Last summer, a former deputy clerk and treasurer of the town of Newburgh was sent to jail after pleading guilty to taking the town’s money, nearly $200,000 of it.
Last spring, the Pleasant Point police chief pleaded guilty to taking $33,000 from the Passamaquoddy tribe.
Last year, the former Frenchboro treasurer pleaded guilty to a $5,250 theft; the former Amity town manager pleaded no contest to the charge of theft of $40,000; and a former Rumford parks and recreation superintendent pleaded guilty to theft for selling a piece of town equipment and pocketing the $1,500 proceeds.
A Maine Center for Public Interest Reporting examination has found that over the past five years at least $800,000 has been taken from municipal coffers across Maine in the form of money or services by local officials whose job was to faithfully and honestly serve their towns. And this has often come at steep cost to the towns, not just in missing money but in added fees and charges, not to mention hard feelings.
The extra charges — sometimes thousands of dollars — go to cover attorney fees and the cost of additional forensic audits that are used to substantiate what are often complicated cases of theft.
Like many cases involving fraud, the crime of the Newburgh official, Cindy Dunton, went on for several years, from 2006 to 2009. It was uncovered beginning in March 2010 after two Newburgh selectmen noticed discrepancies in the town’s annual report between their figures and Dunton’s.
‘Stole our trust’
A certified fraud examiner who was called in to investigate alleged, in an audit reported by the Bangor Daily News, that Dunton had stolen from the town in a range of ways, including forging select board members’ names on town checks. The money went toward paying her health insurance premiums and property taxes, as well as a number of other purchases, including drill bits. The grand total of missing money, according to the report: $199,536.54. Dunton acknowledged her guilt.
Newburgh, a town of slightly more than 1,500 in Penobscot County, reacted strongly. Residents gathered names on a petition calling for the longest jail sentence possible.
On July 1, Dunton was sentenced to five years with all but 20 months suspended. She also received three years of probation and was ordered to pay approximately $252,000 in restitution — the sum of money that she stole, plus attorney and forensic auditor fees. Enraged residents had demanded a 10-year sentence.
As one irate Newburgh selectman, Mike Burns, told the court, according to the Bangor Daily News, “She didn’t only steal our hard-earned money, she stole our trust and the innocence of the town of Newburgh. Newburgh isn’t a happy place to live any longer.”
In Chelsea, scene of one of the most recent cases, former member of the select board Carole Swan has pleaded not guilty to felony charges of aggravated forgery (for falsifying a public record) and attempted theft (alleging that she authorized a $22,075 check from the town to
pay for a fraudulent invoice). She also is charged with two counts of improper compensation for services, alleging that she received money for promoting contracts while she served on the board. She declined to run for reelection last June.
The charges revolve around Swan’s alleged acceptance of kickbacks from a snowplow contractor, as well as allegations that she oversaw favorable treatment of her husband’s construction company, which has done work for the town. A trial date has not yet been set.
The uproar surrounding Swan’s case was accompanied by the termination last June of the Chelsea town clerk, Flavia “Cookie” Kelley. An investigation by Kennebec Journal reporter Mechele Cooper found that, despite no municipal experience, Kelley had received compensation that exceeded that for clerks in every other Kennebec County town the size of Chelsea. Kelley has since filed suit against the town.
Voters at a special town meeting in March set aside $50,000 to cover legal expenses and the cost of an audit. The final legal fees could total nearly $320,000, according to the newspaper.
Hundreds of municipal officials are serving their towns and cities without incident, but crime statistics indicate that embezzlement and other kinds of theft from government, along with corporate theft, have increased notably in the state and across the country over the past decade. And this crime, with its added costs, comes at a time when Maine’s towns and cities are dealing with shrinking budgets. In a survey conducted by the Maine Municipal Association, municipalities recently reported a 6 percent drop in operating revenue last year, compared with 2009.
Becoming more common
“When I started out, the idea of selectmen or a town manager stealing money was rare, but over the last 10 or 12 years it has become more common, unfortunately,” said R. Christopher Almy, district attorney for Penobscot County, where Newburgh is located.
Almy added that the full picture couldn’t necessarily be found in the stories that make their way into local newspapers and websites. His office also considers — and rejects — cases in which there may be cause for some investigation but ultimately not enough evidence to bring charges. He declined to say how many of those cases had crossed his desk in recent years.
