Focus intensifies for Alaska embezzlement prosecutions

casey.grove@adn.comJanuary 17, 2014 

With millions of federal grant dollars flowing to Alaska organizations every year, federal prosecutors are hoping to send a message to people embezzling money from those groups: They're coming for you.

Recent cases the U.S. Attorney's Office in Alaska has handled have ranged from a scheme in which a surplus officer gave heavy equipment to a middleman, who sold it and returned a kickback, to a village council president who simply wrote herself checks from the council's federally funded accounts. And while there are a wide variety of reasons people steal -- among them, drug and alcohol addiction, gambling debts, a desire to live an extravagant lifestyle -- federal embezzlement cases always involve an abuse of trust.

"The primary mechanism for ensuring the money is spent the way it's supposed to is trust that these people that receive it do what they say they're going to do with it," said Aunnie Steward, an Assistant U.S. Attorney who has prosecuted several such cases recently. "And so our mission is to make sure that there's deterrence for those that might see a way to personal gain, to deter them from doing that."

As federally funded programs see fewer dollars and budget belt-tightening increases, the need for that deterrence is greater than ever, said Kevin Feldis, another Assistant U.S. Attorney who is in charge of federal criminal prosecutions in Alaska.

"We're keenly aware of the impact that these kind of crimes have, not only on taxpayers in general, but on the individual communities where this money is often intended to go, to benefit the folks in the community."

An example is a recent theft from the Prince William Sound village of Tatitlek, population about 90 and roughly 110 miles east of Anchorage. The Tatitlek Village Council's former president, Lori Clum, admitted in an October plea agreement to stealing about $112,000 from the village and funneling $20,000 to her brother, James Kramer.

A judge sentenced Clum on Jan. 6 to spend 18 months in prison and Kramer, on Friday, to eight months.

According to a letter filed at that sentencing by current village council president David Totemoff, Clum's theft made it difficult to hire employees for certain programs and destroyed the village's relationship with a heating fuel service, to whom they owed tens of thousands of dollars because of an unpaid bill.

"While we can list the damages from not having money to operate our community, the damage done to the residents emotionally is something that cannot be fully described in words," Totemoff wrote. "The fear that you will be without your job to create income for feeding your family or the threat of not having fuel to heat your home is devastating."

Another example is Kenneth Browning, a state surplus officer who was responsible for finding federal surplus equipment for local governments and other qualified recipients. Browning, in a plea deal entered in court Thursday, admitted to transferring equipment -- such as dump trucks, cranes and an ambulance -- to a private business that sold it and returned thousands of dollars to Browning. The theft amounted to more than $140,000, according to the plea agreement.

Browning has not yet been sentenced.

The surplus he diverted for his own gain could have been used to better the communities that needed it, Steward said.

Steward and Feldis say the vast majority of Alaska organizations receiving federal funding operate lawfully. But past experience, often with small groups that have only one person in charge of the accounts, shows that people will sometimes take the opportunity to line their own pockets, Steward said.

"In most of the cases I've seen, it actually usually starts kind of small as payroll abuse, usually pay advances that don't get paid back," Steward said. "From there it tends to snowball into bigger and faster, taking cash, sometimes moving money around so you can't trace exactly where it went as easily."

"It just gets carried away," Steward said.

Figuring out the extent of these types of thefts can be difficult, which means it is not always clear how much a convicted embezzler should pay in restitution, Steward said. Plus, if the money is already spent, it may take years for the person to pay it back, and they might never be able to pay all of it back, Feldis said.

"But certainly money does come back, over time, and we do our best to seize whatever assets are available at the time," Feldis said. "I think what we focus on is trying to properly and fairly enforce the law with reason and empathy and with a sense of justice. Obviously part of that sense of justice is, if money was stolen, trying to get that back for whoever the victim is."

Bringing attention to such prosecutions and the consequences of embezzlement helps in deterring other would-be thieves. Still, Feldis admits that violent crime can grab the average person's attention more than news of fraud or embezzlement in a far-flung community. That might be due to the perception of a more immediate threat to public safety from violent crime and the fact that cases involving thefts of thousands of dollars at a time do not seem as serious, he said.

"Dramatic events are going to catch the headlines," Feldis said. "But when you look at (fraud) as a whole and you stop to investigate and understand the circumstances of each case, you see the impact that it has. And those impacts are real and significant and deserving of attention."

Reach Casey Grove at casey.grove@adn.com or 257-4343. Twitter updates: twitter.com/kcgrove.

 

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