Foster contractor Embezzlement
Greegor
Genesis board stands behind nonprofit's indicted leaders
By Pablo Lopez / The Fresno Bee
(Updated Sunday, September 24, 2006, 7:29 AM)
Three defendants are accused of embezzling from Genesis, a nonprofit
foster-care and group home business in Fresno. The following lists the
amount of money they're accused of taking:
Business checks/credit card purchases: $284,900.65
Vacation pay cash-out: $226,636.75
Total theft: $511,537.40
Source: Grand jury exhibit No. 250
Lawyers next week will start a fraud trial in Fresno that will pit a
mountain of documents against a pair of unlikely defendants: two
sisters known for helping troubled children.
Elaine Bernard and Carol Dela Torre borrowed money to launch Genesis in
1987, eventually turning the Fresno group home and foster-care business
into an $8 million annual enterprise caring for neglected, abused and
abandoned children under contract with local county governments.
Now the sisters -- along with Elaine's ex-husband, Rene Bernard -- are
accused of using the nonprofit's credit cards and business checks to
skim more than $500,000 from the nonprofit business between 1996 and
2002, squandering public money intended for children on vacations and
shopping sprees.
The criminal case puts District Attorney Elizabeth Egan's commitment to
fight white-collar crime at the forefront. A conviction would validate
nearly five years of investigation. An acquittal could spell political
trouble for Egan next time she runs for re-election.
Key evidence in their upcoming criminal trial are hundreds of boxes of
documents, never made public before, that show the defendants used
Genesis credit cards to buy expensive clothing, home furnishings and
steaks, lobster tails and flowers for dinner parties.
Prosecutors also allege that the defendants each took more than 60
weeks of vacation pay in cash without the knowledge of the Genesis
board of directors. The vacation time was "far in excess of any
possible accrued or vested amounts" according to the Genesis employee
handbook, prosecutors say.
Defense lawyers bristle at the charges, saying the defendants initially
used their personal credit cards to start the company and that those
cards eventually evolved into corporate credit cards in their names.
They say the two sisters are guilty of nothing more than sloppy
accounting.
"Here's a beautiful person who has done only good things for this
community," said defense lawyer Roger Nuttall, who represents Elaine
Bernard. "Instead of prosecuting her, the DA should applaud Elaine for
the great work she has done."
Fresno lawyer W. Scott Quinlan, who represents Dela Torre,
characterized the defendants' purchases as loans, which he says they
have paid back to Genesis.
"It's their credit card," he said. "There was no intent to steal."
Quinlan also said the board has expressed no dissatisfaction with the
vacation cash-out. The defendants earned the vacation credits by
working long hours during Genesis' early years, he said.
The alleged victim, the Genesis board of directors, sides with the
defense, saying the defendants were authorized to use the corporate
credit cards.
"The board of directors is completely satisfied there was no criminal
or evil intent to embezzle any corporate monies. At most, this is a
case of sloppy fiscal practices," Genesis' board attorney, Linda
Kollar, said in a court declaration.
But prosecutors say Elaine Bernard hid the credit card receipts from
Genesis board members and auditors. They also say Elaine Bernard and
Dela Torre spent taxpayer money at stores including Ann Taylor, Macy's,
Pier 1, Talbots, Nordstrom Rack, Victoria's Secret, St. John Knits and
Neiman Marcus; Rene Bernard spent $3,500 on photography equipment at
Boot's Camera.
The defendants also paid for country club green fees, gym memberships
and vacations, prosecutors alleged, taking with them family members and
friends to places including Washington, D.C.; Seattle; Hawaii; and
Mazatlan, Mexico. More than $55,000 in taxpayer money was spent on
airfare alone in six years, prosecutors say.
A 17-count indictment, which came after 10 days of grand jury testimony
in Fresno County Superior Court in the summer of 2005, charged Elaine
Bernard with embezzlement and theft of $150,000 or more. Rene Bernard
and Dela Torre were charged with embezzlement and theft in excess of
$50,000.
The other felony charges related to allegedly filing false state income
tax returns and evading state taxes.
If convicted, Elaine Bernard faces up to seven years and eight months
in prison, and Rene Bernard and Dela Torre face up to six years and
eight months in prison. Elaine Bernard and Dela Torre would lose their
license to operate Genesis. Earlier this year, defense lawyers asked
Superior Court Judge Stephen J. Kane to dismiss the charges because the
women had paid back the money.
