The Kennett Township investigation: A trail of fraudulence, disbursements and thievery
● By Richard Gaw
The following news story is the second and last in a series of articles that provide a summary of the findings contained in the 34-page police criminal complaint filed by Robert J. Balchunis, Jr., a sworn police detective with the Chester County District Attorney's Office, that details former Kennett Township manager Lisa Moore's seven-year misuse of Kennett Township funds, that resulted in her Dec. 10 arrest when it was discovered that she had allegedly embezzled $3,249,453 from Kennett Township over an eight-year period.
While much of this news story contains information pulled nearly verbatim from this report, it is also supplemented with additional facts relevant to Moore, the township and the investigation, in order to provide a clear and comprehensive narrative.
By Richard L. Gaw, Staff Writer
In many ways, he was the perfect person for the job.
Ricardo J. “Ric” Zayas is a partner in the accounting firm of Marcum, LLP, a member of the firm's advisory services division, and has over 40 years of experience in the field of forensic accounting and litigation support for attorneys, insurance companies and corporate and government services.
When Zayas and his Marcum colleague Nicole M. Donecker – who has 20 years in the forensic accounting field – were hired by Kennett Township in May, Marcum joined the Chester County District Attorney’s Office in a two-tiered, eight-month investigation that uncovered evidence in the misuse of township funds, which resulted in the Dec. 10 arrest of former township manager Lisa Moore, who now awaits a preliminary hearing for allegedly embezzling $3,249,453 from the township from 2013 to 2019.
During the course of their eight-month investigations, Zayas, Donecker and the Chester County Detectives discovered that for seven years, Moore had orchestrated a deceptively conceived shell game of financial improprieties. For Marcum, the degree of fraudulence they were finding seemed ripped from the handbooks of greed that they had seen in the course of their other investigations into the industries of manufacturing, distribution, retail, health care, financial services and real estate.
The Kennett Township case began to turn up everything: unauthorized disbursements and check payments; money transfers from the township’s bank into personal accounts; personal use of a township credit card; and the unauthorized decision to get township employee benefits for a boyfriend.
Soon after being hired by the township, Zayas and Donecker knew they were beginning this investigation with one hand tied behind their backs. In a recorded interview with the Chester County Detectives, Moore – who was placed on administrative leave from the township and later fired from her position on May 17 – revealed that all financial records for the township prior to 2012 had been destroyed.
Inaccurate and Incomplete Accounting Files
While the archival records dating before 2012 had mysteriously vanished, Marcum did manage to obtain a backup copy of the township's QuickBooks (QB) from February 2013 on. There, Zayas and Donecker discovered that the QB accounting files for the township were neither complete nor accurate. Beginning in 2013, the accounting files did not record all disbursements – checks and transactions – that were being made to Moore, and they contained modified and unmodified entries that had been altered to show that disbursements made to Moore were doctored as payments to various vendors who did work for the township.
After poring through the township's QB accounting records from Jan. 1, 2012 to April 30, 2019, Marcum discovered that Moore had paid herself $1,978,151 over that time, which included payroll disbursements during the period between December 2014 and April 2019 that were processed as automated clearing house (ACH) transactions through the township's account at Fulton Bank, identified as account x 0780.
Year by year, the annual payments increased. In 2012, Moore paid herself $141,022.94; in 2013, her total disbursements amounted to $192,933.14; and in 2018, Marcum calculated that Moore had made deposits totaling $410,641.75.
Throughout the investigation, the work of Zayas and Donecker continued to dovetail with the data that was being compiled by the Chester County District Attorney’s Office, namely, Detective Robert J. Balchunis, Jr. At one point, Balchunis received township account records – statements, paid checks and account transaction documents -- from National Penn Bank (now BB&T) and Fulton Bank, where the township maintained banking relationships. (Eventually, the township phased out its National Penn/BB&T accounts but continues to do business at Fulton Bank.)
In his findings, Balchunis discovered that ACH payroll disbursements were transferred from Fulton Bank to Moore’s accounts at Capital One Bank and Wells Fargo, from August 2012 to April 2019; disbursements from the township account were made to Moore’s four E*Trade accounts from January 2014 to April 2019; and various additional ACH disbursements were made to credit card accounts that were attributed to Moore, including payments to credit card accounts she held at American Express, Wells Fargo Bank and U.S. Bank.
