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

Oklahoma Embezzlement Case

Kelly BakerSue Bordeaux

Oklahoma State Department of Health

2008 NAPHSIS Annual MeetingCelebrating 75 Years of ExcellenceOrlando, FL June 1st – 5th, 2008

Presentation Goals Describe the case

Circumstances What to expect

Problems Solutions

Embezzleme

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Not So Happy Days


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


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


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?


New Management Previous Registrar retires Jan 1, 2006 New Registrar begins


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


March 2, 2006 Sue’s Birthday


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


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


Initial Questions raised

More Questions than Answers $25,000 Refunds/Voids Summer ’05 NO SPECIFIC ALLEGATIONS MADE


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


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


Staff Search for “Richie” Called his home

Richie wasn’t returning calls

Went to his house Richie wasn’t answering his door


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


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


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


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


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


April 6 “Richie” Leave with pay 2 1/2

months Exoneration Resignation Termination

Money seen hanging out the back of “Richie’s” desk


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


April 7 Richie dismissed


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”


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


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


Oct 19-GJ Indictments Issued

18 counts ~$133,373

1. 2001 $37,378.002. 2002 $ 3,385.003. 2003 $ 3,805.004. 2004 $39,160.005. 2005 $49,645.00


18 counts6. Oct 00 – knowingly, willfully, fraudulently and

feloniously misappropriate or prevent, interfere with and prohibit from presentation for deposit

7. Nov 008. Dec 009. Oct 0210. Nov 02

15. Apr 0316. May 0317. June 0318. July 03

11. Dec 0212. Jan 0313. Feb 03 14. Mar 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)


Oct 19-Media inquiries

Open Record requests Dates of employment Job title Salary Letter of Termination


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


Grand Jury Testimony Sept 21, 06 (7 months)

Judge issued Gag Order on individual testimonies AG FBI OSDH (VR and Audit) Wife “Richie”


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


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.


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.


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


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.


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)


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


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


Recommendations

Conduct routine audits to validate policies and procedures Appropriate & Adequate vs. In Use

Separate functions Receipting Issuance Daily Reconciliation Refunds/Voids


Recommendations Assure audit logs are included in

receipting system Who changed what when What was the specific change

Get away from Access and into SQL Back-end security


Recommendations Maintain professional distance

Urge staff to report concerns Investigate all concerns Formal/informal

Document Policies/Procedures Historical record Personal accountability


Policies and Procedures DETAIL, DETAIL, DETAIL

Certificate issuance Receipting system use Receipting process Application reconciliation Discrepancy review Required Reports


Policies and Procedures Continued

Cash drawers Access to safe Spot audits by supervisor Password abuse


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


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


Communicating with Peers Active Investigation

Couldn’t share internal information due to public record• Picked up by Media• Used by Defense


If you can’t be a good example- then you’ll just have to be a horrible warning

Catherine Aird

A Long Story Short


Contact Information

Sue [email protected](405) 271-8552

Kelly [email protected](405) 271-6217

Oklahoma State Department of HealthVital Records Division1000 NE 10th Street, Room 114Oklahoma City, OK 73117

Documents

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