Millions vanish through misuse (NC agencies tales of misspending, theft and embezzlement )

Millions vanish through misuse
State agencies have not uniformly reported years of misspending, theft and embezzlement

At UNC-Chapel Hill, the manager of a scholars program for doctors turned it into her personal piggy bank for groceries, CDs and books, and allowed staff and scholars to walk off with computers and furniture. Over 10 years, the theft and misuse of state property totaled $157,000.

At the State Property Office, a temporary employee forged her boss's name to steer more than $66,000 to Duke University to pay her son's tuition. She got caught when Duke called the office and said the checks should be made out to the university, not its bursar.

At Cherry Hospital in Goldsboro, a payroll glitch caused a cook to be paid $787 an hour for three months. Rather than report it, the cook treated the $71,000 overpayment as "a gift from God," hospital officials said. She spent her windfall, took unpaid disability and has since declared bankruptcy.

These are some of the ways that money has disappeared from state agencies over the past five years. Reports filed with the State Bureau of Investigation in the first nine months of 2002 show that more than $815,000 in embezzlement, misspending, property theft and damage may have occurred.

But it's an incomplete picture. Although a 25-year-old state law requires every state agency to report every possible incidence of theft, damage and misuse of state property, many agencies fail to comply. In the past five years, for example, 12 of the UNC system's 16 campuses have filed few or no reports to the SBI.

Experts in crime statistics say the state is failing to make use of an important crime-fighting tool by not collecting all the data and analyzing them.

"They could quantify how much theft there was, how it varied over time, across places where it was most common and least common, and what kinds of things are most likely and least likely to be stolen," said David McDowall, a criminal justice professor at the State University of New York in Albany and editor of the Journal of Quantitative Criminology. "All of those kinds of patterns could be useful in figuring out where to concentrate resources in preventing crime in the future."

SBI officials say they lack the resources to compel compliance with reporting requirements. But they also admit that they haven't given much thought to analyzing the data; they think the purpose of the reporting law is to make sure that the SBI is aware of cases it needs to investigate.

"We've never done any real analysis because I don't know if there is a connection between crime at UNC-Asheville and at UNC-Wilmington," said SBI Assistant Director Larry W. Smith, who reviewed the reports from 1999 to 2001.

Some university officials said they didn't know they were required to report all cases of possible property theft and misuse, while others didn't realize that they hadn't been reporting them. On Oct. 10, after The News & Observer asked about the lack of reporting, the SBI sent letters to the universities telling them to comply with the law.

"I was under the impression that they were being sent up there, but evidently there's been a glitch," said UNC-Wilmington police director Billy Dawson. "I'm remedying that problem as we speak."

The N&O analyzed hundreds of these reports filed with the SBI since 1997, along with internal audits and other state documents. Though many reports detail lesser crimes such as tire slashings, vandalism and theft of radios and televisions, they also include cases in which employees illegally steered state business to their companies, stole state money or goods worth tens of thousands of dollars, or misspent hundreds of thousands more.

Not all reports result in a determination that a crime occurred. In some cases, lost money or equipment is later found. In others, the problem turns out to be misspending instead of theft.

In dollars, the biggest case over the past five years appears to be at N.C. State University, where former Public Safety Director Ralph Lex Harper and some of his staff used unspent salary money to buy TV sets, stereos, travel, vehicles, clothing and other unneeded items and services. Some were recovered from Harper's home. NCSU removed Harper in June 2000 after The N&O reported the misspending. A state audit released the following October found $843,000 in improper or unnecessary purchases.

In several major cases of embezzlement and misspending, state officials -- and sometimes the reports themselves -- acknowledge that better oversight could have prevented the losses. The accounting term for it is "separation of duties," in which more than one employee has to sign off on financial transactions before they can be completed.

At the Department of Environment and Natural Resources, for example, Lillian T. Liggins, a clerk in the Division of Forest Resources, created a fictitious company, processed nearly $28,000 worth of phony invoices and issued checks to pay for them. Liggins also steered a renovation contract to a business she and her husband owned, overcharging the state $1,113.

"She was an accounts payable clerk, so she could enter the invoices," said DENR Controller Rod Davis. "She was not supposed to be able to do the other things, but the Division of Forestry said they were short-handed and were not able to do the proper internal controls."

Liggins, 45, of Bailey, was fired from her job and pleaded guilty to a felony charge of obtaining property by false pretenses. She was put on probation and ordered to make restitution.

