Exec charged in $1M fraud - Over nine years, $982,686 allegedly taken. Ex-president reportedly gave company cash to paramour.

January 13, 2006
By MEGHAN SMITH
The Express-Times

The former president of a Lower Saucon Township mineral wool manufacturer was arraigned Thursday on charges he embezzled nearly $1 million from the company between 1993 and 2002. Court documents say 57-year-old John Folck, of New Tripoli, took $982,686 from MFS Inc., and its subsidiary Eastern Land & Resources, during his nine-year term as company president. Investigators say he issued unauthorized checks to himself and used MFS funds to cover private expenses. Records say $379,410.25 of the amount taken was given to Kelly Castaneda, who now lives in Snow Hill, Md. Investigators allege Folck was having an extramarital affair with her.

Castaneda, formerly Kelly Minnich, who was not an employee of MFS, received bi-weekly paychecks and medical coverage from the company from 1994 through 2002, records say. During that time Folck secured a cell phone for Castaneda, allegedly using company funds to pay the $300 per-month bill. On the company's tab the former president hired a private investigator and an attorney to help Castaneda settle a child custody dispute, according to police.

He also wrote checks for more than $10,000 to "KT Marketing" -- a fictitious company traced to Castaneda, court records say. Folck was arraigned before District Judge Elizabeth Romig Thursday on one count of theft and was released on $250,000 unsecured bail. He gave up his right to a preliminary hearing and is scheduled to appear before Northampton County Court Feb. 16.

Castaneda was also arraigned Thursday before Romig on one count of receiving stolen property, and was released on $100,000 unsecured bail. Her preliminary hearing is scheduled for Jan. 19. No one answered the phone at Folck's Weisenberg Township, Lehigh County home Thursday. Attempts to reach Castaneda were unsuccessful.

An answering machine at MFS Inc said the office was closed for the day at 4 p.m. Thursday. The manufacturing company, also known as Mineral Fiber Specialists, is on Easton Road on former Bethlehem Steel Corp. land. The company manufactures products used in ceiling tile, insulation and fireproofing.

In December, U.S. Attorney Patrick Meehan and the U.S. Environmental Protection Agency filed a civil complaint against MFS Inc., seeking an injunction and civil penalties for violations of the Clean Air Act. The complaint said the company has not met testing standards and emissions limits that were to be in effect no later than June 2003. The emission standard specified refers to hazardous air pollutants such as arsenic and lead. According to the EPA, the company is the only mineral wool manufacturer in the country that has not complied with the standards.

In 2004, former company controller Ralph Klotz alleged top MFS executives threatened to kill him if he revealed the company's unlawful business practices. His suit alleged executives took "decadent" trips to Atlantic City using company funds, and added a prostitute to the payroll. Klotz, who was fired from the company in 2003, also said the company participated in fraudulent accounting practices.