BOS Votes to Pursue Claim
Knoch, Stevens, Maxwell Named
Part I
After months of debate, stalling and indecision the Modoc County Board of Supervisors Tuesday, Feb. 22, voted unanimously, following a closed session to pursue an insurance claim in the amount of $12.5 million against various county officials in an effort to repay money that was misappropriated from the treasury.
The claim, obtained by the
Modoc Independent News, was drafted by Gary Woolverton last year when he was Modoc County district attorney and specifically points to a number of “levels” of culpability starting with Treasurer Cheryl Knoch and Auditor Judi Stevens as the two county officials who “most likely” violated state law in the misappropriation of an estimated $20 million from about 1997 to 2009.
Next in line is Mike Maxwell, chief administrative officer until Jan. 1, 2009.Woolverton qualified his listing of Maxwell by saying that Maxwell could be as culpable as Knoch and Stevens if he had been receiving Knoch’s treasurer’s reports.
However, Woolverton acknowledges in his claim that Maxwell has denied having any knowledge of the alleged illegal misappropriation of the treasury.
Of lesser blame are Alice Marrs, county auditor from Jan. 1, 2009 to June 30, 2010; Dan Macsay, a two-term member of the Board of Supervisors who was defeated for re-election in 2010; current supervisor Patricia Cantrall, who has been on the board since the misappropriation began; and Dave Bradshaw, who ended his term on the board last year and did not seek re-election.
Also named is Karen Stockton, director of public health, although Woolverton said in the claim that she “apparently did not know the county was pooling her restricted funds and spending them.”
Further down the list are Rick Rudometkin, head of roads and current chief administrative officer; and Darcy Locken, formerly assistant CAO and now county auditor.
“It is not known whether Rudometkin knew his restricted funds were being improperly utilized, but it is assumed he did not receive enough accounting and financial reports to be placed on notice that his restricted funds were being improperly diminished,” Woolverton said in the claim that’s expected to be signed officially Thursday morning by Supervisor Shorty Crabtree, chair of the board.
Escaping any involvement, according to Woolverton, is Pauline Cravens, director of social services, who had the foresight to institute an investigation of her own department and county accounting practices by bringing in an independent certified public account who “discovered suspicious accounting practices.”
“But, before the CPA was allowed to complete her forensic accounting, she was terminated by CAO Mike Maxwell and the accounting project for Social Services was abruptly terminated,” Woolverton alleges.
While only board members Cantrall, Macsay and Bradshaw are named in the claim, Woolverton notes, “members of the Board of Supervisors are the trustees of the county funds for certain specified purposes and they may not allow them to be applied to other purposes.”
The report raises a number of questions including, were the restricted funds being used knowingly by Knoch or were she, Stevens and Maxwell getting bad advice from outside auditors.
“Without a thorough investigation and an accompanying forensic audit, many of these questions will not be answered,” Woolverton predicted.
The loss of monies from the treasury was first discovered by then CAO Mark Charlton about March 1, 2009, according to Woolverton, who stated, “the loss is a direct result of a fund diversion occurring within county offices/buildings and the action that occurred affected funds being removed from various bank accounts and investments at Plumas Bank and possibly 'other places.'
“As time went on it became obvious that the diversion of funds by Modoc County officials was much more extensive than simply school funds and the amount of the diverted funds kept increasing as more information was received.”
The claim alleges the losses occurred over a period of eight to 12 years, but “the diversion of restricted funds continues even until today although some county officials contend that the diversion of funds at the present time is justified and legal because of a dry period loan agreement” with the state.
The claim goes on to say, “At some level, the legal efficacy of the so-called dry period loan resolution is suspect,” but “there is evidence that Modoc County Counsel, with the assistance of the Attorney General’s Office has blessed this procedure.”
While county officials are saying they had no knowledge of the diversion (with the exception of Stevens in an interview with the
Modoc Independent News) Woolverton’s report points out that after about April 8, 2009 “no county officials would be able to claim lack of knowledge of diversion of funds from restricted funds,” and he recommended that "a thorough investigation be completed.”
He added that “it is probable that no employees in the last eight to 10 years personally benefited from the diversion of restricted funds.”
However, “various county officials were charged with protecting public monies and preventing appropriating public monies in a manner which would be considered illegal or inappropriate and inconsistent with their duties as public officials.”
-- Barbara March and Ray A. March
