Hardwick is a small town with a big reputation.
It used to be known as little Chicago. At one point there were four bars downtown, including a tavern known as Benny’s, which until about five years ago was the last taproom standing. For years, town do-gooders attempted to establish street trees downtown, and the saplings would survive for a few years until the drunks broke off the tops and limbs. After a while, the trees weren’t replaced anymore.
In 2005, a fire destroyed the Bemis block – a three-story clapboarded turn-of-the 20th-century edifice — and even Benny’s gave up the ghost.
Hardwick began to kick its hard luck notoriety about three years ago, when the town became a Mecca for foodies, localvores and entrepreneurs. Emeril Lagasse filmed a show at Claire’s Restaurant. A book was published about the transformation of Hardwick called “The Town that Food Saved.” (Townspeople greeted the attention with equal parts interest and ambivalence.)
But sometimes the more things change, the more they stay the same – particularly when tragedies hit a town that’s seen more than its fair share of difficulties over the years.
Now it’s news that a well-respected member of the community allegedly stole more than $1 million from her neighbors – the 4,300 ratepayers served by the Hardwick Electric Department – over a 10-year period. The department commissioners found out about the missing money on Oct. 20 and shortly afterward, the Federal Bureau of Investigation launched a probe. As Hardwick resident and former selectboard member Brad Ferland put it, “It’s always people you trust the most.”
The tiny utility has a budget of $5.5 million a year, and it employs seven lineman, four office employees and a general manager.
Municipal officials at a meeting last week at Town Hall tried to explain how Joyce Bellavance, who lives in the bosom of the community and is part of a local French Canadian clan, could have allegedly pilfered so much money from the accounts. Bellavance, the office manager for the small utility for 37 years, was asked to sign a letter of resignation last week. Over the course of the 10-year period under investigation, department commissioners say she allegedly managed to hoodwink three separate auditors, including KPMG, a global auditing firm, the general manager of the small electrical utility and a panel of commissioners. Annual audits, and reviews by the Vermont Department of Public Service in the wake of requests for rate increases, missed the accounting anomalies. One of the other administrative employees in the office discovered the unendorsed check for $12,000 that unraveled the tangled web of deception and led to the probe now under way by the Federal Bureau of Investigation.
Joe Wood, chairman of the commission, told townspeople that the situation is difficult, but “We’re not Burlington Telecom. This is a one-time event we can get through in good shape.”
“The deep hole is not $1 million; it’s much less than that,” Wood said. “The early money disappeared into bookkeepers magic.”
Wood said the utility, which has $5.5 million in annual revenues, spends everything it makes on line improvements and energy costs, so “when someone takes money (from HED) they’re taking money from us.”
“There are no profits, no investors — it’s just us folks, and we’re in this together,” Wood said.
Residents were cautious about blaming Bellavance, but the sense of betrayal was potent, particularly as Commission Chairman Wood described her expenditures on “consumables,” such as vacations.
What Wood says appalls him “more than anything else” is the 10-year time frame. “We may not be able to keep (embezzlement) from happening, but we should be able to catch it sooner,” he said.
Many Vermont communities have been riven by similar strife, and when a bad turn comes, residents sometimes lash out at town officials. Not so in Hardwick. Local residents face trouble with an admirable equanimity and forbearance. Natives and the imports – from Quebec and more recent interlopers from points south – come together to try to make sense of what went wrong.
Hardwickians have faced more than their fair of communal hardship over the years, and their capacity to pull together in the face of difficulties is a tribute to the many members of the community who have volunteered to keep the local fire department, EMT service, churches, historical groups and schools a vibrant part of this Northeast Kingdom town.
Hardwick has lost three soldiers in Iraq and Afghanistan war effort – 7.5 percent of the total number of Vermonters who have died in the two conflicts. When a popular graduate of Hazen Union School, Army Sgt. Tristan Southworth, died in Afghanistan in September, more than 1,400 people from the area attended his funeral.
