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FRAUDBARON.com
The Anti-Fraud Professionals'
Source for Fraud News
#511 Updated: 11/26/07 10:31 a.m.

Sarbanes-Oxley affects Hawaii nonprofits big time
Honolulu Star Bulletin | 11/25/07 | Rob Kay
The Sarbanes-Oxley Act was passed on July 30, 2002, in response to the corporate and
accounting scandals of Enron, Tyco and others. The purpose of the law is to restore public
trust in Amecica's corporate sector. The law requires that publicly traded companies adhere
to stricter governance standards that both broaden board members' roles in overseeing
financial transactions and auditing procedures.  Although most provisions of Sarbanes-
Oxley apply only to public companies, at least two criminal provisions apply to nonprofit
organizations: provisions prohibiting retaliation against whistleblowers and prohibiting the
destruction, alteration or concealment of certain documents or the impediment of
investigations. Despite the law's spotlight on the for-profit sector, Sarbanes-Oxley casts a
long shadow over the nonprofit community around the nation and in the Aloha State.
"Sarbanes has definitely helped put the issue of good governance on the radar screens of
nonprofit managers. Many of Hawaii's larger nonprofits have adopted many of the
governance principles embodied in Sarbanes," said Jeff Piper, an attorney at Schlack Ito
Lockwood Piper & Elkind, who serves as outside counsel for the University of Hawaii
Foundation and other Hawaii charities.  While SOX states that nonprofits need only comply
with whistle-blower protection and document destruction provisions, all nonprofits in Hawaii
"should comply with the spirit of Sarbanes-Oxley and other sound corporate governance
practices as if they were a for-profit company," says Henry Montgomery, founder of MontPac
Outsourcing and a director who heads the audit committees of three public companies and
serves on the boards of the Honolulu Symphony and several private companies.  This
entails procedures such as setting up audit committees, ensuring availability of timely
financial information, establishing policies for addressing, among others, conflicts of
interest, loans to directors, officers and executives, and making information about the
organization's financial condition and other pertinent information available to appropriate
parties.  Complying with SOX costs money, takes time and adds more responsibilities to
already overstretched nonprofits. To say that many nonprofits are not happy about the
added costs is an understatement. "My colleagues in the nonprofit community tell me that
auditing expenses have gone up 50-100 percent," says Norm Baker, vice president of
community building for Aloha United Way.  Despite the expense, many of the larger
nonprofits and sometimes even smaller organizations bite the bullet and conform to most if
not all of the SOX requirements. "It's just common sense," says Henry Montgomery, whose
company outsources accounting and financial services. "Having solid internal controls and
corporate governance procedures in place may limit your organization's exposure to
lawsuits or other claims by creditors, the IRS, or other stakeholders, to say nothing of
potential damage to the reputation of the organization, its directors and management."
Montgomery suggests that some of the recent, highly publicized scandals involving
nonprofits, including the saga of a former Oahu Salvation Army official fired last year after
stealing money and property from elderly donors, might have been prevented with better
oversight. What can a small nonprofit do to adhere to SOX? Montgomery believes small
nonprofits, like their larger brethren, must have good financial systems in place.  "A small
nonprofit without the resources to set up good internal controls risks not having the
safeguards to prevent fraud or other malfeasance," says Montgomery. He believes a
nonprofit that can't afford good governance should consider combining with a larger
nonprofit that has the wherewithal to comply with SOX or outsource aspects of accounting
or financial management to make those activities more affordable.  Although compliance
with SOX is cumbersome for many nonprofits, Dwight Kealoha, CEO of the Better Business
Bureau puts a positive spin on it. "Donors want to do the right thing," says Kealoha,
"and SOX provides a way for them to get a level of comfort with regard to the effective use
of their money." Montgomery agrees. "It's true that audits, corporate governance and SOX
can drive up costs, but nonprofits must always be beyond reproach." (Excerpt)

