LOL!! It Was Bound To Happen - What Happens When Money Talks?
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http://www.latimes.com/news/politics/2004/la-na-embezzlers31may31,1,7272445.story?coll=la-home-headlines
THE NATION
Campaigns Catching Hands in the Till
Amid record donations and little oversight, more candidates and PACs become
victims of embezzlement. They'd rather not talk about it.
By Lisa Getter
Times Staff Writer
May 31, 2004
WASHINGTON - For a man with a gambling problem, Russell Roberts had what
seemed like the perfect job. He worked as the campaign treasurer for Rep.
John A. Boehner (R-Ohio), which gave him access to lots of money.
From 1994 until he was caught last year, Roberts embezzled $617,563, wiring
money directly from the congressman's campaign office to riverboat casinos
in Indiana.
Lydia Percival Meuret, a Texas mother of three, was afraid to tell her
husband she had racked up too much credit card debt. So to pay her family's
household bills, she began embezzling money from a political action
committee for minority candidates run by Rep. Henry Bonilla (R-Texas).
Meuret, the PAC's executive director, stole more than $120,000 over the
course of three years.
"Had there been any checks or balances, it probably never would have
happened," she said recently, as she prepared to begin serving a 15-month
prison term. "I would just write myself checks."
From Hawaii to Delaware, more and more candidates and political action
committees are becoming victims of embezzlers. As record amounts of money
are donated to political groups, the temptation to steal is greater than
ever.
House and Senate campaigns have become multimillion-dollar enterprises, but
the money going in and out is often controlled by one person - usually a
trusted aide or friend of the candidate who works as the campaign treasurer.
And financial controls, commonplace in business, are frequently nonexistent
in the world of politics.
Campaign embezzlers can go undetected for years. And when they're caught,
it's a problem members of Congress and political committees would rather not
publicize.
"You know how senators are. They don't like to talk about it," said Calvert
Chipchase III, the campaign treasurer for Sen. Daniel K. Inouye (D-Hawaii).
"Typically, these people are their friends and supporters, and they trusted
them."
Chipchase got the job after the former treasurer, Theresa Blanco, spent
about $100,000 in campaign funds for her personal use. A good friend of the
senator's, she repaid the money. The campaign did not press charges.
With burgeoning campaign coffers and little oversight, the number of federal
campaign embezzlement cases has increased in the last few years, election
lawyers say.
One embezzler dipped into a senator's campaign cache to woo men over the
Internet, buy a Porsche Boxster, a BMW convertible and send a $10,000 check
as a wedding gift. Another went on a shopping spree at Best Buy and the
Men's Wearhouse. And one campaign worker spent $85,000 in campaign
contributions to support his drug habit.
"I think there's been a lot more of it recently," said Jan Witold Baran, a
Washington attorney who has represented four campaigns and political
committees that were fleeced by embezzlers since 2000.
"There are two basic themes in all of these embezzlement cases," Baran said.
"A longtime trusted individual . operating with the exclusive and
unsupervised control of funds."
No single agency tracks campaign embezzlement, and there are no
dollar-figure estimates. But The Times identified 11 federal cases since
January 2002 that involved the theft of more than $1.73 million.
Misusing campaign contributions violates election laws and subjects
campaigns to civil fines. But the Federal Election Commission does not
require campaigns to report embezzlement to law enforcement. Instead, the
campaigns must disclose the thefts as unauthorized expenditures.
When the campaign of Rep. Anne M. Northup (R-Ky.) discovered last year that
one of its aides had stolen $24,000, it decided to let Stephine Stottmann
pay back the money - plus the $17,000 cost of the audit that documented the
theft. The campaign did not pursue criminal charges.
"She had been a very good employee," said Ted Jackson, the campaign manager.
"It was just a judgment call that nothing more could be served by trying to
prosecute her."
But such decisions can have ramifications.
Baran cited one case in which a PAC discovered an embezzler, demanded
restitution and fired the person without pressing criminal charges. Within a
year, he said, the embezzler stole from another PAC. That time, he said, the
person was prosecuted and convicted.
Washington lawyer Cleta Mitchell said she advised Sen. Elizabeth Hanford
Dole (R-N.C.) and Robert Lamutt, a Georgia legislator who is running for
Congress, to go to the U.S. Justice Department when they realized money was
being stolen from their committees recently.