In addition, several fires have devastated the downtown, including one that occurred a few years ago, in which a drunken driver drove full speed up Wolcott Street, rolled his SUV and left his girlfriend in the vehicle. A bystander pulled her out just seconds before the car burst into flames. The fire scorched the façade of the building and rendered the interior of the three-story clapboard structure on the main street useless.
People in Hardwick stalwartly carried on with other improvements, in spite of the new blight on downtown, and raised money to paint the Town Hall.
Embezzlement: “A cottage industry”
Though the $1 million Hardwick employee theft case is more dramatic than most, and it’s thought to be the only recent case of fraud involving a municipal utility, it isn’t exactly an isolated incident. Hundreds of thousands of dollars are stolen every year from the state of Vermont, municipal entities, nonprofits, individuals, businesses and schools, according to data from the Vermont Crime Information Center in Waterbury.
There has been a spate of high-profile embezzlements around the state over the last several years. Six have made the news in the last two months.
Businesses are most typically the victims of this criminal activity, and they represent roughly 70 percent of the cases reported to law enforcement officials.
Included in the rash of crimes: a woman who allegedly took $178,000 from two Upper Valley restaurants; the director of a Newport office for the Department of Children and Families who was indicted for alleged embezzlement of $490,000 from the indigent burial fund; a high school coach who is accused of stealing $1,700 from a school in Bennington; a town treasurer who is charged with taking $400,000 from the town of Ira; a fund manager in St. Johnsbury, who allegedly can’t account for $300,000 in missing funds; and a corrections official who has been charged with taking small amounts of money from her probationers.
In 2008, the high water mark for reported ill-gotten gains included 126 individual instances. On average, about $10,000 was stolen by embezzlers that year. In 2009, the number of reported instances dropped to 73 statewide, but the average amount was up to $25,000 (there were six cases involving amounts of more than $50,000.)
Businesses are most typically the victims of this criminal activity, and they represent roughly 70 percent of the cases reported to law enforcement officials. Figures for 2010 are not yet available.
The cases we hear about, in which police investigate and apprehend thieves, aren’t necessarily indicative of just how widespread the problem is. Sources interviewed for this story said there is no way of knowing just how many entities are harmed by unscrupulous employees because businesses, in particular, are more likely to settle their negotiations with embezzlers quietly so that they don’t have to face negative publicity. The secrecy, however, can make matters worse. Serial embezzlers can move from one entity to the next, and because of confidentiality agreements are able to do so with impunity.
Municipal embezzlement cases, on the other hand, are more likely to see the light of day because of inherent public scrutiny, and once a charge has been lodged, it’s more difficult for the perpetrator to find employment in finance.
Chittenden County is embezzlement central in Vermont – there have been 69 cases since 2004 –although there are also a surprisingly large number of cases in Bennington, Franklin and Lamoille
counties, according to VCIC data.
Don Keelan, a retired accountant from Arlington who tracks financial improprieties, calls embezzlement Vermont’s “cottage industry.” In a column for the Bennington Banner, Keelan regularly chronicles the lives of the rich and devious who have found novel ways to liberate money from the people they work for. Keelan says the problem is pervasive, and the state isn’t doing enough to prevent perpetrators from serially embezzling money from unsuspecting companies.
“The court system and the state’s attorneys don’t treat it as a serious crime,” Keelan said. “There’s been a number of businesses that have gone out because they can’t recover from the loss.”
State statute allows for jail time of up to 10 years. Because the crime is nonviolent, most embezzlers spend very little time in prison, however. The remedies prescribed by judges include community service, probation and restitution.
Too much trust, too little verification
People steal from their employers for two main reasons: opportunity and incentive.
In Vermont, where a belief in community is part of the state’s mythology, embezzlers can rely, perhaps more so than elsewhere, on their coworkers’ and neighbors’ naïve sense of trust.
No matter where they operate, however, an embezzler’s motives and rationalizations are universal, according to Gary Zeune, an expert on white collar crime who recently gave a workshop in Vermont to certified public accountants.
Zeune’s mantra is: “Trust is not (an internal) control – it’s a feeling.”
