September 18, 2013 - A total of $20,684 in Oxford Village property tax funds from 2010 is definitely missing and former Deputy Clerk Marion Patricia Paad is "a person of interest" in connection with its disappearance.
That was the conclusion of the 25-page forensic audit report dated June 25 that's been kept under wraps for months until village attorney Bob Davis released it to the public last week.
The audit was conducted by Karl Haiser, a certified public accountant and certified forensic examiner who co-owns the Ann Arbor-based Michigan Forensic Accounting, Inc.
"His report is very generic," Davis said. "It's not a finger-pointing report. It basically says this happened."
In June 2012, the village council voted to hire Haiser to investigate the missing tax money, which based on the village's numbers at the time totalled $20,594. The missing money was from 34 village taxpayers, who paid by either cash or check and had stamped receipts to prove it.
Although Haiser named Paad, who was terminated by village Manager Joe Young in March 2011, as "a person of interest," he noted that his "comments do not imply guilt or criminal intent by" the former village employee.
It was stated in Haiser's report that he did not interview Paad as part of his investigation.
Several requests to comment on and explain his report were made of Haiser, but he communicated through his secretary that he would not be commenting on it.
In the absence of Haiser, Davis answered questions concerning the report.
Although Davis acknowledged there's no direct evidence showing Paad took the tax money, he said, "Her fingerprints are all over the deal."
Davis explained that "her name" is on all the "relevant" transactions. He said based on log records, it was Paad who accessed the village computer system that records tax payments and made adjustments concerning the affected taxpayers. Davis indicated Paad's also the one who handled the payments based on communications with the affected taxpayers.
"The report looks to the person who managed the transactions," the attorney said. "(Haiser's) concluding that she's the most logical person who probably did it.
In the report, Haiser stated that in performing his analysis, he made three assumptions. One of them was that "Former clerk, Marion P. Paad performed the cash receipting, collections, deposit slip preparation, and account distribution and BSA tax recording duties."
"That was all verified and those are the assumptions going in, so she ends up being the person of interest," Davis said.
So, how did the tax money go missing?
Davis said the report indicates it appears to be a case of "pre-booking fraud."
"The money's manipulated before it's booked," he said. "Basically, they would manipulate what's owed on the tax before they would log in the money."
In a nutshell, a village resident would submit their payment and receive a stamped receipt. But instead of their payment being deposited into the village's tax account, the money would be placed in an unrelated account. Meanwhile, the village's computerized tax records would be adjusted to either lower or eliminate the amount due without any actual cash being placed in the tax account. Since the money that was placed in the unrelated account isn't supposed to be there, it could be removed without raising any red flags.
In his report, Haiser cited an example in which a village resident's $1,233 tax payment made in August 2010 was deposited in the sewer account, not the tax fund.
"This is a repeat act," Haiser wrote. "In my opinion, a deliberate on-going choice."
He mentions in his report that "other deposit errors were noted."
Haiser included two exhibits related to Paad's personal bank account in his report, but their significance wasn't clear.
One was a June 14, 2007 personal check Paad wrote to the village for $200 and the other was a June 22, 2007 document from Oxford Bank indicating that check was returned because of insufficient funds. There's nothing in the report that indicates what the check was for or what connection it had to the investigation of 2010 tax monies.
Davis did not know Haiser's reason for including these exhibits.
Flint-based attorney Tom R. Pabst, who's representing Paad in the civil lawsuit she filed against the village in December 2012, had plenty to say about Haiser's report.
"I don't see any evidence to indicate she did anything wrong, to be honest with you," he said. "I think (Haiser's) hiding behind jargon and the weasel phrase 'person of interest.' That's what it seems like to me. I guess a cynic would look at this and say he created a lot of smoke to try to help the village in this lawsuit."
"Where's the evidence that says Pat Paad did anything wrong?" Pabst continued. "This whole thing smells."
Pabst said Haiser is a "nice guy" and "he's qualified," but "I just don't think he has anything here."
"I think if he would have had something, he would have put it in the report," he said. "I would have. I would have said, 'Oh, look at this. Here's $10,000 missing and here's a deposit in Pat Paad's account.' Why hide the ball? Unless there is no ball."
The attorney believes in this case, Haiser "bent over backwards" to give the village's legal team "some cans of smoke" to release as part of their defense.
"A lot of people are dazzled by (the fact that) a certified fraud examiner came in," Pabst said. "But really, look what he says in this report. What does he say? Person of interest? He could have put my name in there. Tom Pabst is a person of interest. He's helping Pat Paad . . . This guy's not saying anything in his report."
Pabst doesn't understand how the audit report can single out any one individual when the village finances had "no controls" and "no oversight for years."
"There was money in drawers (at the village office) and people could go in, take what they needed out and put a piece of paper called an 'IOU' in, then put (the money) back later," he said. "I've never seen anything so lax and it was common practice for goodness' sake. I don't know how you point the finger at one person and say, 'She did it,' when 10 people have access to the (cash) drawer."
Davis noted that Pabst is going to have "a hard time discrediting" Haiser because the Flint attorney has hired him as an expert in other cases.
Paad is suing the village, Manager Young and Councilwoman Maureen Helmuth in U.S. District Court. She 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" to village officials, management and employees regarding the "improper spending/use of taxpayers' money, and/or volunteers stealing taxpayers' money"
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 previously accused of stealing more than $3,300 in property tax payments made by three village residents in 2006.
She was also charged with embezzling almost $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 accusations concerning the alleged theft of the 2006 tax funds were made by Helmuth in January 2011, resulting in Paad's suspension without pay and two months later, her termination.
After remaining silent for four years, Helmuth went to Young and admitted she had discovered the alleged embezzlement, loaned Paad money from her own pocket to cover the missing tax funds in early 2007 and didn't report the incident to the village.
At the time all this supposedly occurred, Helmuth was not serving on council in an elected capacity, but was employed by the village as its deputy treasurer. She was promoted to treasurer by Young in July 2007. Helmuth's 20-year tenure as a village employee ended in September 2008 as a result of the village council's decision to consolidate the treasurer's position with the clerk's position as a cost-saving measure. Helmuth was elected to council in September 2009.
The village has spent a total of $38,795 on Haiser's services. Of that, $24,623 was related to the missing tax funds and $2,827 to Paad's lawsuit. 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.
In a previous interview with the Leader, Davis stated the forensic audit report will be used for three purposes – 1) to hold the person responsible for the missing tax funds accountable for their actions via the criminal justice system; 2) recover the money through the village's insurance carrier; and 3) defend the village against Paad's lawsuit.
Davis said the village plans to pursue criminal charges, it's just a question of timing.
He explained that first, the village is going to attempt to get Paad's civil suit dismissed.
"I really don't want to do anything too early to disrupt that dismissal," Davis said.
If the motion to dismiss the case is rejected, he said, "We'll probably go ahead and initiate (a criminal investigation)."
Davis noted he doesn't have any "preconceived" notions regarding the outcome of a criminal investigation.
"All I have is (Haiser's report)," he said.
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.