Woman may get embezzlement trial
mcall.com | 11/25/07 | Patrick Lester
An Upper Bucks woman accused of embezzling more than $400,000 from a Montgomery
County retirement community will face dozens of charges in Montgomery County Court.
Joanne L. Hippeli, 50, of 2425 Bannerstone Drive, Milford Township, waived her right to a
preliminary hearing on theft and related charges at District Court in Blue Bell on
Wednesday, meaning the charges will be sent to county court.  Hippeli is accused of
stealing $417,099 from Foulkeways at Gwynedd Retirement Community in Lower Gwynedd
Township, where she worked for 25 years, according the Montgomery County District
Attorney's office.  Lower Gwynedd Township police say Hippeli, who was most recently an
accounts payable and receivable clerk at Foulkeways, wrote 47 checks totaling $172,940 to
herself from 2002 to 2006.  She also forged signatures on those checks and deposited
them into personal accounts at three banks, police say.  In addition, Hippeli took $244,159
in revenue that she was responsible for depositing into a Foulkeways account, police said.
Doug Tweddale, chief executive officer at Foulkeways at Gwynedd, a nonprofit Quaker
community of 430 residents, said the retirement community was able to recoup the stolen
money from its insurance provider.  Since the thefts, Foulkeways has instituted more
stringent accounting guidelines, Tweddale said.  Hippeli is accused of 88 offenses in all.
That includes 47 bad check charges, 30 theft charges and 10 forgery counts. She is free on
$15,000 unsecured bail.

Hotline tips reveal county workers' fraud
Daily Breeze | 11/23/07 | Staff Writer
A Los Angeles County hot line has yielded tips that have led to hundreds of employee fraud
and theft investigations over the past six months, the Los Angeles Times reported Thursday.

Based on the information left on the county's hotline, officials opened 348 investigations into

alleged employee wrongdoing and substantiated 73 cases, the paper reported.  The six-
month report released by the county included allegations of theft, fraud, lying, failing to
report outside employment and downloading pornographic material at work, the paper
reported. In one case a welfare worker stole more than $4,000 in bus tokens earmarked
for foster children. A second welfare employee falsely claimed her father had died and then
pocketed money donated to her in sympathy. And the third most serious case involved a
retirement agency worker who fraudulently claimed nearly $90,000 in welfare benefits.
The hotline has so far produced three criminal convictions. Four more cases were referred
to the District Attorney's Office for possible prosecutions. Nine employees have either been
fired or put on notice they would be. Six were suspended, and six more resigned or retired,
the paper reported.  "It doesn't reflect well on the county, but it's hard to make people
understand that when you have 100,000 (workers), some people go bad on you," Los
Angeles County Auditor-Controller J. Tyler McCauley told the Times. McCauley's office runs
the fraud hotline.  The welfare worker who stole the bus tokens pleaded guilty to felony
theft and was sentenced to three days in jail and three years' probation, Department of
Children and Family Services Director Patricia S. Ploehn told the paper.  Another successful
prosecution from the hotline involved Rita Kay Brown, 52, a retirement specialist who
worked for the Los Angeles County Employees Retirement Association, the agency
that manages the $43-billion pension fund for most county workers.  Brown was accused of
using a false identity to fraudulently claim $89,522 in welfare money, food stamps and
medical benefits.  She was convicted in June and sentenced to 16 years in prison, James
Baker of the district attorney's welfare fraud division told the paper.  She was convicted in
June and sentenced to 16 years in prison, James Baker of the district attorney's welfare
fraud division told the paper.

Ex-teller sentenced for embezzlement
Maui News | 11/21/07 | Staff Writer
HONOLULU – A 23-year-old Wailuku woman who embezzled $21,000 from about 20 Bank of
Hawaii customers was sentenced Monday to 30 days in federal custody.  Tiana Alconcel, a
former teller at the Bank of Hawaii’s Maui Marketplace branch, was also sentenced by
federal District Judge David A. Ezra to four months of home detention with electronic
monitoring following her release from jail as part of an order for five years of supervised
release. Alconcel must perform 150 hours of community service and pay back $21,000 to
Bank of Hawaii.  Assistant U.S. Attorney Tracy Hino called the crime “serious” because
Alconcel was stealing money directly from customers and the crime would not have been
discovered if customers had not noticed discrepancies in their statements and reported
them.  Alconcel was a teller at the bank from August through December 2004, when she
was terminated. She debited customer accounts on about 40 separate occasions in
November and December, according to the U.S. Attorney’s Office. Alconcel forged cash
withdrawal slips and customer signatures, the office said. Hino added that it isn’t practical
for a bank to review every cash-related transaction performed by its tellers, so it is
important for bank customers to review their bank statements and report any suspected
discrepancies.