Zeune’s mantra is: “Trust is not (an internal) control – it’s a feeling.”
“The only people who can steal you blind are the people you trust,” Zeune tells his students. He said keeping an eye on an organization’s finances is easy and inexpensive. He recommends that town leaders verify the organization’s bank statements – even if the bookkeeper sees it as a possible breach of trust.
Most often, the perpetrators are lifelong honest citizens who rationalize the thefts, according to Zeune. “They talk themselves into doing something wrong,” Zuene said.
Embezzlers believe they can pay the stolen money back, Zuene said, but inevitably, as reports come due, the losses get out of control.
He compares workplace thieves to speeding scofflaws who justify driving too fast because they are late for a meeting. They tell themselves they’re safe drivers and they won’t hurt anyone.
“If there was a cop every mile and you could get a $1,000 fine for every mile over the speed limit, would you do it?” Zeune asked. “That’s a control because it governs people’s behavior.”
Requiring bookkeepers to submit bank statements to a superior is the same kind of governor on behavior, he says.
Municipalities are particularly vulnerable
Vermont is a small state made up of lots of tiny communities, many of which are isolated in the round-the-mountain, can’t-get-there-from-here reality of mountainous topography. About 66 percent of Vermont towns, or 166 out of 256, have a population under 2,000, according to 2009 U.S. Census figures.
In many towns, there are barely enough volunteers to staff the fire department and emergency medical technicians to run the local ambulances – let alone manage the villages and towns that operate as independent governmental entities.
Steve Jeffries, executive director of the Vermont League of Cities and Towns, said the recent spate of embezzlements comes with the territory — with our nexus of little burgs.
“We are sized-challenged in Vermont,” Jeffries said. “We have so many small communities. You can be a check or a balance (as a town clerk and/or treasurer), but you can’t be both … because you’re the only one in the office.”
Key finance positions in municipal government are elected, not vetted through a hiring process, and, under state law, town treasurers aren’t required to have bookkeeping and accounting experience. In addition, because municipalities are run on tight budgets with as few personnel as possible, the separation of duties recommended under government accounting standards is more difficult to achieve.
External audits of municipalities by certified public accountants are optional under state law.
Typically, a town clerk also functions as the town treasurer and the tax collector. Selectboard members who may have no finance experience approve the checks, and a board of auditors, also a group of volunteers, keeps a watch over the accounts.
“It’s going to be a tough challenge for towns to comply with the checks and balances that would further remove the potential for someone to abuse (the treasurer) position,” Jeffries said.
Deb Markowitz, Vermont secretary of state, said there are some communities where volunteers do a thorough job. In others, the board of auditors is likely to miss anomalies in bookkeeping because regular and thorough reviews of town accounting practices haven’t been conducted.
The board of auditors is often the first line of defense, however.
Markowitz said in the Isle La Motte embezzlement case, the board of auditors discovered that Suzanne LaBombard, the town clerk and treasurer, had allegedly stolen $100,000 from the town from 1985 to 2007. Her father and boyfriend were both longtime members of the Selectboard. Part of the money was used, according to a WCAX report, to pay for a family wedding.
“It was the elected board of auditors (investigation) that led to arrest of the clerk,” Markowitz said. “It took quite a bit of time to get there.”
External audits by certified public accountants are optional under state law. Of 297 entities that responded to a survey from the Vermont League of Cities and Towns, 105 conduct audits on an annual, three-year or five-year basis. Ninety-two municipal officials reported that they do not seek audits by outside certified public accounting firms.
John Cushing, who has served as Milton’s town clerk for nearly 40 years, recommends annual audits and a separation of duties. Over the last several decades, municipal bookkeeping has become more complicated, he said, and it’s important to ensure that town money is handled with fiduciary integrity. Selectboard members and village trustees should understand the bookkeeping system and be able to explain how it works to taxpayers, Cushing said.
“In the majority of cases, embezzling is not an issue,” Cushing said. “When it becomes an issue, it’s a black eye on the town.”
