OKLAHOMA CITY – The Oklahoma State Bureau of Investigation recently completed its investigation into alleged irregularities in the municipal government of Lone Wolf and submitted its findings to District Attorney David Thomas.
“It came in last week,” Thomas told the Southwest Ledger on Monday. “My first assistant prosecutor, Dan Jacobsma, is still reviewing it. Within the next two weeks at the latest, we should have our charging decisions made.”
The OSBI probe was apparently triggered by an investigative audit performed by the staff of State Auditor and Inspector Cindy Byrd in response to a request from the Lone Wolf Town Board of Trustees. The state audit is posted on the auditor and inspector’s website and on Lone Wolf’s Facebook page.
The catalyst for the board’s request was an audit performed by Furrh & Associates of Lawton, which examined the town’s records for fiscal year 2015, 2016 and 2017 and identified “questionable financial activity,” Byrd wrote.
Much of the “questionable activity” focused on Margie Horton, the former office manager at Lone Wolf’s Town Hall, and included:
- Problematic payments of almost $24,000.
- Unauthorized purchases totaling more than $22,00 made with the town’s debit card.
- Sales of fireworks to the town by Horton and two other former employees.
- Excessive and unapproved bonuses paid to town employees.
- Falsified and substandard minutes of meetings of town trustees.
- Unauthorized payments of insurance premiums for Ms. Horton’s two dependent children.
Under provisions of two state statutes, “the use of funds entrusted to Horton for an unauthorized personal purpose would be a violation of law,” Byrd pointed out. Both sections of law refer to embezzlement, a felony crime.
Health insurance premiums
Horton “improperly” used municipal funds to pay health insurance premiums for her dependents, Byrd’s staff discovered.
The town’s code of ordinances did not provide for paid health insurance for family members of employees. Furthermore, the minutes of Board of Trustees and Public Works Authority meetings over a 10-year period, from January 2008 through December 2017, did not reflect approval of dependent health insurance.
Former Clerk/Treasurer Charlene Keesee and former Trustees David Morris and Doug Tollison all said “they believed and understood that the Town paid for employees’ health insurance but not for their family members,” the state audit said.
Nevertheless, the town paid bills that Blue Cross Blue Shield mailed to the “attention of Margie Horton” at Lone Wolf Town Hall, which reflected that health insurance coverage was being paid for Horton’s two dependent children, as well as for Horton and former town maintenance employee Rick Harris, who has since died.
The town of Lone Wolf paid at least $17,524 between July 1, 2015, and Dec. 31, 2017, for “unapproved health insurance” for Horton’s two children, Byrd wrote.
However, according to a renewal-rate record from BCBS, “the Town paid for the Horton children’s insurance since at least 2010,” the state auditor wrote. Although records dating back to 2010 were not available, “It is estimated that the Town would have paid an additional $47,526 on such unauthorized coverage between 2011 and 2015.”
Horton “admitted that she purchased the insurance for her children and did not obtain Board approval,” the state audit reported.
Also, according to Horton, the board initially paid Harris $500 per month “in lieu of providing him with health insurance.” After he began to receive the town’s insurance coverage, “he continued to get paid the $500 per month,” Byrd wrote, adding, “Horton said she purchased her dependent insurance coverage because she did not receive the $500.”
‘Questionable’ expenditures
During the 2 1/2-year period covered by the state audit, no evidence could be found that the board of trustees “reviewed receipts or supporting documents” which resulted in at least $23,813 of “questionable expenditures.”
Those includes purchases of fuel ($10,650.88), supplies ($8,053.41), food ($3,480.67) and petty cash reimbursements ($1,628.01).
The town had no receipts or supporting documents for the fuel purchases, “and there was no evidence that town employees kept odometer readings or logs to account for fuel usage.” Also, five fuel purchases occurred in a 1-hour and 16-minute period on the Friday evening before the 2015 Labor Day holiday weekend, Byrd noted.
$22K in credit card purchases not OK’d by trustees
In addition to the $23,813 in “questionable expenditures,” $22,743 in town funds were spent from January 2012 through December 2017 with a town debit card, “with no evidence that the transactions were ever presented to or approved by” the Public Works Authority or the board of trustees.
Those included purchases at International House of Pancakes, Sonic, McDonald’s and Arby’s, as well as expenditures at CJ’s Corner, Walmart, Staples, Dollar Tree, PayPal and Cellular Outfit.
Horton told auditors she kept the card in her desk drawer “and there was no log used to track the control of the card or the purchases made.” Horton “claimed that Harris and trustees also made debit-card purchases.”
In the absence of a log, receipts or purchase orders, “it could not be determined who was responsible for these questionable expenditures,” Byrd wrote.
‘No accountability’ for $2,031 in utility revenues
The town of Lone Wolf provides water, sewer and trash collection services to approximately 175 customers, auditors reported.
Lone Wolf is an aged, tiny town in western Kiowa County. It was founded in August 1901, when the Kiowa-Comanche-Apache Reservation was opened for settlement. The town’s population in 1907 at statehood was 307. As of July 1 last year, the population numbered 461.
During a three-year period, $159,661.62 in cash payments were posted to customer accounts in the town’s utility billing system, but $157,629.92 in cash was deposited in the town’s PWA bank account – leaving $2,031.70 unaccounted for.
Because of the town’s lack of properly receipting and recording utility payments, “it could not be verified that these funds were ever deposited,” auditors reported.
Several” customer histories” in the utility billing system “appeared to have been altered or were missing information,” with “substantial time gaps” between billings and postings. In one case a customer’s payment was not logged for four months, and the gap in another customer’s account was seven months, records show.
