KINGMAN - Just when it seemed things couldn't get worse, an internal audit revealed former city of Kingman budget analyst Diane Richards allegedly took more than $1.1 million from a city bank account over a more than eight year period - not $300,000.
Even more troubling, the City's insurance against employee theft has a $500,000 cap.
"The Kingman City Council and staff are outraged at this type of behavior and, like the citizens of our community, feel betrayed," said City Attorney Carl Cooper in a statement. "It is the goal of the city to regain the trust of its citizens and move forward in a positive manner."
Special agents with the federal Department of Homeland Security and state Attorney General Mark Brnovich's office served search warrants at City Hall and Richards' home on Nov. 16 after learning she allegedly stole roughly $300,000 from the Employee's Benefit Trust Account, which Cooper said was a pass-through account vendors use to make drawdowns to pay insurance type claims and bills. Cooper said a city credit card also was allegedly used.
Richards was terminated shortly after agents arrived and is reportedly cooperating with investigators. However, there have been ramifications for others.
Cooper said the city fired a Phoenix-based certified public accounting firm that conducted its annual financial audit. Mayor Richard Anderson told the Miner the firm, Heinfeld, Meech and Co., reportedly failed to look at the account for at least the past six years, before the city performed its internal audit of the account.
Cooper said City Manager John Dougherty directed Finance Director Tina Moline, who was hired last March, to "implement new protocols to prevent this type of action occurring again in the future."
Richards has not been formally charged or indicted. She faces potential charges of fraudulent schemes, computer tampering, money laundering and theft. Cooper said Homeland Security and the state Attorney General have been informed of its audit results, which could lead to more charges.
The audit revealed more than $1.1 million was missing from the account, and the money began going missing in July of 2007, three years before previously thought.
Richards allegedly used the account to cover credit card cash withdrawals she took out over the years, primarily at Laughlin casinos, where she gambled at slot machines. The city hopes she was a highly successful gambler, because Kingman might be on the hook for more than $600,000 if its insurance provider won't pay due to the $500,000 policy limit against employee theft. A forensic auditing team has been assigned to the claim and will review the records soon, said Cooper.
"The city will take any action available to recover the missing funds from the person responsible," said Cooper.
Cooper said the investigation continues and he expects Richards' indictment will come down after the holidays. The state will prosecute, but it is unknown which Arizona county will assume jurisdiction.
For Cooper, the Council and city employees, it's personal. "The city of Kingman and the citizens of this community are victims of this betrayal of trust," he said.