Former Auditor Implicates BOS
in Misappropriation

Former Auditor Judi Stevens has identified the Modoc County Board of Supervisors as the entity that intimidated her and Treasurer Cheryl Knoch to pay Modoc Medical Center expenses with misappropriated treasury funds.

Stevens told the Modoc Independent News that not only did the Board of Supervisors order her to pay down the hospital debt from the treasury, but that former CAO Mike Maxwell was also involved.

A Modoc County Grand Jury report released July 1 stated that both Stevens and Knoch had been intimidated to use money from the treasury to cover the hospital debt, but the report fell short of revealing who it was that ordered the illegal use of the treasury.

“For 14 years, every time I took a hospital charge to the board that I disagreed with they told me to pay it,” Stevens said. “They had to know there was a deficit in the hospital budget, they had to know.”

“Cheryl Knoch gave them a treasurer’s report every month that showed the deficit,” Stevens explained. “Cheryl and I would ask each other, how far is this deficit going to go?”

Knoch, when asked to respond to Stevens' comments on the board of supervisors as the intimidators, said she disagreed but she would not elaborate.

Stevens said she believes the board relied on former county CAO Mike Maxwell’s direction regarding financial matters.

“Mike Maxwell and the board were mad at me when I started giving the Modoc Record the hospital deficit figures on a monthly basis,” Stevens said. “I hoped the public would get involved, but unfortunately nothing happened.”

Maxwell, when contacted by the Modoc Independent News declined to comment other than to make the following statement:

“You didn’t call me for a comment when this first came out,” he said. “Why should I talk to you now? Most of what Judi says is false. I’m not going to comment. You probably wouldn’t get it right anyway.”

There is no mention in the grand jury report of any role Maxwell might have played in the misappropriation although his name was linked to both Stevens and Knoch when the misappropriation was first revealed more than a year ago by then-CAO Mark Charlton.

A source close to the grand jury investigation said Maxwell refused to be interviewed by the committee looking into the misappropriation.

The intimidation factor, according to Stevens, was the implied threat that if she did not draw from the treasury at the order of the Board of Supervisors that her office budget could be threatened.

“I knew if I didn’t pay what they told me to the Board of Supervisors could cut my budget,” she said. “I never played politics but there are times when you have to bend for the good of your office.”

At one point Stevens said she told the board it should not use taxpayer money to have a pizza party for the hospital staff, but the supervisors went ahead and did it anyway.

Stevens said the hospital was in debt when she took over as auditor 14 years ago and systematically increased to $12 million, which is the amount the board has been ordered by the state to repay the misappropriated treasury.

When the misappropriation was first exposed by Charlton in June 2009, the draw on the treasury was estimated at nearly $20 million. Since then monies belonging to the schools has been replaced, leaving an unpaid balance of approximately $12 million.

The Board of Supervisors is under mandate from the State Controller’s Office to replay the money “as soon as possible,” but has failed to replace the $12 million to the treasury.

The state, facing its own fiscal crisis, has agreed that the county can continue to use monies from the treasury to off-set a negative cash flow, thereby averting a declaration of bankruptcy. However, there is no requirement that the county repay that money to the treasury.

Now Stevens is frustrated and disappointed to see that with the implicit permission of the State Controllers’ Office the board is paying bills out of the same restricted funds that she was criticized for using just a short time ago.

“I received a statement of excellence from the State Controller’s Office for nine years. I thought I was doing a good job,” she said.

“I feel like everyone is blaming me for the county fiscal crisis,” she continued. “I loved my job, I was there to protect taxpayers’ dollars.” Stevens worked in the auditor’s office for 29 years, the last 14 as auditor.

“I feel horrible that it has come to this. I feel like everyone is blaming me for what has happened. I don’t like going out in public. Pat Cantrell won’t talk to me.”

-- Barbara March

Audits Delayed Once Again

The two audits expected to reveal the ineptitude of Modoc County’s handling of its financial affairs are not expected to be released to the public until after Sept. 1, according to Auditor Darcy Locken.

Locken said the release of the 2007-08 audit is being held up by VTD because the outside auditing firm has not completed its work.

The 2008-09 audit is still being worked on by Locken’s office before it can go to VTD for its final review.

“It’s doubtful the audits will go to the Board of Supervisors next week,” Locken said. “The best case is the end of the month, but realistically it will be September before the audits are finished.”

Locken said it was not necessary that the two audits be released simultaneously. Whichever audit is finished first could be accepted by the Board of Supervisors without the other.

Since the State Controllers’ Office (SCO) ordered the outside audits of the county’s books last December, after rejecting previous audits of the county’s books, VTD has been conducting an intensive investigation of the county’s finances.

During the process it has been discovered the county’s financial management practices and policies were either out-dated or non-existent, including the absence of any written procedures.

VTD is on an informal “approved” list with the SCO, meaning its audits of the county are likely to be accepted by the state once they are released, according to a source with knowledge of the state’s auditing review process.

Modoc County 2010 - 2011 Grand Jury

Wesley Cook (foreperson)  
Frank Carter     
Carol Irwin    
Jim Massey, Jr.   
Terry McChesney   
Gary Slinkard   
Bob Zane
Barbara Boyd
Loretta McGiffin
Leta Bethel

Alternates:
Patricia Budmark
Jerry Schliesser
 

Linda Ostoja, superior court executive officer, reports that the grand jury, which was sworn in in July, has already lost four members. One regular and three alternates, which leaves 10 regular members. One of the alternates will have to step up to fill out the new requirement of 11 members on the grand jury panel.