WorkForce Central case a lesson in broken trust

Office had to piece together accounting puzzle after CFO’s misappropriation of funds brings heightened awareness for fiscal due diligence

November 10, 2013 

Three employees from the fiscal department knocked on Linda Nguyen’s office door.

She’s the CEO at WorkForce Central, a training, job-placement and career development agency based in Tacoma and serving Pierce County.

“They knocked on my door and peeked in,” Nguyen said recently, recalling that day in the spring of 2011.

One of the employees asked, sheepishly, “Linda, can we talk to you?”

Nguyen asked, “Is this something Lance can help you with?”

Lance was Lance Kenneth Mertz, then the chief financial officer.

No. This wasn’t something Lance could solve. He was in fact the problem.

Nguyen remembers, “They sat down and went from the beginning.”

One of the accounts managers had returned from maternity leave and had been checking the books, and she found a $52,000 hole. She investigated and discovered that the money had been deposited into the same bank account where Lance Mertz’s paychecks were deposited.

Nguyen asked if there could be a mistake.

No. No mistake.

WHAT HAPPENED NEXT

“She couldn’t see how that $52,000 ended up in a bank account,” Nguyen said. “She reached out to a colleague who could look at bank accounts. The bank said it landed in an account his pay went to.”

Nguyen’s reaction was physical.

“I was sick to my stomach, but I needed to hold together,” she said. “They were disappointed. You could see they were disappointed. Perplexed, shocked. They left and I closed the door, took a breath. I was shocked, disappointed. I was crying.”

Nguyen contacted a trusted adviser, the former interim chief financial officer. She immediately placed Lance Mertz on administrative leave.

“What’s this about?” he asked, when he was told to leave.

“Denial, right?” thought Nguyen.

She shut down any access he had to records or funds. By noon, that was done and he was gone.

Nguyen’s next call was to the state auditor’s office. “They came in,” she said. “They’re the ones that helped guide us.”

Mark Rapozo, now deputy director for local audits in the office of the State Auditor, led the investigation. “Fortunately, for WorkForce Central, the accounts-payable clerk saw this one transaction and asked about it, and drilled down into the system to find out what happened.”

Lance Mertz committed a criminal act. That’s what happened, Rapozo said,

“He tried to delete the transaction, couldn’t, and changed the name. He wrote a check to himself. We could tie some of the money to a couple of online transactions. The documents were on his desk when we went to look at his office. We were able to tie a portion of the amount he took to the purchase of a car and gun on eBay.”

THE ADJUDICATION

In court in January, Mertz signed a confession and stated: “On or about 2/15/11 in Washington State, I illegally transferred $52,383.24 from my employer into a checking account that I had access to. It was my intention to deprive the owner of the funds.”

He was thus convicted of first-degree theft, and court records indicate that he was sentenced to serve 15 days in jail and 15 days in home detention. He was also ordered to – and he agreed to – repay the stolen funds and pay costs.

The State Board of Accountancy had previously lifted Mertz’s Certified Public Accountant credentials.

Asked recently if Mertz had paid the money he owes, Mike Naef, the court’s judgments and collections supervisor, said, “There has not been any payment.”

WorkForce Central was insured for the loss, and the insurer paid for the loss, minus a deductible of $2,500, last March.

Contacted through his Tacoma attorney with a list of questions related to this story, Mertz first chose not to reply. Later, in an e-mail, he said, “I am not currently employed and intend to, when I have the money, repay the amount I owe.”

Mertz’s LinkedIn profile lists his experience as the CFO at WorkForce Central.

It does not mention his theft conviction.

Another listing claims current employment as an instructor at Seattle’s City University.

City University, when contacted, had no record of Mertz being on the faculty.

When asked about the apparent conflict, Mertz replied by e-mail: “Old info.”

It’s the kind of thing a prospective employer might want to check.

LESSONS LEARNED

“When this incident happened, what’s really important is that the system worked,” said Pat McCarthy, Pierce County executive and a member of the WorkForce agency board of directors.

“You might just want to put your head in the sand and say you don’t need this problem,” she said. “I’m a big fan of Linda Nguyen. She has had some tough challenges. She was terrific. I wanted to make sure we put into place the kinds of structure where this could never happen again.”

Part of that comes in hiring practices, for WorkForce or any other agency or business.

“You need a thorough interviewing process,” said Josh Warborg, district president for Robert Half, a major staffing and recruiting firm. “Also, references matter greatly. What I always tell our clients — we’re looking for holes in resumes. We need to have descriptions why those holes exist. Third, social media. It’s always a smart thing to take candidate’s names and personal information and Google it.”

Nguyen said the agency did both financial and criminal checks on Mertz.

“All came out squeaky clean,” she said. “We also did call references and all checked out.”

Mertz stood out as the clear favorite from candidates interviewed for the CFO position.

“He seemed fine. He seemed like a good fit,” Nguyen said. “He was friendly, welcoming, very social.”

Which comes to the lesson.

“You have to have good internal controls,” Nguyen said. “You have to have staff that will ask questions about anything that looks strange. If I had staff that didn’t question, who didn’t have the wherewithal to look into this questionable transaction, I may not have been notified, if ever. If my staff were just processors, (Mertz) might still be here today.”

“I asked the auditor’s office what can I do in the future,” Nguyen said.

Since the incident with Mertz, she has added new controls. “I’m more engaged with reconciliation of accounts receivable and accounts payable. They should reconcile every month,” she said.

“He gave himself rights,” she said. “Now, activities must run through me for approval.”

As much as she respects her staff, she said she can no longer offer her complete trust.

“I can’t give 100 percent trust to my senior leaders,” she said. “This one bad apple – Lance — took that away. I wish someone would invent a ‘soul reader.’ It would tell me if you’re the kind of person who would do something like that.”

C.R. Roberts: 253-597-8535
c.r.roberts@thenewstribune.com

The News Tribune is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service