News

Center audit alleges $316,887 embezzled

Report says former city clerk paid personal expenses from public coffers
Missouri Auditor Nicole Galloway in front of the Ralls County Courthouse on Wednesday, where she was interviewed about her office's forensic audit of the city of Center.
FORREST GOSSETT/FOR THE COURIER POST
By Forrest Gossett
For the Courier Post
fgossett@courierpost.com
Posted: Sep. 16, 2020 9:52 am Updated: Sep. 16, 2020 11:57 am

CENTER, Mo. | Missouri auditors alleged on Wednesday that the former city clerk of Center siphoned at least $316,887 of taxpayer dollars for personal use from 2015 to 2019.

Auditors said another $87,691 of questionable payments made by former City Clerk Tracey Ray were uncovered by staff from the Public Corruption and Fraud Division of Missouri Auditor Nicole Galloway's office.

Galloway, whose office last year called in the FBI, said that her staff worked with “local, state and federal law enforcement throughout the audit and will continue to provide additional assistance now that the audit is complete.”

The embezzlement allegations were in an audit of Center, which took more than a year to complete and was released by Galloway on Wednesday morning.

Galloway said Ray's alleged personal use of taxpayer money was a “serious breach of public trust and exposed dishonesty at the expense of taxpayers.” She said Ray paid personal expenses on unauthorized city credit cards, including trips to Las Vegas and Branson, concert tickets and numerous other vendors, including 666 separate purchases from Amazon.

“It is an egregious misuse of public trust to use taxpayer funds to pay personal credit card bills, for trips to Vegas and Colorado, to pay for life insurance policies, and her mortgage,” Galloway said during an interview in the Ralls County Courthouse on Wednesday. “And not only did she steal from the taxpayers, she then falsified documents to cover it up.” 

The audit report was sharply critical of Center leaders for failing to have in place rudimentary financial controls and process reviews that could have prevented or at least limited the extent of Ray's alleged embezzlement of taxpayer dollars.

The city had not obtained annual independent financial audits, as required by Missouri law. Moreover, auditors allege that Ray siphoned off nearly one-quarter of all the revenues collected by the city from Jan. 1, 2015, to June 30, 2019. Galloway said that city leaders failed in their responsibility to ensure that the proper checks and balances were in place to spend taxpayer dollars.

City officials agreed with Galloway's office to establish stringent reviews, dual signing of checks, regular reviews of expenses and to contract for an outside audit of funds.

“This went on for years at a high volume and for years undetected,” Galloway said. “Think about what this means for taxpayers on your own budget. If someone siphoned off one-quarter of your household budget, you would feel the effect. This is citizen money, taxpayer money, and what is really concerning is that the Board of Aldermen and mayor did not detect this.”

Center fired Ray, who had been with the city since 2004, on July 3, 2019, after learning that she had failed to file mandatory city financial reports with the Missouri Department of Revenue for three straight years, despite telling the Board of Aldermen that reports had been filed.

As the board was voting to fire Ray, she was being treated in a St. Louis hospital for three gunshot wounds sustained in an exchange of gunfire in rural Ralls County on July 2. During that exchange, Ralls County sheriff's deputies said they returned fire after Ray allegedly shot a gun.

In the exchange, Ralls County Sheriff Gerry Dinwiddie and Ralls County Chief Deputy Ronald Haught were injured by bullet fragments and ground debris. Both received minor injuries.

Ray was subsequently charged with four felonies related to the alleged shooting incident. Her case was moved to Boone County. She is currently free on $2,500 bond.

After they fired her, Center aldermen passed an emergency ordinance requesting an audit from Galloway, who said that her office had also received a request on her whistleblower hotline.

Center Mayor Dennis McMillen said that Ralls County Clerk Sandy Lanier informed him on June 28, 2019, that the Missouri Department of Revenue called to tell her that Center was facing more than $146,000 in fines for failing to file the mandatory annual financial reports.

The auditor's office accepted the city's audit request and immediately sent staff to Center to investigate. They found a mess. City financial records were stored on computers and accounting programs with  usernames and passwords were solely controlled by Ray.

Data such as accounting systems, financial records and supporting documentation, bank statements and reconciliations, invoices, receipt and deposit records, and payroll records were either not available or incomplete.

City officials were able to recover paper copies of bank statements, which showed a pattern of what McMillen called unauthorized payments for credit cards and health insurance.

“I was shocked,” McMillen said. “We trusted her. I trusted her.”

Subpoenas were issued by Galloway to Capital One Bank, GM Card Services, Wells Fargo Bank, Family Heritage Life Insurance Company of America, CITI Bank and CITI Mortgage, Globe Life & Accident Insurance Company, Nationwide, Kohl's Department Store and LaCrosse Lumber Company to produce records related to Tracey Ray's potential personal transactions paid using city funds.

Auditors said they discovered that Ray used taxpayer dollars to pay personal credit card bills totaling $206,343, while earning $1,997 in credit card rewards points. They say she also paid for health insurance coverage totaling at least $62,013, personal expenses totaling at least $35,547, made improper payroll disbursements to herself totaling $3,580 and did not deposit at least $7,407 in cash receipts.

 Among the payments that auditors uncovered:

• Blue Cross and Blue Shield (Anthem): 39 unauthorized payments, totaling $62,538, and deposits of two refund checks from Anthem, totaling $525, into the city General Fund bank account. The city had dropped employee health care coverage in 2014, but auditors said that Ray arranged health care coverage for her family through a broker and used taxpayer money to pay the bills.

• Capital One: $206,342.53 over the four years, including the Amazon charges, totaling $32,943.03; Walmart, 133 separate transactions, totaling $24,892.55; clothing and accessories, 181 transactions totaling $20,839.12; Lowe's, 62 transactions for $15,069,32.

• Also, travel-related on Capital One, $21,887, including Explore America, HomeAway, Drury Inn, Harpole's Heartland Lodge, Walden Brothers Transportation, Harbor Shores on Lake Geneva, Enterprise Rent-A-Car, Budget Rent-A-Car, Radisson Hotel Branson, MGM Grand Las Vegas, Country Thunder Music, Quality Inn, Residence Inn Breckenridge, Avis Rent-A-Car and Ameristar Casino Resort & Spa .

• Personal expenses: Hair Company, $2,644.58; Walgreen's, $1,183.67; and Synergi MedSpa, $690.40.

• Other charges included restaurants, professional services, grocery stores, personal property taxes, television subscriptions, ATM withdrawals and even a payment to the city of Hannibal for a $139.95 for a traffic ticket.

• Tax payments: Auditors said Ray used $1,342 in taxpayer funds to pay the Audrain County Collector for former 2014 and 2015 real estate property taxes owed by her former husband, David Ray, who is the ex-police chief of Center.

Detailed in the $87,691 in questionable expenses were payments totaling $38,375 labeled to David Roberts, a former part-time employee of the city. None of the payments were documented, auditors said.

Auditors said that Ray falsified financial reports to the Board of Aldermen and lists of bills prepared for board meetings. They said that board meeting minutes indicate the board approved financial statements and a list of bills to be paid monthly. Auditors say they found that cash balances presented by Ray at monthly board meetings were falsified.

The Center Board of Aldermen scheduled a meeting for 6 p.m. Wednesday to discuss the audit report with city residents.

 Here is a link to the audit: 

 http://app.auditor.mo.gov/Repository/Press/2020070886816.pdf

 

 

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