"They didn't want to compound wrongs in order to keep things quiet. They bit
the bullet and never flinched," said Mitchell, who represented the
candidates in both cases.
The lawyers for Earl Allen Haywood, the embezzler in Dole's case, urged
Mitchell to settle the case privately. "The first choice is usually to pay
it back and settle behind the scenes," said Kirk Jowers, one of Haywood's
attorneys.
Haywood, 40, an accountant who previously worked on other campaigns, pleaded
guilty to mail fraud in March. He acknowledged stealing $174,725 from two
joint committees that were raising money for Dole and the state Republican
Party, as well as for Robin Hayes (R-N.C.) for Congress.
His explanation: He began embezzling the money "because he believed he was
entitled to being paid for his services and he was not being paid," one of
his lawyers, Preston Burton, told the judge at the plea hearing.
Mitchell said the fundraising committees did not follow a system of checks
and balances that would have prevented the theft.
"These are multimillion-dollar businesses. You need to have the right system
of internal controls, accounting and legal reviews," she said. "You need to
make certain one person isn't in charge of the money."
In 2002, it cost an average of $890,000 to win election to the House and $5
million to gain a Senate seat, according to FEC statistics.
Often, the campaign treasurer is the only person who collects money,
deposits it, signs the checks and prepares the reports for the FEC.
Contributions less than $200 don't have to be reported, which means no one -
but the treasurer - is accountable for knowing where that money comes from -
and goes.
Candidates rarely inspect their own financial records.
That's what made the embezzling case at Lamutt's campaign this year so
unusual. The Georgia legislator, an investor who had loaned his own campaign
$900,000, discovered the theft himself. He made it a practice to look over
his campaign books every week to 10 days.
"I'm a business guy. That's the way I run my business," Lamutt said.
According to amended reports filed with the FEC, Lamutt's campaign manager
made at least $28,000 in unauthorized expenditures to himself and another
$13,000 to others, including a woman with whom he lived.
Most politicians, Lamutt said, worry more about campaign issues than
accounting controls.
"Campaigns are a frantic, short-order kind of thing," he said. "Oftentimes,
candidates are more concerned about their message and campaigning than the
financial end of it."
Meuret, 31, the embezzler who worked at Bonilla's political action committee
between 1999 and 2002, said she got the job because she was a good friend of
Bonilla's scheduler. She had a degree in political science, which helped.
The Texas mother of three said she spent the money on routine things like
eating out at restaurants and buying extra clothes for her kids. "When you
just live outside your means a little bit for a long period of time, it just
adds up," Meuret said.
She handled the checkbook at home, so her husband of eight years, a
mapmaker, had no idea she was in so much debt. The guilt eventually made her
come clean in February 2003. She sent the American Dream PAC a confessional
e-mail.
"I didn't want to wake up every day and wonder if that was the day they were
going to stumble onto it. It was time to pay the price," Meuret said.
She broke the news to her family after she told the committee. Her husband
has promised to bring their three children - ages 3, 5 and 6 - to visit
after she surrenders to prison officials Tuesday.
"He stayed married to me, thank God," she said, adding that she had sought
counseling for her compulsive spending.
One recent embezzling case was discovered after an anonymous tip to the FBI.
The tip involved Roger D. Blevins III, 33, a longtime aide to Sen. Joseph R.
Biden Jr. (D-Del.).
The FBI found that Blevins had diverted more than $400,000 from Biden's
campaign fund to romance three men, buy luxury cars and a plasma television,
pay personal bills and lavish friends and family with gifts "of substantial
amounts of money," court documents state. He pleaded guilty in August and is
awaiting sentencing.
"He was a sort of fixture in Delaware state politics. It was obviously
really distressing," said Margaret Aitken, Biden's press secretary. "It was
somebody the senator trusted and considered competent and honest."
Some election observers think more fraud could be discovered if the FEC
conducted random audits. The agency, created after Watergate, audited 10% of
the House and Senate campaigns after the 1976 elections and found only minor
problems.
Still, some members of Congress felt the spot checks were intrusive and
three years later pushed through legislation revoking the agency's ability
to conduct such audits. The FEC can conduct audits now only if campaign
finance reports show problems or possible violations of the law.