Statistics, both state and national, seem to bear out his perception of a general increase in fraud. Nationally, the total of government and private embezzlement cases increased nearly 17 percent in 2010 compared with the preceding year, according to a detailed report issued by Marquet International Ltd., a business-consulting firm based in Boston. The report noted that of the 13 sectors or industries it listed as primary victims, government agencies and municipalities had the most cases, accounting for $48.2 million in losses.
As of last June, the FBI was working on more than 2,000 corruption cases involving public officials around the country, and in 2009, the latest year for which statistics are available, U.S. attorneys across the country charged 270 local officials with corruption and won 257 convictions (148 officials were awaiting trial).
Maine has kept a low profile, compared with other states: five Maine officials were convicted of corruption in federal courts in 2009.
Numbers posted annually by the state Department of Public Safety show that arrests for embezzlement — both public and private — in Maine totaled 20 in 2002, but shot up to 56 in 2007, and have fallen to 43 as of 2010.
Too many ‘learning on the job’
Experts say that a lack of training in financial record-keeping and uneven oversight by town officials have contributed to this problem. The thefts primarily occurred in the smaller towns among the nearly 500 Maine municipalities, where there may be few people available to furnish the second pair of eyes that theoretically should see every town transaction. Among the cases of theft that have come to light during the past five years, the towns that were victimized had an average population under 3,000.
Mike Starn, city manager of Hallowell and former communications director for the Maine Municipal Association, said that in many cases there are “similar diagrams of the problem. The person who takes funds has usually been in the community for a long time, they have been given ‘extreme latitude’ in taking care of town finances, and local financial practices among town officials — such as routine oversight of town finances — are very lax.”
Too many town finance people are “learning on the job,” said Ron H. R. Smith, managing partner of RHR Smith and Company, certified public accountants with offices in Buxton and Machias, whose firm handles about 140 annual municipal audits. He added that, despite the increasing sophistication of computerized accounting, “quite a few people in smaller municipalities don’t have technical expertise.”
The last decade also brought new challenges to municipalities with the introduction in 1999 of accounting standards that made greater demands on town money managers. Saco in 2001 became the first municipality in Maine to adopt the new accounting standards, which chiefly require that municipalities inventory, value and depreciate all their assets.
This placed a big burden on many small towns that had worked more or less independently to deal with their routine accounting needs. According to an article in Maine Townsman, the magazine of the MMA, Maine is unique in New England in allowing towns to run their own financial affairs with certain requirements set by the state. Maine demands that all town and city finances undergo an annual audit and publishes a list of allowable municipal investment options, but otherwise keeps out of municipal finance.
By contrast, Massachusetts and New Hampshire oversee their municipalities to the point that the states actually set municipal tax rates. Vermont has no municipal finance law beyond requiring its towns to follow the “prudent investment rule.”
Some in Maine, including Professor Tom Taylor, head of the University of Maine’s department of public administration, have called for a professionalization of all town government — the hiring of town or city managers to work on finances and other local matters under the scrutiny of a council or select board.
“You need more than one person to sign off on financial matters,” he said. “Having a town manager brings more transparency and accountability.”
He agrees that many small towns cannot afford to hire managers, but he says the problem could be addressed through mergers of town functions, if not the towns themselves. Many towns, he notes, already are cooperating on joint purchases from snowplowing services to office supplies to sharing the services of a single assessor.
But until full mergers put professional administrators in charge, small towns will rely on training classes, online instruction, reviews and coaching that are offered every year, primarily by the MMA. State administrators (from the state auditor’s office, for example), as well as at least one individual accounting firm also have been working hard to improve local officials’ competence in handling their own municipal finances.
The meeting room deep within the Augusta Civic Center was packed Oct. 5 as town and city finance officials found seats for one of the many popular workshops at MMA’s annual two-day convention. This session’s first topic: fraud and its detection.
Kate McCormick retired to Newcastle after a long journalism career at New York Newsday, the Patriot Ledger in Quincy, Mass., and the Indianapolis Star. The Maine Center for Public Interest Reporting is a nonprofit and nonpartisan journalism organization that provides in-depth reporting as a public service to its Maine media partners. The e-mail address is mainecenter@gmail.com. The website is pinetreewatchdog.org.