That’s why he recommends that all municipalities hire professional auditors to review the books every year. “It’s not a slam against (the board of) auditors who are elected,” Cushing said. “Our accounting system is very complicated; we have to step up to the plate.”
Cushing, who became the Milton town clerk in 1976, has served as the president of the Vermont Municipal Clerks’ and Treasurers’ Association. He said Vermont is seeing more embezzlement cases than ever before. In some instances, he said it boils down to a lack of accountability. In his own office, three people handle the accounts – one person writes checks, another reconciles the accounts and a third makes deposits and transfers money.
“My concern on the municipal side is towns should have a process where things are checked multiply,” Cushing said. “You have to have the checks and balances. If you have checks and balances in place, you have a lot less chance of these things (embezzlements) going on.”
“Vermont local government, in many aspects, is a continuation of our society and our culture and not a governmental structure per se,” Jeffries said. “It’s the heart and soul of the community. Unfortunately, we have enough experience to know we really shouldn’t be looking at it that way anymore.”
Jeffries ticked off a list of instances in which the balance went awry in a number of towns. He pointed to a case in the 1970s in which the Manchester town treasurer made off with $400,000 over a number of years by robbing Peter to pay Paul. When the town audit was due Jan. 1, he would shift money from the school revenues to balance the budget; when the school district books came due on June 30, he’d use town monies to shore up the accounts, according to Jeffries.
Linda Hall was convicted of embezzling $200,000 from the town of Bakersfield. She was still serving out her prison sentence, according to WCAX, when she was hired by the Burlington YMCA. In her new employ, she allegedly took $70,000 and was charged with a second felony embezzlement charge in 2004.
“Vermont local government, in many aspects, is a continuation of our society and our culture and not a governmental structure per se,” Jeffries said. “It’s the heart and soul of the community. Unfortunately, we have enough experience to know we really shouldn’t be looking at it that way anymore.”
The state auditor’s office has provided financial and ethical training for dozens of town treasurers, but Auditor Tom Salmon said he hopes to widen the net to ensure everyone participates in workshops.
Salmon would like to see a statute requiring that selectboards or town treasurers certify that accounting duties have been segregated and that bank statement reconciliations have been conducted by an independent party.
Salmon said town officials could be asked to fill out and certify an annual questionnaire about their accounting practices. The professional conduct board requires attorneys to use a similar certification process. When lawyers lie or fill out the forms sloppily, the review board steps in to examine the conduct of an attorney, Salmon said.
Salmon is also working with the Legislature to find the resources to dispatch outside contractors to municipalities that need auditing assistance.
“We’re not in the business of municipal audits in this office,” Salmon said. “But immediately sending out a contractor would take us to first base in terms of embezzlement prevention.”
Checks to self
There are three kinds of perpetrators, according to accountants, lawyers and state officials: Those who are trying to make ends meet and turn to the company till as a financial backup plan; avaricious thrill-seekers who blow money on jewelry, camps on Lake Champlain or expensive vacations; and those who are supporting a drug or gambling habit.
Here is a rundown of recent cases:
- On Nov. 17, Michele Storm, a financial officer for Mountain Trading based in Woodstock, pled innocent to embezzlement charges. She is accused of stealing $178,000 from the company, which owns two restaurants, Bentleys of Woodstock and Fire Stones of Quechee. The Valley News reported that she
allegedly used the money to pay for her Tunbridge home. - Steve LaLonde of Bennington was arraigned in court on Nov. 17 for allegedly embezzling $1,700 from students at Mount Anthony Union High School. The football coach is accused of collecting money from players for sweatshirts and using it to pay his rent.
- The FBI is investigating the financial records of a revolving loan fund administered by the town of St. Johnsbury. Files for the Jay-Lyn Fund went missing in July, shortly after the director of the loan fund stopped working for the town. Some of the files were returned, and now the FBI has subpoenaed the records. The Jay-Lyn Fund was founded with Housing and Urban Development Department money in 1995, and received more HUD money to administer in 2000, according to the Caledonian-Record.
