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Forensic audit could yield criminal charges

July 03, 2013 - Oxford Village attorney Robert Davis confirmed the municipality is considering seeking criminal charges in connection with approximately $21,000 in missing property tax payments.

"I'm not going to say (against) who yet," he said.

The potential criminal charges stem from the findings of a forensic audit conducted by Karl Haiser, a certified public accountant and certified forensic examiner who co-owns the Ann-Arbor-based Michigan Forensic Accounting, Inc.

Last week, the village council had a closed session meeting with Haiser and Davis to discuss the forensic audit report. Haiser's findings are not being released to the public because they're going to be used to defend the municipality in a pending lawsuit.

"It's attorney-client privilege at this point," Davis said.

Haiser was hired by council in June 2012 to investigate what happened to $20,594 in missing property tax payments from the 2010 collection. Of that total, $4,217 was in cash and $16,377 was in checks. The total amount was spread out amongst 24 village taxpayers.

"We had taxpayer residents come in and show proof that these taxes were paid," said Haiser, who made a brief public report to council prior to the closed session. "I have credible evidence those dollar figures were not deposited in the (village) account. It will be disclosed in more detail in closed session."

Haiser noted he would not take any questions from the public.

Following its discussion with Haiser behind closed doors, council took no action when it returned to open session.

Davis said that Haiser's report confirmed "the money is gone."

"The report indicates that the $20,594 never made it into our hands," he said. "This report has got solid information to support that number."

As for how it went missing, Davis said basically, the residents paid their property tax bills, but the money was "not properly credited into the village system."

"It's what they call – and I've heard this concept before in accounting – a pre-booking experience," he explained. "Before the money's ever booked, it gets maneuvered (around), written down, credited and discredited in certain ways (so) that it's like it never came in. That's how these things start."

"We have evidence supporting that (missing) money being the subject of the scenario I just gave you," Davis said.

When asked if Haiser's report indicates whether it was one individual or multiple persons responsible for the missing money, Davis replied, "His focus is one person of interest."

Davis noted one of his main goals is to make sure this individual is "held accountable" for his or her actions.

In addition to potentially seeking criminal charges, Davis said the audit report will be used for two other purposes.

The first is to attempt to recover the missing funds through the village's insurance provider.

"Getting the money back so the village is whole – that's my Number One goal," Davis said. "(The audit report is) going to be helpful in convincing the carrier . . . they have a basis to pay us."

Having a forensic audit, conducted by a certified expert, that proves money is missing should carry more weight with the insurance company than the municipality simply filing a claim, in Davis' opinion.

He said this isn't a case of the village not being able to balance its books and running to the insurance company to fix things.

"Here we've got a rationale," Davis said. "You buy coverage for these types of events. And now we can show that it really is an event beyond the control of the village. It really is a loss."

The report's second purpose is to provide the village with "a very viable defense" against the civil lawsuit filed by former Deputy Clerk Marion Patricia Paad in December 2012.

"We have received a confidential report from our litigation expert and we're reviewing it," Davis said. "We will make a decision at the next (village council) meeting as to what to do with (the audit report)."

Paad, who was terminated in March 2011, is suing the village, village Manager Joe Young and Councilwoman Maureen Helmuth in U.S. District Court.

Paad is seeking money damages against all three defendants "for purposeful discrimination and/or retaliation," which she claims took the form of her losing her job and standing trial for embezzlement charges that she was innocent of.

Paad's suit claims that "throughout her tenure" working for the village, she "raised concerns" involving "improper spending/use of taxpayers' money, and/or volunteers stealing taxpayers' money" to village officials, management and employees.

Because she did this, Paad's suit alleges she found herself facing "false and baseless" charges of embezzlement that "were made to try to cover up (the) defendants' unlawful conduct."

Paad was accused of stealing more than $3,300 in property tax payments made by three village residents in 2006.

She was also charged with embezzling nearly $600 worth of funds from the village police department in 2010.

In April 2012, an Oakland County Circuit Court jury found Paad not guilty of five felony counts of embezzlement by a public official over $50. Each count was punishable by up to 10 years in prison.

The village spent a total of $35,968 on Haiser's services.

Of that, $24,623 was related to the village's missing tax funds.

The remaining $11,345 was spent on a forensic audit that showed the Downtown Development Authority (DDA) was not shorted $8,550 in property tax revenue in 2006 and 2007 as was previously believed.

CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.
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