Charges filed in Two Rivers, Minnesota $65,000 school theft

A former Lake Superior School District employee faces three felony counts after admitting she stole money from the lunch program at Two Harbors High School, a Lake County criminal complaint filed last month says. It accuses Sherry Rae Udenberg of embezzlement of an estimated $65,275 from the district from 2007 to 2009. Udenberg worked as a financial assistant and food service coordinator for the Lake Superior School District until suddenly resigning in October.
Udenberg is charged with felony counts of theft, embezzlement, and forgery. If convicted on all three counts, she could get maximum penalties of 25 years in jail and $50,000 in fines. She was not arrested and no bail was set. She isn’t considered a flight risk, Sheriff Carey Johnson said.
Earlier this month, Udenberg was officially charged in Lake County District Court and awaits a trial date. It isn’t clear where Udenberg is currently living. She did not return phone calls asking for comment.
According to a Lake County Sheriff’s Office investigation and court records, the district filed a fraud complaint Oct. 30, two days after Udenberg left a resignation letter on her desk.
Business manager Susan Mitchell then began looking into bank deposits Udenberg was responsible for and told an investigator she believed Udenberg had “incrementally stolen thousands of dollars” from the district, mostly from the food service fund.
Udenberg worked for the district for 13 years. The court document says she admitted to stealing funds beginning in March 2007 until her departure last fall.
Deputy Erik Furo interviewed Udenberg at her rural Two Harbors home and he reported that Udenberg admitted to taking money from the lunch program. Furo reports that she told him she took money in the district office from high school office staff. The money was from students for lunch accounts. Udenberg, 41, was responsible for recounting the funds and then depositing them into the district’s bank account. Student accounts were credited but Udenberg hid the money with falsified documents, the court record stated.
Superintendent Phil Minkkinen said insurance will cover the missing money and student’s lunch accounts were not affected because high school staff credited accounts assuming the money would be deposited by Udenberg. Lunch money collected from students in Silver Bay and Minnehaha Elementary in Two Harbors was directly deposited into the bank, Minkkinen said, and didn’t go through Udenberg.
Deputy Furo said he was told by Udenberg that she only deposited checks and coins into the district’s Lake Bank account. She said she took only cash, Furo wrote.
When Furo said the amount estimated to be missing was about $65,000, “Udenberg said that she did not think it was that much, but at this point could not dispute it.”
Minkkinen was obviously dismayed by Udenberg’s alleged actions. “Have you ever felt your stomach fall,” Minkkinen said of his reaction when he first found out about the missing funds. “You have to rely on people to be honest.”
Furo reported that Udenberg detailed how she took the funds without being detected. She used her own computer program to mirror the official district accounting program to “make sure everything matched” to cover the missing cash, the report says. She also admitted, Furo reported, to creating a false medical bill of $420 and submitting it to her benefits plan for reimbursement.
Mitchell told Furo there may be other funds missing. Udenberg deleted many of her computer files before leaving the district but they were later recovered. The district reported documents showing the false balance sheets.
Furo asked Mitchell, the business manager, how the district passed a state audit in 2008 if so much money was missing. At the time, Mit-chell told Furo the district was still looking into the records and later said Udenberg likely provided falsified documents to state auditors.
The district has five boxes of documents showing how the money was taken, Furo’s report says.
Fraud “happens in districts, but not frequently,” Minkkinen said. “There’s a potential for all kinds of things to be going on.”
Under district policy that was in place, Udenberg was supposed to count the money and then return it to the original counter who would make the deposit, Minkkinen said. He said the state auditor is happy with how the district is now handling funds, in short, by reinforcing existing policy.
Sheriff Johnson said “it’s always kind of a shock” when something like this happens in a small community and especially when it’s someone in a position of trust. He said it isn’t surprising when a suspect admits wrongdoing. “It’s like a monkey on their back,” he said. “They are so worried and then when they get caught they tell everything just to put it behind them.”
An omnibus hearing, where Udenberg is allowed to hear and dispute evidence, has been set for Feb. 1 in Two Harbors. After that, a trial date will be set.
The charges
Count 1: Felony theft. Maximum sentence of 10 years/$20,000 fine or both.
Count 2: Felony embezzlement of public money. Maximum sentence of 10 years/$20,000 fine or both.
Count 3: Felony forgery. Maximum sentence of 5 years/$10,000 fine or both.