In four cases, payroll errors caused employees or former employees to receive thousands of dollars in wages they didn't earn. The biggest case involves Mary B. Turner, a former cook at Cherry Hospital in Goldsboro with an annual salary of about $18,000. From November 2000 to January 2001, the payroll system mistakenly paid Turner at the rate of $787 an hour, and within the three-month period she racked up $71,000 in unearned wages.

Cherry Hospital is operated by the state Department of Health and Human Services. Allyn E. Guffey, the DHHS budget director, said the hospital now requires a supervisor to review the payroll to make sure errors are corrected before checks are issued.

On three occasions, SBI reports show, UNC-Chapel Hill paid tens of thousands of dollars for goods and services never received. From September 2000 to March 2002, for example, the university's undergraduate admissions office paid more than $49,000 for advertising in nonexistent publications.

NCSU hired an employee who had a criminal record and placed her in positions where she had access to departmental charge cards. The employee then made personal expenditures with state funds.

Most of the theft, vandalism and misspending detailed in the reports comes from the state's universities, particularly its flagships, N.C. State University and UNC-Chapel Hill. So far this year, the two universities have accounted for nearly 60 percent of the $815,000 reported loss.

State and university officials say that should come as no surprise. The universities are huge, open institutions filled with expensive equipment and hundreds of expense accounts, making them ripe targets for thieves inside and outside. Five of the 16 UNC schools have each had an employee who stole at least $34,000 over the past five years, and the SBI is investigating suspected five-figure embezzlement at N.C. Central University and Winston-Salem State University.

At NCCU, a state audit in September found $78,000 missing from the campus bookstore. At WSSU, Internal Auditor Monique Taylor-Broome reported that the former campus radio station manager may have kept money he raised in joint underwriting campaigns for the university station and a local AM station he owns. Without the underwriting money, the WSSU station's revenues plummeted by $67,000 from 1999 to 2001, Taylor-Broome's audit said. The former manager, Joseph Watson, declined to comment.

Despite having their own police departments, internal auditors and trustee boards, several universities perform little analysis of theft and misspending. One police chief, UNC-Charlotte's Anthony Purcell, mistakenly boasted in an interview that no computer laptops had been stolen from the university in the past two years.

After further review, however, UNC-C officials acknowledged that five laptops have been stolen this year alone and that state property theft has nearly tripled over the past three academic years -- from about $9,600 in 1999-2000 to $27,000 last year.

The rising volume of theft at some state universities is catching their attention. Last month, NCSU invited several universities to discuss the theft of laptops, video projectors and other expensive equipment.

In the first nine months of this year, NCSU has reported more than $265,000 in possible theft and misuse of state property -- nearly $106,000 more than all of last year. NCSU Police Chief Thomas Younce said some of the theft is the work of wily thieves, but a lot happens because faculty and staff aren't paying enough attention to securing high-tech equipment.

"What we found is a lot of it was just unsecured," Younce said. "People have left office doors open, classrooms open."

Younce recently assigned an investigator to work specifically on state property theft and has sent his troops out to conduct theft-prevention training sessions with faculty and staff. The emphasis has paid off: On Oct. 30, his department arrested three people, including an NCSU computer system administrator, who police say stole 21 laptops and other computer equipment earlier that month. The property, most of which was recovered, was worth $62,000.

The thefts hit especially hard during the current budget crunch. When money is tight and universities are becoming more reliant on technology to teach students and perform research, they can ill afford to have computers, digital cameras and video projectors walking out the door. Both NCSU and UNC-CH have had a huge flat-screen television disappear this year. NCSU's cost $5,000; UNC-CH's $6,699.

At N.C. Central University, where theft and misuse may top $100,000 this year, compared with $17,584 in 2000, Chancellor James Ammons has ordered that faculty or staff members may not buy expensive equipment without showing that they've taken the proper steps to secure it. If they lose it, they won't be able to replace it at university expense.

"If you can't keep up with that stuff," Ammons said, "then you won't be getting it in the future."

Staff writer Dan Kane can be reached at 829-4861 or dkane@newsobserver.com.
News researchers Brooke Cain, Lucy Reid and Toby Lyles contributed to this report.

To: *Old_North_State; **North_Carolina; Constitution Day; mykdsmom; Lee'sGhost; KOZ.; borntodiefree; ...

My hubby read this to me out of this am's paper.

I can't read it anymore, I only buy it on Sunday for the ad's. It's not good for my blood pressure.

NC PING YA'LL!

No damned wonder that the denizens of university campuses (or is it campi) constantally and continually clammor for more taxpayer money. It ain't "for the children" as Jim Hunt, Bill Clinton, Mike Easely, and the rest of their ilk chant, it is for the stealing, looting, pilfering, and stealing by the folks in charge.

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