$6.9 million misappropriated from Pierce County Housing Authority by finance director, auditor’s report says
A former finance director misappropriated more than $6.9 million in public funds from the Pierce County Housing Authority, according to a fraud investigation report the State Auditor’s Office released Monday.
It’s the biggest case of fraud for a local government in the state, according to Auditor’s Office records of the past 25 years.
State Auditor Pat McCarthy McCarthy said at a press conference that it was a “shameful breach of public trust” that hurts those in need of affordable housing, and that the “massive fraud was designed to mislead everyone at the Housing Authority.”
The Housing Authority filed a lawsuit in August, alleging finance director Cova Campbell and her husband, Mark Campbell, appeared to have stolen millions.
Cova Campbell later filed a declaration in the case that accused executive director Charlie Gray of planning the theft and said she participated to keep from losing her job.
The Auditor’s Office found no evidence of that.
“We interviewed the Executive Director on Oct. 22, 2019, examined his personal bank records, and performed additional tests in response to the former Finance Director’s statements,” the auditor’s report says. “We did not find any evidence that indicates the Executive Director was involved in, or benefited from, the misappropriation. We did find evidence that contradicts some of the statements the former Finance Director made in her deposition.”
The Housing Authority has filed a report with the Federal Bureau of Investigation and U.S. Department of Housing and Urban Development Office of Inspector General, which will both receive the auditor’s report.
Gray will remain on paid administrative leave as those investigations go forward, the Housing Authority said.
“We were really pleased to see the State Auditor’s report that there was no corroboration,” Housing Authority Board chair Sally Porter Smith said at the press conference. She said the agency will work to rebuild the trust of its clients, landlords and the community.
The Auditor’s Office discovered the theft as part of a routine audit earlier this year.
The finance director started working at the housing agency in 1998, and she misappropriated $6,948,277 from March 18, 2016 to July 17, 2019, the report says. She was fired Aug. 8.
The auditor’s investigation found that she made purchases with the Housing Authority’s credit cards in 2016 and started transferring funds to her bank account by making the transactions look like payments to vendors.
She purchased property in Oklahoma in 2018, the same month she transferred funds from the housing agency to a bank there, the Auditor’s Office said.
“... we found a correlation between withdrawals from her account and 46 subsequent parcel shipments to a man in Oklahoma who is now her husband,” the report said. “These shipments occurred on the same day as the withdrawals or within a week thereafter, and started with her first large cash withdrawal. In our interview, the former Finance Director said she was mailing personal items, and that the timing must have been a coincidence.”
Mark Martinez, a commissioner on the housing agency’s board, said its services have not been disrupted and that it has been able to keep housing 3,500 families.
Martinez said he’s also hopeful services won’t be disrupted going forward but noted it’s not entirely clear how the agency’s status to keep receiving federal HUD funding might be affected.
“It is certainly a tough time,” he said.
Of the Housing Authority’s $33.9 million budget last year, $23.2 million went to housing assistance payments, the Auditor’s Office said.
“The Housing Authority did not have adequate internal controls to safeguard public resources,” the report said.
The Auditor’s Office recommended increased oversight of financial transactions, limited wire transfer capabilities, training for employees about how to review financial information, and closing unnecessary bank accounts, among other changes.
The report also noted the Housing Authority only had $500,000 coverage for employee theft insurance.
“We recommend the Housing Authority evaluate its insurance and performance bond coverages to better protect itself in the future,” it said.
In its response in the report, the Housing Authority agreed with all recommendations from the Auditor’s Office and said it will seek to recover the missing funds from the former finance director.
“We began the recovery process as soon as we learned a theft had occurred,” Porter Smith said.
The report said the Housing Authority hired attorneys and got preliminary injunctions to prevent “the former finance director from disposing of assets,” and it “restricted access to all banking and other financial systems.”
The housing agency also hired a firm that specializes in public housing authorities to assess its “current financial processes and procedures and to implement strong internal control systems in the agency’s financial systems,” the report said.
This story was originally published December 16, 2019 at 10:06 AM.
