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Over $700,000 of Taxpayer Money Stolen from County Governments Across Tennessee

By Jeaneane Payne

More than $700,000 of taxpayer money was stolen from county governments across Tennessee during the fiscal year that ended June 30, 2010.

"These cases of theft are disappointing," said Comptroller Justin P. Wilson. "It is particularly frustrating because many times thefts could have been avoided if the counties had better procedures for money handling and record keeping. These procedures, which our auditors refer to as 'internal controls,' are essential for government officials who want to be good stewards of their taxpayers' money."

County governments in East Tennessee that suffered from embezzled taxpayer money included Anderson, Cocke, Cumberland, Morgan, and Sevier. Of the $717,426.49 stolen funds, the following five county governments were victims of approximately 28% of those funds:

Anderson: $1,209.87 - Office of County Clerk
Cocke County: $41,315.00 - Office of Clerk and Master
Cumberland: $8,893.20 - School Maintenance Department
Morgan County: $54,611.33 - Office of County Clerk
Sevier County: $94,645.50 - Office of County Clerk

In Anderson County a cash shortage of $4,104.26 was reported in the 2008-09 annual financial report, resulting from documents that had not been entered into the accounting records. A review of the deposit slips for those days revealed that nine checks related to the unrecorded documents had been included in the items deposited, and cash from other unrelated documents had been removed from the deposits to reconcile with the amount of work reflected on each date. This $4,104.26 cash shortage was collected by the county clerk from a former employee's family on November 24, 2009.

During the billing cycle for 2009-10 business tax collections, the county clerk discovered an additional four checks totaling $1,209.87 that had been channeled through the office without being accounted for on the official records.

The county attorney and the district attorney general have been notified of this additional cash shortage. The county's bonding company has been notified that the county plans to file a claim.

In Cocke County and audit for the 1996-97 year reported details of a $101,822 cash shortage in the Office of Clerk and Master. The former clerk and master, Charles Chesteen, pled guilty to theft and conversion of office funds and was ordered to pay restitution totaling $101,822. His surety bond company paid the office $50,000 during a previous year, and as of June 30, 2010, Mr. Chesteen had paid $11,482 toward liquidating the remaining shortage. A balance of $40,340 is reflected as a cash shortage in the financial statements of this report.

An audit of Cumberland County for the 2008-09 year reported a cash shortage of $8,893.20 in the School Maintenance Department as of November 4, 2009. This cash shortage resulted from a recycling company paying $11,175.69 in cash to Maintenance Department truck drivers for the sale of scrap metal. The truck drivers remitted the cash to the maintenance supervisor; however, the maintenance supervisor could not document the use of $8,893.20 from the sale of the scrap metal. This shortage has been reviewed with the district attorney general.

Morgan County Clerk Carol Hamby was arraigned on January 24, 2011 on charges of theft, official misconduct, and failure to follow the three day deposit law.

A special report by the State Comptroller's office dated February 10, 2011 reported a cash shortage of $54,611.33 at December 14, 2010.

The Tennessee Department of Revenue informed the State Comptroller of certain allegations concerning customer payments made at the Morgan County Clerk's Office. Several customers making payments for services to the clerk's office complained that their checks were taking up to three months to clear their personal bank accounts. Based on this allegation, a special investigation was conducted with the assistance of the Tennessee Bureau of Investigation of the Morgan County Clerk's Office for the period July 1, 2009 through December 22, 2010. This investigation included a cash count, a review of the office's accounting records compared with receipt logs, a review of the bank deposit detail in the deposit books, bank records, and interviews.

On February 18, 2011, the Criminal Court of Morgan County accepted a plea of guilty to charges of official misconduct and violation of the three day deposit law. The charge of theft was dismissed. The court also accepted a memorandum of understanding to defer entry of judgment of guilty if terms and conditions of that memorandum are met. Among the conditions specified was the requirement that Ms. Hamby pay the remaining cash shortage, the cost of the extended audit ($11,562), and court costs. Also, on February 18, 2011, Ms. Hamby resigned as Morgan County Clerk and submitted payment of $6,500 to be applied toward the agreed obligations.

The Sevier County Clerk's office came up nearly $100,000 short. During an annual audit by the State Comptroller of the Office of Sevier County Clerk for the year ended June 30, 2010 procedures identified a cash shortage of $94,645.50. The examination found serious delays in depositing daily collections into the office bank account. By delaying deposits, large amounts of cash and checks/money orders were allowed to accumulate in the office.

When asked about the collections, the clerk presented the checks and money orders ($149,289.09); however, the clerk could not produce the cash from those collections ($92,334.29). The clerk later provided a statement that he had used this cash for his personal use.

Sevier County Clerk Joe Keener, II, resigned his position on August 30, 2010.

Published April 19, 2011

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