In 2002, Sen. Jack Reed (D-R.I.) offered an amendment to the campaign
finance reform bill to restore the FEC's ability to conduct random audits,
but the measure failed.
The FEC, nevertheless, has tripped over some embezzlement cases.
For instance, the agency sent 20 letters over several years to the treasurer
of the Lockheed Martin Employees' political action committee questioning why
monthly reports weren't being filed.
But the assistant treasurer, Kenneth D. Phelps III, intercepted the FEC
letters.
It was only in December, when an FEC auditor called the treasurer on Phelps'
day off and informed him that the committee would be audited for failing to
respond to their letters, that the treasurer realized there was a problem.
A subsequent investigation indicated that Phelps allegedly stole $170,000.
The case has been turned over to the Justice Department for possible
criminal prosecution.
Discrepancies on FEC reports also led to the discovery of Roberts, the
treasurer with the gambling problem at Boehner's congressional campaign.
When the campaign asked him to explain the discrepancies last year, Roberts
said the records he needed had been destroyed in a flood. That led campaign
officials to reconstruct financial records by seeking copies from the bank.
The bank records showed Roberts had been embezzling.
Boehner was shocked by the revelation. The Ohio congressman sent a letter to
8,000 supporters reassuring them that he would never be victim to such a
crime again. He hired a new treasurer, required that no one person ever have
control of his accounts, and promised to personally review his campaign
records every month and subject them to an independent audit every two
years.
"Safeguards that should have prevented this were not in place. They are now
and to a degree not seen in most congressional campaigns," Boehner wrote.
Roberts pleaded guilty and was sentenced to a 30-month prison term in
January. He is due to be released in June 2006.
*
(Begin Text of Infobox)
Misappropriated political funds
*
Embezzlement cases since 2002:
Campaign: Friends of (Rep.) John A. Boehner (R-Ohio)
What happened: Treasurer Russell Roberts stole $617,563.
Outcome: Serving a 30-month prison term; ordered to pay restitution.
Campaign: Sen. Joseph R. Biden Jr. (D-Del.)
What happened: Treasurer Roger D. Blevins III stole more than $400,000.
Outcome: Pleaded guilty; awaiting sentencing.
Political action committee: Lockheed Martin Employees
What happened: Assistant Treasurer Kenneth D. Phelps III accused of stealing
$170,000.
Outcome: Justice Department investigating Phelps, who was fired in January.
Campaigns: Dole North Carolina Victory Committee, North Carolina's Salute to
George W. Bush Committee
What happened: Earl Allen Haywood stole $174,725.
Outcome: Pleaded guilty; sentenced to 18 months in prison, three years'
probation and restitution.
PAC: American Dream
What happened: Executive Director Lydia Percival Meuret stole $120,000.
Outcome: Pleaded guilty; reports to prison Tuesday to begin 15-month term.
Campaign: Sen. Daniel K. Inouye (D-Hawaii)
What happened: Treasurer Theresa Blanco withdrew about $100,000 for personal
use.
Outcome: Restitution made in 2001 and 2002. No prosecution.
Campaign: Robert Lamutt for Congress
What happened: Campaign manager Jack Thomas made $28,000 in unauthorized
expenditures to himself and allowed another $13,000 to others from the
Georgia legislator's funds.
Outcome: Campaign fired Thomas and plans to pursue prosecution.
Campaign: Northup for Congress
What happened: Treasurer Stephine Stottmann caught embezzling money from
Rep. Anne M. Northup (R-Ky.).
Outcome: Repaid $40,990 on Dec. 20, 2003. No prosecution.
Campaign: Friends of (Rep.) Ernest J. Istook Jr. (R-Okla.)
What happened: Volunteer Jeremy Pinson, with six prior felony convictions,
embezzled $32,000 in October 2003 by stealing campaign checks.
Outcome: Pleaded guilty in March; sentenced to three years in prison, 15
years' probation and restitution.
Campaign: Friends of (Rep.) Doc Hastings (R-Wash.)
What happened: Bookkeeper Sheri Sprague took $28,000 from 2001 to 2003.
Outcome: Quit and made restitution. Campaign turned case over to federal
prosecutors, who have not filed charges.
PAC: American Forest & Paper Assn.
What happened: Dylan Amos stole about $20,000.
Outcome: Pleaded guilty; received 40-month suspended sentence and five
years' probation.