First Security Bank and Utah Structural Coatings Inc. are suing three people for allegedly embezzling more than $270,000. The suit names up to 25 John Does.

But the defendants say they are the ones who are the victims.

According to documents filed March 2 in 3rd District Court, Jeff and Michael Phillips worked at Utah Structural Coatings (USC) from 1995 until January 2001. Part of Jeff Phillips' duties included turning in time sheets of all the employees under his supervision to the company's payroll agent and then distributing paychecks.

USC is a business that applies fire retardant to buildings and construction sites.

From January 1997 to Jan. 22, 2001, the Phillipses submitted false time sheets with the names of former employees or people who had never worked for the company, according to court documents.

The Phillipses and a friend, Jill Jensen, ended up pocketing $270,127 after collecting hundreds of checks issued by USC to fictitious employees, court documents stated.

But the Phillips brothers told the Deseret News they were set up. They said it was the owner of Utah Structural Coatings, Chris Utley, who told them to submit false time sheets. Utley was the one who collected the money, the Phillips brothers said.

Michael Phillips said Utley told him it was a "tax strategy." He said he didn't think it was illegal because Utley was receiving money that was already his.

Jensen is also named in the suit. She is accused of having an account at First Security Bank where many of the phony checks were cashed, according to court documents. The other checks are believed to have been cashed at Universal Campus Credit Union, documents state.

Attorneys for First Security and USC believe other co-workers may have helped the Phillipses submit false time sheets. They said those individuals may be added to the suit later.

The embezzlement scheme was discovered after the Phillipses were fired for an unrelated incident, court documents stated. After they were fired, USC noticed a sharp decline in the number of employees submitting time sheets, according to court documents.

The Phillipses said they were fired because they realized what they were doing was illegal and confronted Utley about it.

Attorneys for the plaintiffs called the scheme "extreme and outrageous and shocking to the conscience" in court documents.

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The Phillipses said after they were fired they contacted the U.S. Attorney's Office and the Salt Lake County Sheriff's Department. A detective with the sheriff's department confirmed he had been contacted by the Phillipses to investigate possible illegal activity at USC but said it was too early to release any details.

In the suit, USC wants all the money issued in phony checks repaid and any property turned over to it that may have been purchased with the embezzled money.

The plaintiffs are asking for $800,000 in punitive damages.


E-MAIL: preavy@desnews.com

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