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2017-11-08 / Front Page

SRP fraud complaint gets messy

New questions arise over fraud examiner’s report
BY JIM McCONNELL STAFF WRITER

 A meeting that was intended to resolve any lingering uncertainty over a county resident’s Fraud, Waste and Abuse complaint instead has raised many additional questions – particularly, why a certified fraud examiner hired to investigate the complaint didn’t consult a seemingly important document prior to filing his report.

John Hanson, executive director of Artifice Forensic Financial Services, appeared last week before the county’s Audit and Finance Committee, which comprises two members from the Board of Supervisors and two from the School Board.

Hanson fielded questions from committee members about his work on behalf of PBMares LLP, a Newport News-based company that was contracted in September to probe Brenda Stewart’s complaint to the county’s Fraud, Waste and Abuse hotline.

Brenda Stewart is the citizen who filed the Fraud, Waste and Abuse complaint. ASH DANIELBrenda Stewart is the citizen who filed the Fraud, Waste and Abuse complaint. ASH DANIELStewart, a county resident and regular attendee at School Board meetings, initiated the complaint in February after the School Board attorney rejected her claim that Sharon Thomas, a highly paid former school executive, had been improperly permitted to collect more than $300,000 under the school system’s supplemental retirement program.

Greg Akers, director of the county’s Internal Audit Department, considered Stewart’s allegation and likewise dismissed it.

Frustrated that Akers didn’t prepare a formal report outlining his findings, Stewart called on the Board of Supervisors to request his resignation. Instead, the board directed County Administrator Joe Casey to hire an independent fraud examiner to investigate the complaint. “For transparency, we wanted to make sure that there’s adequate proof we did not cover up anything. We weren’t trying to hide anything. We weren’t trying to sweep it under the rug or off the table,” said Matoaca Supervisor Steve Elswick, who represents the Board of Supervisors on the Audit and Finance Committee along with Clover Hill Supervisor Chris Winslow.

Hanson filed his report last month, concluding that Thomas met the eligibility requirements for participation in the schools’ SRP.

Since the report’s public release, however, Stewart and other citizens have questioned the method and information Hanson used to arrive at that opinion.

Hanson, who was under no contractual obligation to do so, agreed to answer questions from the Audit and Finance Committee during last week’s regularly scheduled meeting.

During the meeting, Hanson acknowledged he never consulted the plan document that provides the basis for the school system to administer an SRP in accordance with the federal Internal Revenue Code, state law and a county ordinance under which the program was authorized.

After suggesting that Stewart’s complaint involved an alleged violation of a School Board policy, he said the SRP plan “was pretty much irrelevant for my purposes.”

Hanson, a former FBI agent who has more than 25 years of experience in forensic accounting and fraud investigation, compared the plan document to strategic plans private companies develop in advance of new business ventures.

“That plan is not a policy,” he said. “Now, policies may be enacted to help facilitate that plan in achieving its objectives, but as it’s not a policy per se, it’s ultimately irrelevant.”

Winslow clearly was surprised by Hanson’s comment.

“Did you read the plan at all?” Winslow asked.

“No, I didn’t look at it,” Hanson replied.

“You didn’t read the plan?” Winslow asked again, to which Hanson responded, “No.”

“When I requested all documents that were relevant, that was never provided,” Hanson added.

Asked from whom he made the request, Hanson couldn’t remember. A citizen sitting in the audience called out the name Rusty Fairheart, who serves as chief of staff under Chesterfield County Public Schools Superintendent James Lane.

“Yes, I think that’s right,” Hanson said.

Stewart and others have seized on that exchange as evidence that school and county officials improperly limited the scope of Hanson’s work to produce the conclusion they wanted.

“They were just trying to shut [Stewart] up and make her go away,” said Rodney Martin, one of four citizens who attended last week’s Audit and Finance Committee meeting. “Neither of these two entities wants to get to the truth.”

According to Stewart, Hanson’s admission that he didn’t read the plan’s governing document was “a fatal flaw” in his investigation.

If the SRP plan document is “irrelevant” for determining employee eligibility, Martin said, why did Casey assign three members of his executive team – Deputy County Administrator Scott Zaremba, Finance Director Allan Carmody and County Attorney Jeff Mincks – to spend months analyzing the document and recommend major structural changes that were approved by the Board of Supervisors in April?

Many of the plan amendments were designed to close bureaucratic loopholes that, citizen watchdogs say, contributed significantly to the benefit plan’s current $99 million unfunded liability.

One such change prevents the school system from granting employees service time credit to make them eligible for SRP. Thomas, who worked for eight years as chief executive to former Superintendent Marcus Newsome, didn’t meet the plan’s 10-year minimum service time threshold when she retired in June 2016, but she was credited with more than 20 years of prior related experience.

The new plan document also requires that employees participating in the SRP be assigned to a temporary, part-time assignment no more than two salary grades higher or lower than their final full-time position.

During her 11 months of SRP service, Thomas was assigned to a newly created position as paralegal and public records coordinator, which was several grades below her last full-time position on the school system’s salary scale.

Stewart has repeatedly cited that fact as part of her argument that Thomas should have been denied access to the SRP.

Before the plan document was amended in April, it required that employees participating in SRP be given assignments that were “the same or equivalent” to their final full-time positions.

School Board Attorney Wendell Roberts conceded in a letter to Stewart last November that Thomas’ SRP assignment did not meet that threshold. But Roberts also claimed that plan regulations in effect at the time of Thomas’ retirement gave the superintendent wide latitude in making SRP assignments “compatible with [employees’] training, experience, qualifications and previous position.”

Roberts referenced that clause when he determined that Thomas’ paralegal assignment was compatible with her experience as an attorney and thus qualified her to receive SRP benefits.

Akers concurred with that opinion in dismissing Stewart’s Fraud, Waste and Abuse complaint earlier this year.

And while he didn’t consult the SRP plan during his investigation, Hanson ultimately also made the same finding.

“The outside auditor was tasked with looking at the facts and making a judgment. He came to the same conclusion as our internal auditors,” wrote Dorothy Jaeckle, chairwoman of the Board of Supervisors, in an email.

That conclusion appears to run counter to a 2014 opinion filed by Virginia Attorney General Mark Herring in regard to an SRP controversy in neighboring Powhatan County.

In response to a request by state Del. Lee Ware, Herring wrote that Powhatan’s retiring school superintendent could not be permitted to participate in SRP because her newly created part-time assistant superintendent position was not the “same or equivalent” to her final full-time assignment.

Stewart noted Herring’s opinion in an October 2016 letter to Lane, but she has been unable to convince local officials that it is applicable to Chesterfield.

Tim Bullis, a spokesman for the school system, issued the following statement last week on behalf of the School Board:

“It’s time for this matter to be put to rest once and for all, especially after the very thorough interrogation of a well-credentialed auditor, who is a certified fraud examiner and who previously developed and implemented a fraud and investigative training curriculum for the FBI.

“The Supervisors have given us their word that this is the end of the inquisition, given that everyone who has studied this issue has come to the same conclusion: That the employee was eligible to participate in the program and that no policies were violated.” ¦

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