Wednesday, October 20, 2010

Iona College Fires 2 Employees After Discovering $800,000 Fraud in New York

A former employee of Iona College defrauded it of hundreds of thousands of dollars over nearly a decade.

The Roman Catholic college reported on its 2008-9 Internal Revenue Service tax forms that an unnamed employee fraudulently misappropriated $80,000 per year for approximately 10 years. The employee obtained the money though a series of small-dollar transactions, approving a college credit card for personal use and fraudulently signing checks.Dawn Insanalli, a spokeswoman for the college, declined to comment on the matter following repeated phone calls seeking further information. The president's office directed comment to Ms. Insanalli; the office of the vice president for finance and administration and the chair of the Board of Trustees did not return requests for comment.Iona discovered the transactions during the 2009 fiscal year, and the employee was terminated after the matter was brought to the attention of Brother James A. Liguori, the college's president. Following an investigation, another employee thought to be involved in covering up the fraud was also fired.It's unclear whether the college took legal action against the employees. The police department in New Rochelle, N.Y., where the college is located, was unable to find a record indicating that Iona had reported the incident, and Ms. Insanalli would not say whether criminal charges had been filed.While roughly a dozen fraud cases at colleges may make news each year, scores more go unreported, said William K. Black, an associate professor of economics and law at the University of Missouri at Kansas City and former director of the Institute for Fraud Prevention. Nonprofit organizations often do not report those types of crimes because they find them embarrassing, he said, and because they do not expect to recover the money.It is unclear whether Iona recovered any of the lost funds. Often, Mr. Black said, people who embezzle money are in financial trouble and unable to pay it back. After uncovering the fraud, Iona hired an accounting firm to perform an internal-control review, hoping to prevent a similar situation from happening again. According to the tax form, the college was scheduled to have finished carrying out suggestions from the review by October 1.

Long-term fraud schemes are not new to colleges and universities. As recently as June, La Salle University fired its vice president for auxiliary services after discovering that he had funneled several million dollars through a fictitious food company over the course of 20 years. In recent years, colleges of all types, including St. John's University, Valley Forge Christian College, and Berry College, have had employees embezzle money or defraud the institution.Colleges and other nonprofit groups may be particularly vulnerable to that type of fraud because they often have "very weak or nonexistent" internal controls, Mr. Black said. He said colleges could borrow the fraud-prevention tricks of major companies, such as having a different employee provide documentation for a transaction that another employee conducts.They could also improve their chances of preventing problems by conducting regular audits."People sort of assume that folks in the nonprofit sector are not there to make money and are, therefore, at reduced risk of being a thief," he said.

A New York nun has denied charges that she embezzled 850,000 over 10 years from the college where she worked.

Sister Marie Thornton, known as Sister Susie, took the money to pay “credit card bills for personal expenses”, according to court documents.

Prosecutors say she hid the thefts by submitting fake invoices to Iona College, the Catholic institution where she was vice-president of finance.

The 62-year-old nun denied a federal embezzlement charge.

Judges did not remand her in custody, and her religious order, the Sisters of St Joseph, said they were providing her with “emotional and spiritual support”.

Sister Susie's lawyer, Sanford Talkin, said he thought the case would be resolved “in a manner fair to all the parties involved”.

In a , the college said it had “recovered the majority of the funds”.

The college stressed it had taken action to make sure the same thing could never happen again.

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