From 2009 and ending in April 2019, records for the township’s Fulton Bank account also included more than 100 checks that identified Moore as the recipient.
Misuse of Township Credit Card
In July 2014, Fulton Bank opened issued a credit card account for the township, and records indicate that from July 2016 through April 2019, Moore, an authorized user of the credit card, made purchases with it that totaled $696,053.98 – of which $214,032 was to be determined to be used for Moore’s personal benefit, and not for township business.
Fulton Bank’s records indicated that Moore used the township’s credit card to make purchases at selected retail clothing outlets such as Neiman Marcus, Nordstrom and Saks; women’s boutique outlets, including Michael Kors, Gucci and Chanel; jewelry outlets that included Cult Gai, David Yurman, Lagos and Jewelry Coll; out-of-state food and travel expenses that included The Meat Hook and The Saint Austere restaurants in Brooklyn, N.Y.; as well as airfare to Italy, Las Vegas and Paris.
On April 3, the Capital One Bank Fraud Department contacted township supervisor Dr. Richard Leff to explain how and why $756,751.92 had been transferred from the township’s Fulton Bank account (x 0780) to Moore’s personal Capital One 360 account (x 1751). Records provided by Capital One Bank showed that Moore opened the account in Sept. 2011, and records showed deposits of $2,834,956 and disbursements of $2,770,119.36 from January 2016 to March 2019.
The investigation found that approximately $2,404,730 of the deposits entered into her personal account came from Kennett Township accounts, that included $830,231.51 from the township’s E*Trade account; and $1,150,000 from the township’s payroll.
During that 39-month period, Moore also deposited more than $400,000 worth of township checks into her Capital One account. Marcum discovered that these checks, made payable to “Lisa M. Moore,” at times displayed a different type font than those checks that were considered legitimate township checks that were authored through the township’s QB program.
Of the $2,770,119 of disbursements from the Capital One account, more than $1,800,000 was paid to Moore’s credit cards, $115,625 was paid to Neiman Marcus and Nordstrom and $97,503 was paid to Quicken Mortgage.
For Zayas and Donecker, every file they opened and every financial component of the township continued to reveal more forensic evidence of wrongdoing – all of it pointing to the control Moore had over the township’s money, including its payroll.
Unauthorized Payroll Disbursements
As they continued their investigation, Zayas and Donecker learned that in her role as township manager, Moore oversaw the township’s payroll functions, which included recording hours worked, the processing of employee payroll payments and associated benefits, and the processing of required tax deposits and other payroll-related functions. In addition, she was the point person for all financial statements provided to the township’s auditors.
When they obtained the township’s payroll data, Zayas and Donecker
saw that QB records indicated that township employees were, at times, paid more than 2,080 hours per calendar year, a figure that Marcum believed was the “rule of thumb” number of annual work hours accumulated before consideration of overtime.
Moore was listed as one of those township employees who was compensated for more than 2,080 hours per calendar year. Using the hourly figure as a guide from 2013 through 2018, Marcum determined that the supervisors would have authorized Moore’s salary at an average of $132,994.16 for a total of $797,964.97, for 13,240 hours worked during that time.
However, Marcum discovered that from 2013 through 2018, Moore compensated herself for a total of 20,050 hours worked – at an average of 3,341 hours per year that earned her a total of $1,476,504.99 at an average salary of $246,084.
It was ultimate abuse of fiduciary responsibility, a consolidation of power that went, for the most part, unchecked by the township’s three supervisors. When Leff, Scudder Stevens and Whitney Hoffman were interviewed by Marcum about township payroll records, their answers revealed a startling lack of insight and knowledge about the extent to what Moore was doing behind closed doors:
· They did not have specific knowledge of nor had they authorized Moore to receive annual compensation beyond her base salary;
· They were under the presumption that Moore was receiving an annual salary that ranged between $120,000 and $130,000;
· They did not receive a township memorandum dated Jan. 3, 2017 from Moore entitled “Compensation for Township Employees and Staff in 2016,” which indicated that Moore’s salary was $195,652.30 plus “unused vacation” and other “accumulated time” that totaled $113,648.04;
· They did not receive a second version of the memo, that indicated that Moore’s annual salary was $290,580; and
· While stating that they had not received the memos, the supervisors said that they would not have authorized Moore’s new salary figures of $195,652.30 or $290,580, but did acknowledge that they had received of township memos dated Jan. 6, 2014 and Jan. 5, 2015, which showed Moore’s salary to be $120,380.92 plus overtime in 2014, and $125,196.16 plus overtime in 2015.
