Oklahoma Embezzlement Case

1. Oklahoma Embezzlement Case Kelly Baker Sue Bordeaux Oklahoma State Department of Health

2. Embezzlement Presentation Goals • Describe the case • Circumstances • What to expect • Problems • Solutions

3. Not So Happy Days

4. Let’s Meet Richie • Trusted employee 17 yrs • Loved by staff • Front Desk Supervisor • Provide system access • Receipt fees • Daily deposits • $ to Accounting Services • Bad checks/refunds • Little oversight

5. Hindsight: December 2005 • Richie requested mtg with Registrar • Admitted to taking work documents home • Catching work up • Divorce pending • Wife took documents • Legal Div negotiated return of documents • LWOP 1 wk

6. Lingering Questions • Returned documents odd assortment • Dates of the documents • Types of documents • Envelope’s appearance bulged beyond what contents were returned • Question: what was missing? • Upon return, Richie checked to verify he still had access to safe • Brief Audit review • No internal controls • Would we be able to find anything?

7. New Management • Previous Registrar retires Jan 1, 2006 • New Registrar begins

8. February 24, 2006 • AG approached Commissioner at Capitol • Investigating potential wrong-doing • Commissioner remembered previous offense • Richie immediately put on Adm Leave • Richie was off that day • Can’t change records

9. March 2, 2006 • Sue’s Birthday

10. February 24, 2006 • Sue’s Birthday • 2:00 AG/FBI arrive

11. February 24, 2006 • Sue’s Birthday • 2:00 AG/FBI arrive

12. Initial Questions raised • More Questions than Answers • $25,000 • Refunds/Voids • Summer ’05 • NO SPECIFIC ALLEGATIONS MADE

13. Immediate Actions • Remove door separating front desk from main office • Camera • Not working over “Richie’s” desk • Agency backup footage • Not available due to server crash • System no search capability • We checked our retirement dates

14. Talking to the Staff • Staff questions • “Richie’s” well-being • Explained “Richie” on leave • Couldn’t discuss specifics why • Couldn’t suggest any wrongdoing • Began changing procedures • Not how “Richie” did it • Can’t wait til “Richie” comes back

15. Staff Search for “Richie” • Called his home • Richie wasn’t returning calls • Went to his house • Richie wasn’t answering his door

16. Follow-up by Authorities • They couldn’t share specific concerns • Criminal chgs not used for employment actions • >$25,000 • Several years • Funeral Homes • Wanted to inventory “Richie’s” desk • No subpoena • Staff interviews

17. Now What? • Left to follow logic • Had to do own investigation • Pulled applications May-July ’05 • Set aside “Richie’s” hard drive for imaging by FBI • Pulled copies of receipting system complete with internal flags • Copies of deposited checks • Electronic door logs • Couldn’t inventory desk • Secured - pending subpoena

18. Unpleasant Discoveries • No formal documentation of policies/procedures • All informal, word-of-mouth • What policies were there - not in practice • Staff and Supervisor passwords were shared openly among Front Desk staff • Several days no deposits made

19. Unpleasant Discoveries • Applications were incompletely documented • Date of transaction • What fees were due • What fees were paid • Form of payment • Which clerk worked the application • Was a cert issued • Inappropriate IDs

20. Follow-up by Authorities • Beginning to realize the complicated business that is VR • Needed our help to prove the case • Share more specific information • Specific dates of interest identified • Specific receipts issued

21. April 6 • “Richie” Leave with pay 2 1/2 months • Exoneration • Resignation • Termination • Money seen hanging out the back of “Richie’s” desk

22. Desk inventory • ~$6,000 Undeposited checks • Returned checks • Minimal cash • Credit reports • Gambling paraphernalia • Delinquent bills/Cutoff notices • PO Box application

23. April 7 • Richie dismissed

24. New Leads from Desk • Compare check issue dates vs deposit dates • 1,600 cases of internal flags indicating system manipulation since 2001 • Changes of check to cash • Comparison of T&E to deposit errors • Reconciled specific days (Applications to deposits) • Late checks group-deposited - “Court Clerk”

25. Lapping Schemes • Hold a check back • Don’t receipt it • Add check back to deposit - later date • Remove amount of check in cash • Maintain roughly correct overall balance • Check/cash will be off • “Court Clerk” Receipts • Richie deposited checks held too long

26. Deposit Lag - Sample 300+ days: (11) $9,325 100-199 days: (29) $19,845 30-99 days: (76) $45,965 20-29 days: (58) $27,360 15-19 days: (61) $27,405 8-14 days: (434) $195,760 Total $625,660

27. Oct 19-GJ Indictments Issued • 18 counts • ~$133,373 • 2001 $37,378.00 • 2002 $ 3,385.00 • 2003 $ 3,805.00 • 2004 $39,160.00 • 2005 $49,645.00

