Wake schools still feeling financial sting of fraud scandal
Posted September 8, 2011
Raleigh, N.C. — Cars, vacation cottages, golf carts and jet skis were just some of the kickbacks that a group from Wake County public schools and an auto parts company were enjoying in 2004.
The multi-million dollar scheme put seven people in jail, some of whom are now free, but not free of the close to $700,000 in debt they owe.
“It was an unfortunate chapter in the school system’s history and a very painful one,” said Wake schools’ chief business officer David Neter.
The school system estimates at least $4 million to $5 million was diverted from the Wake school system in an automotive parts scheme involving then-employees of the school system's transportation department and a Wilson-based automotive parts company, Barnes Motors & Parts.
A WRAL News investigation found that the total amount of fraud is still unclear.
Wake schools' budget records show the transportation department paid Barnes Motors & Parts $206,611 during the 2000-01 school year. That figure ballooned to more than $1 million in 2001-02, $4.5 million in 2002-03 and about $4.3 million in 2003-04 – totaling more than $9 million from 2001 to 2004.
Investigators said the suspects submitted fake orders for auto parts and bought gift cards, trucks, boats, trailers and other high-priced items for themselves.
Seven people, including five former school system employees and two former Barnes' employees, were convicted and sentenced for their roles in the fraud scheme. Sentences ranged from 60 days to 15 years in prison.
The school system eventually recovered $4.9 million, most of which was a fine the courts imposed upon Barnes Motor & Parts. Wake schools is still trying to collect money from the individuals convicted in the case, but getting it back has proved tricky.
Carol Finch, a transportation department bookkeeper, was fined $100,000. She paid $16,215, which came from the sale of her house, and $115, through her attorney, for a total of $16,330. The State Bureau of Investigation also returned gift cards found in Finch’s home in the amount of $4,095.
Finch will be in prison until next year and doesn't have much money to her name, so getting all the cash back may be a lost cause, according to legal experts.
Connie Capps, who worked for Barnes, left prison in July. Her fine was turned into a civil judgment, meaning the state can take her property. She owes $500,000 jointly with her husband, Harold Estes. She doesn't own property, but he does.
Estes has $890,000 in property to his name. However, he is asking the court to allow him to serve 30 additional days in prison to avoid paying for his role in the crime. A judge will rule when he's released in 2018.
Without property, it can be tough to recover fines and judgments. The courts can’t garnish wages or take a person’s property if they co-own it with someone else.
“Once it gets into felony court, I think the larger the fine, the less likely it’s going to get paid,” said Orange County Superior Court Judge Carl Fox.
Fox says people with six-figure fines or judgments often can't pay. That may be the case for Carol Finch. She already sold her house before going to prison and handed over the $16,000 dollars she made from the sale to Wake schools. She doesn't own any other property.
“Unless a person has a job or assets that can be levied against them, it’s unlikely that a fine of that magnitude would ever be paid,” Fox said.
Two of the seven people convicted in the case have paid their debts. Bobby Browder, who worked for Barnes, paid $3,000 for his role. He left prison in July.
Vern Hatley, Wake schools former transportation director, paid $47,772. He was not ordered by the court to pay restitution. He will be released from prison next year.
Two former administrative assistants with Wake schools are paying a little at a time. Angela Malloy Sanders has paid $3,365 of her nearly $37,000 restitution and returned approximately $6,767 worth of equipment. Pam Stewart has paid $6,098 of her $39,000 restitution and returned $11,381 worth of equipment.
Seven years after the scandal began, it remains fresh for Wake school leaders who added more auditors to watch over the books and a fraud hotline.
“I think it’s very important that Wake schools remain open about it,” Neter said. “We have nothing to hide. It was a real issue, and it did take place.”