Forensic audit puts township loss at over $950,000

By RICHARD JENKINS

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Bessemer — While Judge Michael Pope’s final decision isn’t expected to be announced until a sentencing hearing later this month, both sides made their cases regarding the amount of restitution former treasurer Jyl Renee Olson-DeRosso owes Ironwood Township Tuesday in Gogebic County Circuit Court.

In March, Olson-DeRosso, 48, pleaded guilty or no-contest to 10 counts related to forgery and embezzlement which occurred while she served as a treasurer.

Testimony began with a presentation from Plante Moran’s Michelle McHale, who the township hired to conduct a forensic audit over the past financials in an effort to determine a total for the amount of money missing from the township.

The audit put the township’s loss over roughly a three-year period from June 2013 to November 2016 at between $959,864 and $1,024,770 as the result of what McHale called Olson-DeRosso’s “very complex scheme.” This doesn’t include an additional $196,862 which the Michigan Department of Treasury discovered in its earlier investigation and which Olson-DeRosso admitted to taking Tuesday.

While she acknowledged taking the $196,862, she denied taking any of the funds dealt with in the forensic audit and said the audit was designed to make her a scapegoat.

“I thought (the Plante Moran audit) was ridiculous. Honestly, what the audit was written to do was basically blame me for everything that has ever been wrong in Ironwood Township,” Olson-DeRosso said later in the hearing. “And that is not fair, it’s not fair at all.”

When cross-examined by Gogebic County Prosecutor Nick Jacobs, Olson-DeRosso said she paid bills and purchased things with the money she admitted to taking.

McHale, who heads the Plante Moran’s forensic investigative practice, also detailed the work done to determine those figures.

“Unfortunately these types of schemes are difficult to uncover and we spent over 400 hours trying to piece together the puzzle, if you will, of what happened to the money,” McHale said. “A lot of that included summarizing the detailed banking deposit information (and) tracing and matching up banking details to make sure we captured all of the proper information.”

McHale said the forensic audit reviewed three accounts the township treasurer’s office oversaw — the tax, utility and garbage accounts. While the audit was limited to the three years between 2013 and 2016, McHale testified additional losses beyond that timeframe were “likely.”

Two methods were used to determine the township’s losses, according to McHale – an analysis of the concealing deposits and an analysis of expected revenues versus actual deposits.

McHale explained the concealing deposits involved transferring money from various township accounts to others to cover the diversion of cash from the tax fund. She said while money was initially put into the tax fund from other accounts to cover the diverted funds; this created holes elsewhere in those other accounts, which in turn needed to be filled.

“Bills need to be paid from each of the funds — the garbage, the taxes, etc. — so what was happening was money was being transferred between those funds, like — for lack of a better term, like a shell game,” McHale explained. “And so, from the tax fund, money would be deposited from the utility fund so those bills could be paid.”

She said in addition to moving money within those three accounts, unrelate monies would also be deposited into the accounts. One example cited Tuesday was the deposit of a state revenue sharing check into the tax fund.

McHale said the sources of some of the checks, the round figures used and the frequency of the checks all point to the deposits being used to conceal the missing funds; rather than simply correcting accounting errors.

The losses calculated by this method increased each year, until the upper end of the loss range at $1,024,770 was reached.

The other method used to calculate the missing funds, analyzing expected revenues versus deposits, determined the lower end figure of $959,864.

McHale said this method largely relied on the data from the township’s BS&A software, subtracting the amounts deposited from the expected deposits and accounting for the concealing deposits used to move money around.

Ironwood Township Supervisor Steve Boyd testified after McHale.

As a representative of the township, or the victim in the case, Boyd was asked to come up with a restitution figure he felt would make the township whole.

Boyd discussed both the amounts the township was missing in diverted cash and forged or altered checks, as well as the various costs he said the township has incurred as a result of Olson-DeRosso’s actions.

He put the total for these figures at between $1,321,361 and $1,386,267. He also asked Pope to consider including a portion of the salaries of the township employees for time spent related to the case, as well as a portion of Olson-DeRosso’s salary.

“I feel the people of the township should not be paying her salary to divert their money,” Boyd said, when defense attorney Jim McKenzie asked his reasoning for requesting a portion of Olson-DeRosso’s salary.

McKenzie began his case by calling Olson-DeRosso to testify.

Olson-DeRosso said while she didn’t know what happened to the funds she was responsible for overseeing and may not have been a good accountant, that didn’t mean she took the money.

McKenzie also called Steven Chapski, a downstate forensic accountant, to testify on his opinion of Plante Moran’s forensic audit.

Chapski’s testimony revolved around several issues; primarily that the audit doesn’t show the funds in question went into Olson-DeRosso’s private account and the money transfers between different township funds didn’t benefit Olson-DeRosso as the money simply moved between internal accounts.

During her testimony earlier in the day, McHale addressed Chapski’s criticisms. She said while the money transfers involved internal movement, it did benefit Olson-DeRosso as it hid the original diversion of tax funds.

Olson-DeRosso is scheduled to be sentenced May 14, at which point Pope is expected to announce his decision regarding the amount of restitution in the case as part of his sentence.