The fraud investigation into the alleged embezzlement of funds by former St. Clair Fire Protection District Chief and Treasurer Eric Hinson originally showed a total personal misappropriation of more than $400,000.
When Hinson was indicted on Wednesday, however, the amount of money mentioned was almost $600,000.
BKD CPAs and Advisors of Kansas City compiled its detailed, inch-thick report after being hired by the fire district board of directors in September 2011 to investigate the financials of the department, including the 43-year-old Hinson. A copy of the report was delivered to the fire district board in May with amended figures forwarded on Sept. 7.
Findings could not be released until Hinson was indicted on Wednesday.
The Missourian obtained a copy of the fraud investigation report.
“Through our review of the available documentation, we found that funds had been misappropriated for the benefit of Mr. Eric Hinson during and subsequent to his role as treasurer for the district,” a findings statement in the report reads.
The report then lists several classifications ranging in amounts from $1,248 to $204,309 to produce a $410,933 total. A press release from the local fire district board stated that the “total expected actual loss is closer to $500,000.”
Current fire district board Treasurer Dave Berkel told The Missourian he did not know why there is such a difference in the BKD listed amount of money involved and the $593,236 amount released by the U.S. District Attorney’s Office.
“I will be interested to see where the extra money was found,” Berkel said. “It’s interesting that even the audit company didn’t catch everything.”
Hinson served the St. Clair Fire Protection District for about 25 years and was board of directors treasurer from April 2003 to January 2011, when he became fire chief. He resigned as chief in September 2011, days after the alleged misappropriations surfaced. The report states funds were misappropriated every year from 2005 through 2011.
At the time he resigned, Hinson said his plate was “too full” to continue as St. Clair’s chief. He also was chief of the Ladue Fire District at the same time. He resigned from that position in early September of this year.
Berkel replaced Hinson as the board’s treasurer when Hinson was named chief in January 2011. Documents stated that Berkel and office manager Anna Marie Short discovered the financial irregularities. The other two board members are President Kirby Banderman and Secretary Danny Gossett.
“In October of 2011, the board of directors of the St. Clair Fire Protection District discovered some apparent irregularities in the finances and accounting practices of the district,” a press release from the fire board states. “These issues were discovered by the office manager and the newly appointed treasurer of the district. The initial irregularities dealt with concerns about purchases (and) credit card bills, and the investigation quickly expanded from there.
“Based upon the recommendation of our primary banking institution, an audit and investigation firm from Kansas City (BKD) was retained to do a forensic examination of the financial records and practices of the district. The board worked diligently with BKD and federal authorities (Federal Bureau of Investigation and Internal Revenue Service) to investigate all of the findings.
“The final report from the audit firm has been received. The forensic audit names one individual as being responsible for misappropriation of district funds and details deliberate and elaborate manipulation of the accounting system to conceal such from other officials and the accountant(s) for the district.”
The individual named in the release is Hinson.
In all, the fraud investigation report lists almost 100 pages of transaction-by-transaction details traced to Hinson’s alleged misuse of department credit cards and the misappropriation of funds.
During a fire board of directors meeting on Sept. 11, 2012, Berkel announced in a room full of district firefighters and others that Hinson had been linked to the fraud investigation and that he was the only individual involved. The announcement came almost a year to the day after the board first discovered the financial irregularities.
He also announced at that time a $100,000 check had been received by the district from Volunteer Firemen’s Insurance Services Inc./Glatfelter Claim Service and it has been deposited into the district’s account.
“This check is due to an ongoing investigation concerning Eric R. Hinson about his duties with the St. Clair Fire Protection District as board treasurer,” Berkel said on Sept. 11.
The board members said that after financial documentation was turned into the bonding company, and after further investigation into the matter, board members signed a release and assignment letter which states that if the department receives full restitution, the board must repay the $100,000.
VFIS is the St. Clair department’s insurance carrier. Glatfelter is the claims firm the insurance company uses.
The only other thing board members said they could say about the case before Wednesday’s indictment was that no one else on the board of directors or in the department is involved in the alleged financial irregularities.
