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Suspicions Led to Financial Investigation

Into Alleged Misappropriation of St. Clair Fire Protection District Funds

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Posted: Wednesday, January 16, 2013 8:05 am | Updated: 7:42 pm, Sat Jun 22, 2013.

Editor’s note: Second of a two-part series focusing on the investigation into former St. Clair Fire Protection District Chief Eric Hinson’s alleged misuse of department funds.

It all started in 2011 when current St. Clair Fire Protection District board of directors Treasurer Dave Berkel and Office Manager Anna Marie Short started getting suspicious that something was amiss with the district’s funds during the time Eric Hinson was chief of the department. An investigation was started, and it led to an in-depth report about the alleged misappropriation of funds and later Hinson’s indictment.

When details of the fraud investigation report were released, they showed how Hinson allegedly misappropriated $410,933 to himself over a seven-year period from 2005-2011.

A press release from the U.S. Attorney’s Office in St. Louis last week that announced Hinson had been indicted stated the amount of district money involved was about $183,000 higher at $593,236, but the details surrounding the additiona; funds are not known at this time.

Hinson was indicted on fraud and multiple tax evasion charges on Wednesday, Jan. 9, involving his alleged misuse of about $593,236 of district funds. The U.S. Attorney’s Office for the Eastern District of Missouri released information on the indictment last Wednesday afternoon.

Hinson, 43, who lives just outside the St. Clair city limits, was indicted by a federal grand jury on one felony count of mail fraud and five felony counts of tax evasion.

If convicted, mail fraud carries a maximum penalty of 20 years and a fine of up to $250,000. Each count of tax evasion carries a maximum penalty of five years and a fine of up to $100,000. In determining the actual sentences, a judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.

Last September, it was revealed that only Hinson was involved in the investigation.

The St. Clair Fire Protection District primarily is funded by public funds, through real estate tax, personal property tax and sales tax.

Investigation

BKD CPAs and Advisors LLP of Kansas City reviewed credit card statements, board meeting minutes and check listings, general fund bank account information, electronic QuickBooks files and the bonding company spreadsheet of findings prepared by the district to conduct its financial investigation.

Hinson served as treasurer of the fire district from April 2003 to January 2011. When he became chief at that time, Berkel replaced him as treasurer.

The BKD report states that even after he became chief and Berkel was appointed treasurer, Hinson kept the bookkeeping responsibilities through September 2011. In September, Berkel raised questions to the other board members regarding certain payments and classifications of expenses in the general ledger. Shortly thereafter, Hinson resigned as chief.

“As the treasurer for SCFPD, Mr. Hinson was responsible for preparing the annual budgets, facilitating the annual financial statement audit, gaining approval from the district’s board of directors for expenditures, reconciling bank statements and performing other accounting-related activities,” the BKD report reads. “While treasurer, Mr. Hinson conducted all activity in the QuickBooks general ledger system, other than payroll. Mr. Hinson had the ability to log in to the QuickBooks system remotely from outside the district offices.”

Even when Berkel came on as treasurer in January, Hinson said he would continue paying bills and “taking care of the bank accounts and financials for a time,” the report states.

In September 2011, Short noticed certain items in QuickBooks which caused her concern. Hinson was the only other individual who had access to that accounting system.

During multiple meetings that month, according to the report, Short expressed her concerns to Berkel. She then contacted a local information technology company to cut off the remote access to the district’s computer system, which shut down Hinson’s remote access to QuickBooks.

That access was shut off on Sept. 21, 2011, or one week before Hinson resigned as chief of the fire district.

The report continues by saying Hinson immediately called Short about why his access had been eliminated. Later that day, after Hinson had been in the fire district office, Short said she noticed payments to a financial institution had disappeared from QuickBooks activity.

Reacting to this observation, an emergency board meeting was called for Sept. 22, and the district adopted a new resolution for the bank accounts and made changes to authorized signatures on the accounts. System passwords were changed the next day.

On Sept. 23, the BKD document states that Hinson talked to Short and expressed he was upset. He then resigned on Sept. 28.

Other Information

The report also mentions missing documentation, including receipts and expense details for years 2010 and earlier, are missing from the fire district’s office.

It also mentions Hinson did not allow Short to use QuickBooks for anything other than payroll, and that Hinson would become “suspicious and confrontational” if he felt the office manager was working on reports for any other reason or had been looking into any accounts.

BKD also stated it analyzed data and that existing general ledger activity from Sept. 21-22, 2011, was altered to show it took place in the 1990s. The user identified who altered or “backdated” this activity was “Eric” or “Eric (Admin).”

“This appears to be an attempt to manipulate the accounting records to hide the existence of certain activities,” the report reads.

In addition, multiple entries paid to a financial institution were modified under “Eric” or “Eric (Admin)” to reflect a different payee.

“The act of changing payee name appears to have been a way to disguise a questionable expense as a legitimate expense,” the report states.

There also were cases of missing check numbers, limited details on expense reports and misappropriated use of funds through credit cards. The report also lists other “suspicious activity misappropriated for the benefit of Mr. Hinson.” 

/local_news

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