Fraud experts have seen it all before: the lure of high returns, the covering up, the impeccable résumé, the generosity of the individual, all elements present in the case of the late Clay Stephens and Novato-based Warren Capital Corp. and Warren Equipment Finance now being investigated by a team of forensic accountants under the jurisdiction of a San Francisco court.
“It amazes me how people do Ponzi schemes even today and people fall for them,” said Nancy Young, a Portland, Ore.-based CPA who heads up fraud investigations and forensic accounting for Moss Adams.
“If somebody can promise you returns that nobody else can get,” said Ms. Young, who has investigated fraud for 19 years, and at Moss Adams for the past 8 1/2 years, “you gotta sit back and say, really? No one else can get these returns? People can become victims really quickly because we all like the idea of winning the lottery.”
When prospective fraud victims are presented with too-tempting interest rates, “we want to believe that this person, who is a pillar of the community, is trustworthy, and would never, ever, ever hurt me,” she said.
Ms. Young recalled a 2008 case she investigated where Pamela Rowley-Butcher, former executive financial officer of Estacada fire district in Clackamas County, Ore., was charged with aggravated theft of nearly $2 million. The woman, who wore fine jewelry and adorned her modest home with extravagant Christmas lighting, was convicted and sentenced to 10 1/2 years in a prison term ending at the earliest in 2016.
The district had two sets of checks, one for payroll and another for vendor payments. Ms. Rowley-Butcher, whose salary was about $5,000 a month, “wrote herself $25,000 to $35,000 per month on payroll checks and then hid it on the vendor side,” Ms. Young said. “She confessed to perpetrating her fraud for at least 15 years.” She would double the cost of invoiced items from vendors to cover her fraud.
“The judge didn’t fall for her ‘I’m-so-sorry-I’ll-never-do-it-again,’” Ms. Young said.
“This was her way of life,” Ms. Young said. “It was egregious. She was the big spender in town. She was buying love.” The court ordered the convicted felon to repay part of the amount stolen by giving up some of her PERS retirement account and selling her $178,000 home.
In a false show of generosity and benevolence, Ms. Rowley-Butcher would pay other people’s car and house payments when they could not, spending more stolen money on others than on herself. “She wasn’t living lavishly,” Ms. Young said, though she was bringing home an extra $25,000 to $35,000 a month. “She was the grandma of the community,” there to help everybody.
“If someone is throwing money around, it doesn’t make sense,” Ms. Young said.
In one of her statements, Ms. Rowley-Butcher suggested she didn’t see what the big deal was, “nobody got hurt.” But there was hurt. The fire chief, stressed by the ongoing investigation, had a heart attack. Fire trucks continued to run despite bald tires; there was no money to buy new ones. Employees received no raises for years. “There was no money because she was perpetrating a fraud,” Ms. Young said.
Ms. Rowley-Butcher embezzled money so long that she became arrogant, Ms. Young said, and that led to her undoing. A bank teller who had recently gone to fraud-awareness training noted that Ms. Rowley-Butcher came into the bank two or three times a week and cashed checks, for cash, without depositing them to her personal account. “The teller blew the whistle.”