SAN JOSE, CA -- A former vice president of 24 Hour Fitness and an advertising executive were sentenced to federal prison last week.
Susan Powell, who served as 24 Hour's vice president of marketing, received a 15-month sentence from U.S. District Judge Jeremy Fogel. Michael Johnston, who operated an advertising graphic design company called Transcend Advertising and Design, received a five-month sentence.
Both Powell and Johnston had pleaded guilty in February 2008 to fraud and tax charges after they were indicted in 2004, according to media reports. Specifically, the pair pleaded guilty to a charge to commit mail fraud. Powell also pleaded guilty to a tax evasion charge, and Johnson pleaded guilty to a charge of aiding in the preparation of a false tax return.
Powell and Johnston defrauded Fitness Holdings Worldwide, the former parent company of San Ramon, CA-based 24 Hour, of between $70,000 and $500,000 during an operation that took place between 1996 and January 2000.
Johnston submitted inflated advertising design invoices that were approved by Powell, who received kickbacks in return. Powell had told Johnston not to issue 1099 tax forms for the kickback money.
A source with knowledge of the events says that Powell was terminated upon the company's learning of her and Johnston's actions.
In addition to the prison sentences, Fogel also ordered Powell and Johnston to pay joint restitution of $350,000 to the company.
Fitness Holdings Worldwide sold 24 Hour to Forstmann, Little & Co. in 2005.