The Jack Brown utility software that Lone Wolf uses for its PWA billings allows users to “delete, manipulate, and otherwise modify customer data used in the utility-billing process,” Byrd said.
Payroll, bonuses
Neither the town of Lone Wolf nor CPA+, a firm that donated payroll tax services to the town, “had records of town employees’ wages, salaries, timesheets, or W2 tax forms,” Byrd reported. Paychecks were often issued before the end of pay periods. Employee salaries and pay hikes “typically were not documented in meeting minutes.”
Records of vacation leave and sick leave “did not exist or were not provided” to the auditors.
Christmas bonuses were issued in excess of amounts approved by, or without any approval at all from, the board of trustees.
In 2012, 2013 and 2015, bonuses were paid to town employees in gross amounts that were greater than the bonuses approved by the trustees. For example, in 2012 the board approved $500 Christmas bonuses; instead, employees’ gross pay was $530, which netted a bonus of $500.05. Similarly, in 2015 the bonus approved by the trustees was $350; however, the employees’ gross pay was $380, resulting in a net bonus of $350.93.
July 4th holiday
Horton, Harris and Keesee operated a fireworks stand, bought fireworks from a wholesaler “and sold them to the Town for the Independence Day celebration,” according to the audit.
Horton paid a fireworks wholesaler $7,662.84 from her personal bank account on July 6, 2015, ledgers reflect. The next $4,500 “was transferred directly from the town bank account to Horton’s personal bank account,” the state audit found.
“According to Horton, the $4,500 was payment for the Town’s fireworks.” However, the fireworks wholesaler said the town’s fireworks cost $3,000.
“As such, Horton – and presumably Harris and Keesee – profited … $1,500 from the Town,” the audit reports.
A year later, on July 6, 2016, Horton paid $7,910.12 from her personal bank account to the fireworks wholesaler, records show.
“The next day she withdrew $3,800 from the town bank account,” the state audit reports.
According to the fireworks wholesaler, fireworks for the town cost $3,000. Consequently, “Horton – and presumably Harris and Keesee – profited a total of $800 from the Town,” Byrd wrote.
These transactions between the town and the business owned by employees and officials of the town “appear to be a violation of law,” Byrd wrote.
The state auditor pointed to Article 10, Section 11, of the Oklahoma Constitution, which provides that an “officer receiving interest, profit or perquisites … arising from the use or loan of public funds in his hands” constitutes a felony crime.
Byrd also referred to Title 21 of state statutes, which decrees that every “public officer” of any town who receives “directly or indirectly, any interest, profit or perquisites, arising from the use or loan of public funds” commits embezzlement.
On two occasions, June 24, 2016, and June 23, 2017, Ms. Horton withdrew $1,500 – a total of $3,000 – from a town bank account. Photocopies of the checks are incorporated into the state audit report.
Horton said the money was used “to pay for a bank and inflatable bounce houses” for Lone Wolf’s annual Independence Day celebration. However, Horton “could not provide invoices or other documentation to support the withdrawals,” Byrd reported.
Bank overdraft fees
Lone Wolf’s town records were “disorganized, incomplete, and sometimes missing,” Byrd wrote.
Neither Horton nor Keesee “deposited money daily as required” by law. Keesee “relied on Horton to make deposits,” and Horton “received, recorded, and deposited utility payments only two to six times per month.”
Because of sloppy bookkeeping, the lack of daily deposits “resulted in bank overdraft fees totaling $7,247 and created an overall lack of accountability for utility revenue.” Ultimately, that cost was reduced to $3,972 because in 2017, the town requested and received from BancFirst a refund of $3,275 in overdraft fees.
Horton “was allowed to conduct the majority of the Town’s day-to-day business without oversight from either the Town Clerk/Treasurer or the Board,” the state audit found. Keesee “said that she signed purchase orders and checks once per month and allowed Horton to manage the day-to-day operations of Town Hall,” the state audit says.
The audit revealed that Keesee sometimes signed blank checks, and trustees sometimes signed purchase orders without dollar amounts, “allowing anyone with access to these documents to issue them with no oversight.”
Also, purchase orders “often did not include information reflecting what was purchased, and receipts and itemized invoices were routinely not attached.”
In addition, funds were not encumbered prior to purchases.
Then-trustee, now Mayor Renae Vitale “complained that Horton presented purchase orders to the Board after purchases were made and simply had two trustees sign them without full board approval.”
State law allows the board of trustees to designate employees who have the authority to encumber funds for purchases, “but neither the Town Code nor the minutes of the Board or the PWA reflected any such designations,” the auditor wrote.
2 versions of minutes
The town’s trustees, who also double as the Public Works Authority, are required by state law to post advance public notices of their meetings that specify the subject matter to be considered during those meetings.
They also are required to maintain written minutes that summarize the proceedings of those meetings, the state auditor noted.
“These minutes should be an official summary of the proceedings showing clearly all matters considered by the public body and all actions taken…”
However, minutes of the trustees’ meetings and PWA meetings “failed to reflect what was discussed at meeting and, instead, reflected only that a discussion and action occurred, resulting in a narrow representation” of the actions taken.
What’s worse, minutes of the board’s Dec. 19, 2016, meeting were “fabricated to reflect action taken by the Board that apparently did not occur,” auditors discovered. The minutes related that the board voted 5-0 to give Horton “permission to sign the check Free Pay contract.”
“The minutes and the agenda on file at Town Hall did not include any reference to the contract or permission for Horton to sign for the Board,” Byrd wrote.
Falsifying a public record and submitting fraudulent claims by a town employee or official are felony crimes that can be punished with prison sentences, state law provides.