Guild Group VP-Comptroller Phillip Liu last week pleaded guilty to embezzling nearly $1.4 million from the White Plains, NY-based promotions agency.

Charges filed in U.S. District Court in White Plains alleged that in 2003, Liu withdrew a total of $1.03 million from the employee benefit plan, and between 1998 and 2004, he neglected to deposit another $351,000 into the plan, according to the U.S. Attorney for the Southern District of New York.

Employee participants didn't authorize the withdrawals or benefit from them, U.S. Attorney David Kelley said.

The $1.4 million was more than 50% of the benefit plan. Guild Group CEO Victor Ayala and Liu were trustees on the account. Ayala said he got quarterly statements from Liu, but not directly from the financial institution handling the fund.

Ayala has hired forensic accountant firm Lazar, Levin & Felix, New York City, to review the plan. Insurance may cover some of the loss. Guild has 75 staffers and it is unclear how many current and former employees participate in the fund. Guild Group ranked No. 40 in the 2004 PROMO 100, with 2003 net revenues of $9.1 million, up 1% from 2001.

"This incident doesn't make a material impact on the company," Ayala said yesterday. "We're strong enough to fix it. We have strong new business and 24 years of goodwill [with clients], which I never thought I'd have to cash in on."

Liu will be sentenced Sept. 9; he faces up to five years in prison and $500,000 in fines.