But, Kane ruled that there was no evidence that the defendants intended
to pay back the money until after investigators raided Genesis
financial records. In addition, Kane said: "The evidence that the
defendants were required to reimburse Genesis for any personal charges
made with the credit card incriminates rather than exculpates
defendants."
Despite the legal setback, lawyers for the Bernards and Dela Torre say
they won't admit guilt or accept a prosecution deal that involves
pleading to a felony.
"One felony would be as bad as pleading to all of them [felonies],"
Nuttall said. "They would lose their license. They would lose their
profession."
The trial, set to start Oct. 2, is expected to last several weeks,
perhaps months.
Ultimately, a jury will decide whether the Bernards and Dela Torre
committed crimes.
Complex investigation
The Genesis case tells the story of one of the most complex
investigations in Fresno's history because of the amount of documents
-- 500 boxes worth -- prosecutors examined over nearly five years.
It all began in late 2001, when two Genesis employees tipped off the
District Attorney's Office and the FBI to alleged wrongdoing by the
defendants.
Genesis hired chief operations officer Jose Torna and chief financial
officer Gina Vagnino in 2001 after the board directed Elaine Bernard to
create those positions to improve Genesis' accounting and
administrative procedures.
Their tip led to a massive raid by 45 investigators who searched 17
locations, including Genesis offices and nine group homes in Fresno and
Madera counties on Jan. 28, 2002.
Vagnino declined to comment for this story. Torna could not be reached
to comment. Both have left the nonprofit.
The Genesis investigation was in full gear by the time Egan took office
in January 2003. Her first move was to assign Regina Leary, a chief
deputy district attorney, full time to the case. Egan also committed
Michael Elder, a deputy district attorney, and chief deputy John
Savrnoch to assist Leary.
The prosecution has dedicated nearly five years to the case, Savrnoch
said, because Genesis holds a special status in the community; it
receives government money tax free and holds assets in trust for the
benefit of the children it serves.
Because of this nonprofit status, Savrnoch said, Genesis can not
legally authorize the use of funds for personal benefit, other than
employee salaries.
During the probe, investigators discovered a complicated world of group
homes and foster care homes, two key elements of Fresno County's social
services network to help disadvantaged children.
In general, group homes serve adolescents who are in trouble with the
law but whom judges decide imprisonment won't help.
Foster homes are geared toward children removed from their parents
because of abuse, neglect, abandonment and other issues.
Both types of homes operate out of private residences: Paid staff run
group homes, and individuals or couples who are owners or renters run
foster homes.
Genesis works in both arenas, operating group homes and running an
agency that finds, trains and supervises foster families. It also
provides adoption services.
Catherine Huerta, assistant director of the county's Children and
Family Services, said Genesis "provides a good service to the county."
Supporters say Elaine Bernard and Dela Torre still take calls in the
middle of the night to find beds for children released from a
psychiatric ward or juvenile hall.
Genesis' care of children, however, is not the issue; it's the
defendants' alleged embezzlement of taxpayers' money, Savrnoch said,
noting that the prosecution's investigation has revealed that there is
little or no financial oversight of agencies dealing in foster-care and
group homes.
Honors and trouble with the law
Elaine Bernard and Dela Torre seem out of place in a courts system that
typically deals with violent crimes.
Elaine Bernard, 46, has a polished résumé of public service,
including co-chairing the Measure K school bond campaign committee. In
March 2001, voters passed Measure K, which provided $200 million for
school projects.
In 1999, Hispanic magazine named Genesis one of the 100 fastest-growing
Latino-owned businesses in the country. The next year, Elaine Bernard
was named one of the Top 10 Business Professional Women in Fresno
County.
She makes $155,000 a year as Genesis' chief executive officer.
Dela Torre, 45, was recipient of the 1998 California Wellness
Foundation's Peace Prize for helping to reduce violence in the
community.
She earns $145,000 a year as Genesis' clinical director.
Even after the news-making raid on the sisters' homes and Genesis
offices and group homes, the sisters have continued to attend
charitable events and political fundraisers.
Genesis began as part of the sisters' thesis project at California
State University, Fresno, where they received master's degrees in
social work.
In the early years, the sisters didn't have money to pay 24-hour staff,
so they lived with the foster children, defense lawyers said.
They also made Genesis a family affair, putting relatives, including
their mother, Francis Dela Torre, on the payroll. Former board member
Tim Rios said in court papers that he doesn't know what duties Francis
Dela Torre performed, and he didn't know she was an employee until he
saw her name on a payroll list. Elaine Bernard, in response, said her
mother, a registered nurse, helped her and her sister found Genesis,
and as an employee provided first-aid and CPR training to foster
parents.
