Embezzlement case plea deal in the works in Iowa

A plea deal appears to be in the works for a former Clinton School District business office employee accused of embezzling $1.2 million from the Clinton School District.




At a pre-trial conference earlier today in U.S. District Court, prosecutor Richard Westphal said negotiations with Denisa Babcock and her private attorney, Leon Speis, are under way as they seek to strike a plea deal. Judge Thomas Shields set March 14 as Babcock’s next pre-trial conference date. Her jury trial had been set for March 7, but today was moved to April 4.



Babcock is accused of one count of theft from local government agency/organization receiving federal funds in connection with a serious financial irregularity found in the district’s books and announced a year ago by school district officials. Babcock was indicted on the charge in September, with federal authorities alleging that from approximately Nov. 18, 2005, to Dec. 11, 2009, while an accountant at the Clinton School District, Babcock embezzled, stole or converted to her own use property in value of $5,000 or more belonging to the Clinton School District.



State Auditor David Vaudt released a report two days after Babcock's indictment on the school district's records, identifying $1,207,248.32 of missing funds, although the office has said the true amount allegedly taken may never be known.



Babcock is accused of stealing checks payable to the Clinton School District and depositing those checks in accounts, at financial institutions, under her personal control. Authorities have said Babcock had accounts at several banks, and that she was depositing school district money in them, using the money for her personal expenses, setting up CDs and deriving, and keeping, the interest.



Babcock, a former accountant and business office supervisor, was hired by the district in 2004 and earned a yearly salary of $38,600. Gayle Isaac, the district’s former business manager who left in early 2010 to take a job in Newton, made a recommendation to the school board in November 2009 to lay off Babcock, with a termination date effective Dec. 9, 2009. Isaac has said the position was eliminated out of a need for budget cuts and because of the down economy.



Problems with the district’s books were discovered after Babcock left her position with the district. After the irregularity surfaced and in accordance with state code, a representative of the district's audit firm notified the Office of Auditor of State of the problem.



Investigative work turned up an unauthorized checking account and 30 unauthorized CDs, allegedly improperly established by Babcock in a name which included the district or made it appear as if the account was affiliated with the district through a foundation or scholarship. The unauthorized checking account and CDs identified were held by five separate financial institutions. State auditors also say they identified district collections deposited to Babcock's personal accounts established at two additional financial institutions.



Babcock is free on probation, although she is restricted to a four-county area in Iowa. If convicted on the charge, Babcock faces a potential penalty of up to 10 years in prison, a $250,000 fine, or both a fine and imprisonment, a period of supervised release of not more than three years, a special assessment of $100 and making restitution.



The district has received two $500,000 insurance payments to cover the loss. The district received an initial $500,000 in insurance funds last spring after filing a general claim related to the embezzlement. In January, Superintendent Deb Olson announced that the district’s claim through Des Moines-based EMC Insurance Companies would be honored. That company found Isaac served with a “lack of faithful performance,” and that his oversight allowed the bilking of funds to go on unnoticed. The district recovered another $500,000 insurance claim as a result of that finding.



Olson said that if Babcock is convicted, the district stands first in line to recover the remaining funds lost through embezzlement, slightly more than $200,000. Olson added she believes the funds can be recovered quickly because prosecutors have told the district Babcock has $500,000 in liquid assets that the state is seeking to seize.



The indictment also includes a forfeiture notice that upon conviction, Babcock would have to forfeit to the federal government any and all accounts at Members Choice Community Credit Union under her name and Clinton Education Excellence; all accounts at US Bank and Citizens First Bank under her name; any accounts under her name and doing business as Camanche Consulting Service; Wells Fargo Bank accounts under her name and that of Clinton Education Excellence; a 2006 Hummer, a 2007 Cadillac Escalade; a 1998 Searay Cruiser; and two residences.