City Receives $5 Million from Insurance Carrier for Embezzlement Loss

Pasadena officials today announced the City has received a $5 million payment from its insurance carrier to settle a claim filed by the City regarding the theft of public money from the Utility Underground Program fund.

“While it is important to recover the funds that were lost, it is equally important to ensure that the City makes the necessary changes to prevent another embezzlement from happening in the future and to also recover the public’s trust,” Pasadena Mayor Terry Tornek said.

In addition to the insurance claim, the City has undergone a comprehensive internal financial and personnel audit; changed or increased oversight for many of its financial processes and initiated most of the recommendations announced last year by a citizen advisory task force on financial administration and internal controls, posted online at www.cityofpasadena.net/invoiceinvestigation .

The payment represents the maximum amount of money that could be paid on the insurance claim. It is also about 85 percent of the nearly $6 million allegedly embezzled by a former City employee who is now currently facing both criminal charges and a civil lawsuit in connection to the theft.

City Manager Michael J. Beck said “we are pleased that our insurance carrier has paid the maximum amount on the claim, but in no way does this minimize the importance of our internal efforts to strengthen our financial administration and internal controls.”

A portion of the settlement money will be deposited into the City’s General Fund to offset the cost of investigating the embezzlement and the rest will be deposited into the Utility Underground fund that was impacted by the theft, Beck said.

“The City will continue to pursue legal means necessary to obtain a full recovery of the monies stolen,” City Attorney/City Prosecutor Michele Beal Bagneris said.

A City audit completed in November 2014 documented that a former employee used fraudulent invoices to steal money from the fund that pays for moving overhead power and communications lines underground.

The former employee, Danny Wooten, was arrested in December 2014 and is due in Superior Court March 9 for a preliminary hearing in the criminal case against him. A civil suit filed against him by the City is set for a jury trial in October 2016.

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