While awaiting trial, one sister landed in trouble again.
Police arrested Bernard and her boyfriend, Ken Steitz, a former Fresno
City Council member, on suspicion of driving under the influence after
they returned to their Clovis home in separate vehicles on July 25.
During the incident, police reports say, Bernard directed an
expletive-laced tirade at officers.
Rene Bernard, 49, a handyman who shopped for the group homes and did
repairs, pleaded no contest to misdemeanor drunken driving in 2000 and
2001, and no contest to a misdemeanor possession of drug paraphernalia
in 2004. He was arrested a third time on suspicion of drunken driving
in 2005; that matter remains unresolved.
Rene Bernard left Genesis about three years ago.
The Bernards, who divorced in September 2001, and Dela Torre declined
to be interviewed and referred questions to their lawyers.
Despite the allegations, Genesis board member Marvin Howard said Elaine
Bernard and Dela Torre are honest, hardworking people who grew up in
the community, care about the community and have a passion to help
children.
"I believe in what they are doing or I wouldn't be here," he said.
Question of intent
The Genesis board also remains adamant that the agency is not a victim.
Savrnoch acknowledged the unusual situation, saying the board has been
reluctant to help prosecutors or provide evidence to prove the
defendants have paid full restitution.
Genesis' board attorney, Kollar, disagrees, saying in court papers the
board has cooperated and that prosecutors failed to arrange
appointments with board members.
That's why a main portion of the prosecution's case relies on board
members who resigned soon after the January 2002 search warrants.
Former Genesis board member George Aguilar told the grand jury that
Elaine Bernard thwarted his attempts to get access to the credit card
statements.
He testified to the grand jury that he resigned as board chairman
because there was no oversight of finances and he felt Elaine Bernard
had too much control over the board.
Frank Franco, another former Genesis board member, also tried to get
financial information about the corporation but later said Elaine
Bernard would only tell board members that she was having an accountant
prepare a report.
Franco told investigators he never saw a report, only a single
paragraph from an accountant saying everything was OK.
In addition, former Genesis board member Nora Benavides told
investigators that she knew something was amiss when she and Dela Torre
went on weekend trips to the California coast and Dela Torre used the
corporate credit card for shopping sprees and hotel rooms.
Benavides said she told Dela Torre that she hoped she was paying
Genesis back for the purchases, but Dela Torre did not respond.
Though evidence shows the defendants used a Genesis corporate credit
card to make personal purchases, lawyers say the real legal question is
whether they intended to commit crimes.
Dela Torre's lawyer, Quinlan, said his client should not be prosecuted
because she never hid her credit card purchases and turned in the
receipts to her sister.
Elaine Bernard also authorized Dela Torre to take her vacation in cash,
Quinlan said.
"People forget that Elaine is the CEO," Quinlan said.
The board gives her the authority to run the company, set policy,
authorize credit card purchases and determine how much vacation is owed
to an employee, he said.
"That's her job," Quinlan said, noting that the Genesis board hasn't
complained about Elaine Bernard's job performance or expenditures.
Fresno lawyer Scott Baly, who represents Rene Bernard, said his client
also made credit card purchases and cashed out vacation at his former
wife's direction: "He was the maintenance man. He just a small fish in
this [case]."
Nuttall agreed Elaine Bernard is the prosecution's main target, but he
said she's done nothing wrong.
He said the crux of criminal behavior is the mental state -- did Elaine
Bernard intend to steal? "Of course not. She's not that kind of
person," Nuttall said.
"There was never an intent to steal from anyone."
Anthony Capozzi, a veteran Fresno criminal defense lawyer and former
assistant U.S. attorney, said some of the spending allegations -- food
purchases and trips -- could be explained as business expenditures. But
the shopping sprees for women's clothing "could be a problem," he said.
Character evidence will help the defense because the sisters, by all
indications, have done good deeds for children and the community,
Capozzi said. If witnesses testify about their trustworthiness and
honesty, "then it may be tough for a jury to convict," he said.
But if the prosecution proves the defendants "were living beyond their
means," then it would spell trouble for the defense, Capozzi said.
Supporters including Michael Der Manouel Sr., a longtime Fresno
insurance executive whose clients include Genesis, say Egan is blowing
the case out of proportion.
Said Der Manouel: "If all foster homes were run by her, taxpayers would
get 110%. She should get a medal for what she's doing."