Embezzlement defendant pleads not guilty
news-tribune.com | 11/22/07 | Eric Scott Campell
A former Obelisk Federal Credit Union head teller — charged with stealing $7 million from
the company — appeared in New Albany’s federal district court Tuesday.  An automatic plea
of not guilty was entered for Patricia H. Sherman, a Louisville resident. Magistrate judges
cannot accept guilty pleas, a court clerk said. Sherman faces a maximum penalty of 30 years
in prison and a $1 million fine. There is no further court date scheduled. Her indictment
alleges she embezzled money from an Obelisk vault from May 2003 until this March,
spending much of it at area casinos. Obelisk is now controlled by Centra Credit Union.

Man arrested for allegedly stealing youth league money
Union Democrat |  11/20/07 | Alisha Wyman
Jackson police Monday arrested a man suspected of taking more than $10,000 from a
regional youth football conference that includes teams in Tuolumne and Calaveras counties.
Jackson resident Kevin Barnett, 38, is charged with grand theft and embezzlement of more
than $10,000.  He is in the Amador County Jail, held in lieu of $30,000 bail. "Embezzlement
is too nice a word for what he did," said Mike Dambacher, a varsity coach for the
Junior Cats, the conference's Sonora, Columbia and Jamestown team.  Barnett is the former
president of the Mother Lode Youth Athletic Conference, which includes Calaveras,
Tuolumne, El Dorado and Amador counties, as well as the community of Linden in San
Joaquin County.  He served as a board member for 16 years and as president for the past
six years, but was fired when allegations surfaced in April. The conference serves football
players and cheerleaders from ages 8 to 14 years old.  Board members started having
trouble contacting Barnett in January, said Dan McHoul of Sonora, who has taken over as
board president.  The MLYAC board members began to suspect something was wrong in
April, when the conference's insurance company called threatening to cancel the league
policy for nonpayment, McHoul said.  Representatives from several companies from which
the conference had purchased items like Super Bowl trophies and All Star jerseys also
called to report that checks had bounced.  "We were under the assumption that all these
things were paid," McHoul said.  Around April 14, McHoul, then a vice president, finally heard
from Barnett by phone. Barnett, he said, admitted that he had taken money from the
league. McHoul called an emergency board meeting April 15, when the members voted
unanimously to remove Barnett from office.  After calculating the amount of money missing,
they reported the theft to the Jackson Police Department on June 11, McHoul said.
"We wanted to take the right steps to make sure we were able to convict him to the full
extent," he said.  The investigation into the missing money languished as officials tried to
determine which agency should lead it since the league covers several counties, Jackson
Police Department Investigator Douglas Grey said.  The decision wasn't made until early
October. Investigators have since found probable cause that Barnett took $10,360 from the
conference, said Grey, who declined to give further details.  "Now that figure may go up or
go down as a result of further investigation," Grey said. McHoul said he is unsure how
Barnett used the money, but said he mentioned that the publication he owns, the Mother
Lode Entertainer, was in trouble.  League officials expressed relief that some action has
been taken against Barnett.  Dambacher said Barnett's alleged actions forced the
conference to cancel its annual All Star game, which faces off four northern teams with the
four in the south.  Dambacher worries the league will have to raise its fees to cover some of
the shortfalls that resulted.  Sonora's Jim Schultz, a parent and conference board member
as of April, said he is thrilled the case is moving forward.  He has two boys, one who has
already moved through the system, another who still plays for the Junior Cats. He agreed
that stealing from the conference amounted to taking from children.  "It's about as low as
you go," he said.

Former Bellevue Arts Museum CFO charged with embezzlement
Seattle Times | 11/20/07 | Ashley Bach
The former chief financial officer of the Bellevue Arts Museum was charged today with 38
counts of theft for allegedly embezzling $300,000 from the museum.  According to King
County prosecutors, Janet Ellinger, 53, of Redmond, stole the money from October 2005
until May of this year. She worked for the museum for two years before being evicted from
the building once the accusations came to light.  Prosecutors say Ellinger took most of the
money by writing checks to herself and then covering them up with fake entries in the
museum's financial ledger. She also used her corporate credit card for personal expenses
and funneled money through checks made out to her college-age son, who was not
involved in the embezzlement, according to charging documents.  Neither Ellinger nor her
attorney could be immediately reached today.  Ellinger has cooperated with police and
museum officials and, according to the museum, has returned a small amount of the money.
She told police that she took the money because she was in the process of separating from
her husband and felt "financially compromised," according to prosecutors.  Ellinger and her
husband separated in September 2005, and she filed for divorce in June of this year,
according to court documents.  She told police that she spent the stolen money on private-
school tuition for her son, vacations, wood floors and cabinets for her home, credit-card
bills, mortgage payments and clothes.
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