- In October, Brenda Massie, a Burlington-based probation officer with the Department of Corrections, went to court to face accusations that she inaccurately charged Vermonters on probation and pocketed the excess money.
- Donald Hewitt, the former town treasurer for the town of Ira, has been cited to appear in Rutland District Court on Dec. 13 to answer charges of embezzling $404,268 of town and school funds.
- Kathy Lantagne, a supervisor for the Newport field office of the Department of Children and Families, was indicted by a federal grand jury in Burlington in September on charges of embezzling $490,000 over a five-year period from the state’s indigent burial fund, according to court documents.
- Dawnette Greene allegedly misappropriated $65,000 from the Readsboro American Legion Post and was indicted for the charge in September by the United States attorney for the District of Vermont. According to court records, Greene assisted the treasurer of the Legion with his health care and financial affairs. She had access to the Legion post’s checkbook and allegedly forged signatures on the checks and cashed them at a bank in Massachusetts. She gambled away the money, according to the court.
- Former Chittenden Bank, Bennington branch manager Kevin Thivierge was sentenced in U.S. District Court to four months in jail and three years of supervised release, according to court documents. He pleaded guilty to misapplication of bank funds in July. He was ordered to pay restitution of $100,000 and a $5,000 fine.
- In July, Julie Blake, the former Woodbury town clerk was accused of stealing at least $18,000 from the town.
- In May, Patti Rancati of Concord was arrested and charged with embezzling $15,990 from the Order of the Eastern Star, according to the Vermont state police.
- Laura Giles, of Colchester, pleaded guilty in May in U.S. District Court in Burlington to charges of wire fraud and filing false tax returns. According to court records, between 2004 and 2009, Giles was the office manager for Occupational Disability Management Center of Burlington. From September 2004 to July 2009, Giles allegedly embezzled approximately $290,000 from her employer by stealing checks received in the mail and then depositing the stolen checks into local bank accounts she maintained, according to the court. She faced up to 20 years of imprisonment and fines of more than $500,000 if convicted.
- Julie Garrow, former bookkeeper of Vermont Graphics, pleaded guilty in an embezzlement scheme that cost the printer hundreds of thousands of dollars in April. She agreed to pay more than $600,000 in restitution and $80,000 to the IRS in unpaid taxes. According to a report from the Keene Sentinel, Garrow began forging company checks shortly after she was hired as a part-time bookkeeper in 1994, according to the Sentinel report.
- In April, Amy Cousino, former bookkeeper for the Addison Northeast Supervisory Union in Bristol, pled guilty to a charge of embezzlement. Her sentence was deferred and she was placed on probation. Cousino was ordered to pay $41,746.91 in restitution.
- Melanie McDonald was sentenced to 18 months in jail in March in U.S. District Court in Burlington in March. She will also serve three years of supervised release, and she is required to pay $180,000 in restitution to her two victims — Dowd’s Country Inn of Lyme, N.H., and Wilder Business Services, a small accounting firm in Wilder, Vt.
- In March, Gary Ellis, the former CEO of River Valley Credit Union in Brattleboro, was sentenced for stealing from the company from 2001 to 2005, according to the Office of the United States Attorney for the District of Vermont. Ellis was sentenced to six months in prison. He must also serve five years of supervised release, four months of which will be home confinement. He also must pay restitution of between $120,000 and $200,000.
- Valerie Mason, of Wolcott, was sentenced in February to six months in prison, plus restitution, for embezzling more than $120,000 from the dental office of Gary Morris. Mason allegedly wrote 128 unauthorized checks totaling $120,777 from the dentist business accounts for her own benefit.
- Denise Hall, of East Arlington, went to prison on Jan. 18 to serve 18 months for embezzling $152,735 from Rosemary Altea, a renowned psychic, from 2002 to 2008. The court ordered Hall to repay all of the money, according to boston.com.
DISCLOSURE: The author lives in Hardwick. Her husband is a Hardwick Electric Department commissioner.
A write-thru of the piece, to correct typos was made at 8:21 a.m. on Nov. 19, 2010.