28. 18 counts • Oct 00 – knowingly, willfully, fraudulently and feloniously misappropriate or prevent, interfere with and prohibit from presentation for deposit • Nov 00 • Dec 00 • Oct 02 • Nov 02 • Dec 02 • Jan 03 • Feb 03 • Mar 03 • Apr 03 • May 03 • June 03 • July 03 Penality: Not less than one (1) year nor more than Twenty (20) years imprisonment in the State Penitentiary and a fine not to exceed five hundred dollars ($500.00)

29. Oct 19-Media inquiries • Open Record requests • Dates of employment • Job title • Salary • Letter of Termination

30. Grand Jury • Time Constraint • Near the end of 18 month term • GJ heard previous related testimony from AG in order to issue subpoenas • If process not completed, then start over with newly seated Grand Jury

31. Grand Jury Testimony • Sept 21, 06 (7 months) • Judge issued Gag Order on individual testimonies • AG • FBI • OSDH (VR and Audit) • Wife • “Richie”

32. Public Statements • Be prepared (AG, GJ, editorials) • Often emphasize negative • In general • Historical events • Time factor • Delay from initial event to conclusion • Not always reflective of current state

33. Grand Jury Statement - Nov 06 “The fact that a third grand jury has conducted yet another investigation … underscores the fact that it is time for … the Oklahoma State Dept of Health to clean…[it’s] own house rather than rely on law enforcement to reveal criminal conduct being carried out on a routine basis.

34. Grand Jury Statement “In each of the … investigations, the culprits were long time employees … who held positions long enough to realize vulnerability within their systems and the glaring fact that there were few safeguards in place to assure accountability.

35. Court Proceedings • Preliminary Hearing • Delayed multiple times • Ultimately waived • Plea recommendation • 5-yr deferred sentence for felony conviction • Supervised probation • 200 hours of community service • Pay full restitution $139,077.75 • $3,600 Fines and Court costs • Sentenced June 5, 2007 • 16 months from beginning to end

36. Public Record • After 5 yrs, public court records will be wiped • Still be on OSBI • Could be completely expunged • Clean record for 10 yrs • Pardon by Governor • Criminal history not available to review for licensing, hiring, etc.

37. Problems • Inadequate segregation of duties • Single Person • Control of cash funds • Prepare/change receipts • Prepare/change deposit • Refunds • Prepare/issue system passwords • System override codes (flags)

38. Problems • Lack of Oversight • No routine audits • No routine comparison of receipts/drawer/apps • Confused Priorities • Balance Customer Service vs Accountability • Don’t be so tight you can’t do business • Don’t be so relaxed you’re fiscally irresponsible

39. Problems • Implementing Segregation of Duties • Staffing • Had limited number staff trained on front desk • Many no longer issue certificates • Supervisors: override approval • Lead Cashier: reconcile, refund/voids • “Richie” • Rely on Back office/Amendment staff to cover • Put them behind

40. Recommendations • Conduct routine audits to validate policies and procedures • Appropriate & Adequate vs. In Use • Separate functions • Receipting • Issuance • Daily Reconciliation • Refunds/Voids

41. Recommendations • Assure audit logs are included in receipting system • Who changed whatwhen • What was the specific change • Get away from Access and into SQL • Back-end security

42. Recommendations • Maintain professional distance • Urge staff to report concerns • Investigate all concerns • Formal/informal • Document Policies/Procedures • Historical record • Personal accountability

43. Policies and Procedures • DETAIL, DETAIL, DETAIL • Certificate issuance • Receipting system use • Receipting process • Application reconciliation • Discrepancy review • Required Reports

44. Policies and Procedures • Continued • Cash drawers • Access to safe • Spot audits by supervisor • Password abuse

45. Background Checks • Not a perfect solution • “Richie” not have criminal history when he was hired • Will not have a public criminal history after 5 yrs • Reliable • Potential Liability to Company to admit • Can’t confirm if not pursued legally

46. In the Long Run • Cannot stop everyone all the time • No foolproof solution • Stop doing business • Goal: • Catch any problems ASAP • Identify who did what when

47. Communicating with Peers • Active Investigation • Couldn’t share internal information due to public record • Picked up by Media • Used by Defense

48. A Long Story Short If you can’t be a good example- then you’ll just have to be a horrible warning Catherine Aird

49. Contact Information Sue Bordeaux SueB@health.ok.gov (405) 271-8552 Kelly Baker KellyB@health.ok.gov (405) 271-6217 Oklahoma State Department of Health Vital Records Division 1000 NE 10th Street, Room 114 Oklahoma City, OK 73117