[F]ive years ago, a small-town utility discovered that a longtime employee had embezzled more than $1.6 million over the course of a decade.
Now that utility, the Hardwick Electric Department, is suing the accounting firm that performed the utility’s annual audits for part of that period.
The utility filed suit in Caledonia Superior Court last week seeking $1.26 million from Kittell, Branagan & Sargent Ltd., a St. Albans accounting firm.
According to the suit, the firm audited Hardwick Electric Department’s financial statements from 2006 through 2010 — part of the period during which longtime utility employee Joyce Bellavance embezzled extensively. Bellavance was convicted in 2012 on federal charges and sentenced to 3½ years in prison.
The embezzlement took place between 1999 and 2010. Bellavance used some of the money to renovate her home in Hardwick.
The utility claims that if the accounting firm had done its job properly during the four years it was responsible for auditing, the embezzlement would have been detected sooner.
Kittell, Branagan & Sargent declined to comment on the lawsuit for this article.
The audits were supposed to provide “reasonable assurance” that there were no errors, fraud, or legal or regulatory violations in the utility’s books, the complaint states.
Instead, the audits did not accurately show the “financial condition” of the utility during those years, the lawsuit charges.
The accountants “failed to discover serious and apparent fraud and embezzlement activities” by Bellavance, the complaint states. She had been the office manager.
The utility claims that if the firm had adequately carried out its audits according to two sets of guidelines — the generally accepted auditing practices and the generally accepted government auditing standards — the reviews would have detected failings within the department’s internal controls.
According to Brooke Dingledine, the attorney representing the utility in the complaint, HED has recouped only $1.1 million of the stolen money.
The U.S. attorney’s office for the District of Vermont aided in collecting some of the money from various accounts where it had been stored. The utility also received more than $600,000 from the liquidation of Bellavance’s home, Dingledine said.
Hardwick Electric Department is also getting half of Bellavance’s municipal pension payments — which amounts to more than $15,000 annually. But, according to Dingledine, the payments will not add up to the total financial loss.
The damages being sought — $1.26 million — represent the amount Bellavance embezzled during the period Kittell, Branagan & Sargent did the annual audits, the lawyer said.
“We want to make sure that any party who is responsible” is held accountable to the ratepayers, Dingledine said.