“The entire department has been investigated, and at this time we can confirm that only Mr. Hinson has been connected to the financial losses associated with the department,” the board members said jointly. “Due to the ongoing investigation, we can’t disclose any linking documents at this time. We can confirm Mr. Hinson is involved.”
The fire protection district primarily is funded through public funds through real estate taxes, personal property taxes and sales taxes.
A statement from the board of directors issued in September asked for continued trust from the patrons of the fire district.
“The district has taken many steps, in consultation with our auditor, to make sure this situation will never happen again,” it reads. “We will do everything possible to restore the trust of the taxpayers of the St. Clair Fire Protection District. Action will be taken to collect upon all sums which were misappropriated.
“We are hopeful that full restitution will be paid as a result of the federal criminal case. If not, we intend to pursue a civil lawsuit against Eric Hinson in cooperation with the bonding company.”
“The administration of the fire district acted upon its fiduciary duty to the taxpayers to follow this investigation all the way through to conclusion. Thousands of hours were expended by all of the various entities involved. We are satisfied with the results of the investigation being as complete as possible. The investigation was never about a single person, but an effort to establish accountability for the funds of the St. Clair Fire Protection District.”
The BKD report, which says in its opening that all reference to possible dishonest acts detailed in the report are considered to be alleged dishonest acts, states that Hinson used four “types of schemes” to misappropriate funds: opening credit cards under the SCFPD name and using the credit card for personal expenses and personal cash advances, writing checks to vendors to pay off personal purchases or debts, writing checks to himself, and overpaying himself for his board of director duties.
The financial firm said it analyzed a credit card account and “our review of the statements showed a variety of activity for purchases from jewelry stores, vacations and cash advances. ... Management has represented they did not authorize the opening or use of this credit card and that the purchases on this credit card were for the benefit of Mr. Hinson and not SCFPD.”
Some of the specific findings included more than $94,000 in cash advances over the time period reviewed; nearly $12,000 spent for apparent family vacations to Florida and Hawaii; more than $52,000 for personal shopping, including sports equipment, limousine rentals, jewelry, home improvement, grocery and other stores; more than $8,500 for entertainment; $6,500 for restaurants; more than $5,000 for gasoline that may have included fuel for Hinson’s boat kept at Osage Beach; $6,200 for cellphone expenses; $4,600 for insurance expenses; $2,300 in lodging expenses; $1,600 in medical expenses; more than $7,500 in miscellaneous charges; and more than $3,000 in finance charges and fees on the credit card.
“Payments of over $204,000 were made by SCFPD for the credit card during the time period analyzed,” the report reads, adding that the company discovered an additional $112,000 misappropriation of funds from using the same credit card.
In addition, the investigation found a payment totaling $35,846.12 to Ford Credit, improper payments to two banking institutions, overpaying himself for attending board meetings, and a payment to John Deere Credit.
According to BKD, the misappropriations by year were $1,927.50 in 2005, $10,489.34 in 2006, $122,988.45 in 2007, $65,666.31 in 2008, $66,728.59 in 2009, $129,774.90 in 2010 and $13,357.79 in 2011.
Start of Investigation
On Sept. 28, 2011, during the same St. Clair Fire Protection District board of directors meeting in which Hinson submitted his resignation as chief, public minutes stated that the three-member board that night unanimously voted to “engage the services” of BKD Certified Public Accountants & Advisors “to investigate the financials for the St. Clair Fire Protection District as necessary.”
The vote came after the board went into executive session to “discuss legal matters,” the minutes stated.
“The thing that got the whole ball rolling was a purchase made that he (Hinson) never reimbursed us for,” Berkel told The Missourian earlier this year. “It was brought to my attention, and that’s when we started the investigation.”
Berkel confirmed to The Missourian that the “suspicions arose last year in September and were confirmed in October.”
Later during the same Sept. 28, 2011, fire board meeting, the directors again voted to go into executive session “to discuss personnel matters.” When the meeting returned to open session, Berkel read Hinson’s letter of resignation, which unanimously was accepted by the board.
In January of last year, St. Clair Police Chief Bill Hammack and Berkel both confirmed the investigation to The Missourian, but would provide little add.
Attempts to reach Hinson and his attorney have been unsuccessful.