The supervisors were also being kept out of the loop of correspondence between the township and its two auditing firms – Umbreit Korengel & Associates, PC and Barbacane Thornton & Company. Both auditors prepared correspondence about township audits and that was addressed to the board that contained comments and observations about the internal control environment of the township’s financial books. Often referred to as “management letters,” this correspondence identified deficiencies in the existing financial controls under Moore’s supervision, including inadequate segregation of duties, and the failure to use timecards for certain township personnel.
When interviewed, Stevens, Leff and Hoffman said they never received the letters, from either the auditors or Moore.
Investigators also found that for a period of five years, Moore bilked the township out of more than $50,000 a year, when she fabricated the eligibility of Brian Gore, her boyfriend, in order to become a beneficiary of the township’s employee health plan. On or about Jan. 14, 2014, Moore prepared an application for health care coverage for Gore, whom she identified as her spouse. Under the plan, Gore became eligible to participate in the plan, and the township paid $55,950 of premiums to its health insurance carrier for Gore’s coverage until 2019.
Balchunis was later advised by Moore’s attorney that Moore and Gore were never married, thus making Gore ineligible for the township’s employee health plan.
How did this happen, and why didn’t anyone notice?
Moore was formally arrested on Dec. 10.
In a recorded interview with investigators, she admitted to improper conduct, and charged with 115 felony counts and 26 misdemeanor counts.
She posted a $500,000 unsecured bail, and awaits her preliminary trial on Feb. 11 before Magisterial District Judge Albert Iacocca at the Chester County Courthouse.
In the months that preceded the findings of Zayas, Donecker and the Chester County Detectives, the township has gone to great lengths to get its financial house in order. On Sept. 4, Stevens, Leff and Hoffman voted to hire the Philadelphia law firm of Blank Rome as special counsel to pursue any civil liability associated with the investigation, and seek to recoup financial losses. Township checks now require multiple signatures and soon, its entire accounting records will be placed online. They hired Eden Ratliff as the new township manager and Amy Heinrich as its financial manager, and they have given approval to acquisition of new financial software that will allow for more detail and oversight.
While these safeguards are a strategic attempt to repair the damage of a seven-year act of fraudulence and manipulation, they fail to tamper down the fundamental questions that will linger in the minds of township residents and the key stakeholders in southern Chester County for some time to come.
“Why did she do it?”
“How did this happen, and why didn’t anyone notice?”
Perhaps the best answers can be found in a 2017 documentary that eerily overlaps the findings made in the investigation that ultimately led to Moore’s arrest last month. “All the Queen’s Horses” is the story Rita Crundwell, a city comptroller of Dixon, Ill. who for 20 years, committed the largest case of municipal fraud in American history. Now serving a 20-year prison sentence in the Pekin Federal Correctional Institution, about 100 miles south of Dixon, Crundwell pled guilty to stealing $53 million from the city to support a lavish lifestyle, which included running a well-renowned horse-breeding operation.
Her scheme began to unravel in 2011 during an extended vacation, when the person who filled in for her at the comptroller’s office stumbled upon Crundwell’s secret account, prompting the city’s mayor to call the FBI.
In the Chester County District Attorney’s official release on Dec. 10 – which coincided with Balchunis’ criminal report – then District Attorney Thomas Hogan may have provided the most concrete reason why Moore allegedly stole more than $3 million over a seven-year period.
Very likely, it was because she could.
“This case is a reminder that a determined insider can always find a way to steal, using their knowledge of internal procedures,” Hogan said. “Because of their inside information, these white collar criminals are more difficult to stop than burglars or armed robbers.
“However, this case is also a reminder that public officials who steal from taxpayers will eventually be exposed, arrested and punished.”
To contact Staff Writer Richard L. Gaw, email email@example.com.
This report has been made public by Kennett Township, and is available on its website, www.kennett.pa.us.
Unauthorized Disbursements to Lisa Moore, 2013-2019
Unauthorized payroll $1,167,521
Kennett Township Payments to personal credit cards $547,697
Kennett Township Payments to E*Trade accounts $912,537
Personal Use of a Kennett Township Credit Card $214,032
Other unauthorized disbursements $407,666
Total unauthorized disbursements $3,249,453
Source: Chester County Detectives Police Criminal Complaint, CC-19-00987