenced nearly 18 months after pleading guilty to wire fraud conspiracy to defraud the Bethesda, Md.-based nonprofit. The former CFF employee had been facing up to 20 years in prison for wire fraud related to a 2014 murder-suicide. Sentencing was postponed at least three times, most recently from February to May.

Sherman was employed at CFF from 2005 through January 2010 and again from June 2013 through October 2014. Between April 2011 and August 2014, Sherman and a co-conspirator — believed to be Andrew Racca — purchased unneeded electronic devices, including hard drives and memory tapes, without authorization. The two later sold them online, using email to communicate with potential buyers and used online payment companies to accept payment and distribute payments amongst themselves.

Sherman was director of enterprise applications and Racca was a senior systems engineer and director of network operations at CFF. Racca was suspected of murdering the wife of a CFF executive who confronted him about the theft before allegedly killing himself in October 2014.

According to a press release from the U.S. Attorney’s Office announcing the guilty plea in December 2015, the loss as a result of Sherman’s conduct was estimated to be $292,593.75. Sherman admitted the amount of loss “reasonably foreseeable” to him was at least $120,000. The exact amount of loss was to be determined at sentencing and as part of his plea agreement, Sherman agreed to a restitution order in that amount.

CFF recovered $1.1 million of the misappropriated funds through its insurance company, according to a spokesperson. The organization reported a “significant diversion of assets” on its federal Form 990 for the Fiscal Year Ending 2014: “During the year, the organization’s internal controls detected misappropriations of foundation assets, which amounted to approximately $1.47 million. The misappropriations were carried out from 2010 to September 2014, with approximately $1.233 million of the losses incurred between January and September 2014.

Misappropriations involved IT equipment stolen by two employees and fraudulent invoicing by a vendor and employee, according to the Form 990. “Upon discovery, the foundation immediately notified the audit committee of the board of trustees who engaged an independent law firm to investigate the schemes. The individuals involved are no longer employed by the foundation and the foundation has terminated its business relationship with the vendor involved in the fraudulent invoicing.”

“The foundation is cooperating with law enforcement officials in support of prosecution of any individuals who have violated the law. The foundation has filed claims with its insurance company and corrective actions have been instituted.”