Embezzlement Fallout: City Extends Fraud Risk Assessment Contract

[Editor’s note:  This article has been corrected. The original story contained an attribution to the City Manager’s newsletter which was not correct and has been removed.]

In yet another response to the 2014 alleged embezzlement of more than $6 million from the City’s coffers, the Pasadena City Council Monday evening approved a recommendation by Pasadena’s Internal Audit Manager to increase the contract value of the City’s Fraud Risk Assessment fund and extend its duration following the contract’s “successful” first phase.

The recommendation was approved as part of the Council Consent Calendar, and there was no discussion. It will cost an additional $433,320 and lengthen a contract with Macias, Gini & O’Connell LLP, the company in charge of the assessment, by two years.

A comprehensive assessment of Pasadena’s departments was first requested after City employees were caught allegedly embezzling nearly $6 million in 2014, according to Ruthe Holden, Pasadena’s Internal Auditor and the project manager of the Fraud Risk Assessment contract.

Danny Ray Wooten, Tyrone Collins, and Melody Jenkins are accused of embezzling more than six million dollars from the City of Pasadena.

Wooten, 52, a management analyst for Pasadena’s Public Works Department, in charge of moving the city’s utility lines underground, is charged with 20 felony counts of embezzlement by a public or private officer and public officer crime, along with 19 felony counts of conflict of interest and five felony counts of filing a false tax return. He is expected to begin trial sometime next year.

Wooten,, is accused of creating false invoices for the underground utility program between 2004 and 2014.

Collins, 56, who owned Collins Electric, is charged with 10 felony counts each of embezzlement by a public or private officer and public officer crime. Prosecutors allege that Wooten directed more than $2 million to Collins.

Jenkins, 47, was a temporary city employee and is charged with one felony count each of embezzlement by a public or private officer, public officer crime and grand theft of personal property. Prosecutors say that Wooten gave more than $40,000 in city funds to Jenkins, who served as his personal assistant for some time.

In that case, Pasadena was awarded a $5 million payment after three city workers were caught stealing money from the Underground Utilities Fund over a span of 10 years, according to earlier reports.

As a result of the fraud, former Pasadena Mayor Bill Bogaard created a seven-member Citizen Task Force that reviewed Pasadena’s policies and procedures and advised the City to internally investigate its risk assessment. A four-member ad hoc committee of Councilmembers was also created to work collaboratively with the Citizen Task Force.

“The Fraud Risk Assessment is to assess the level of control we have to reduce fraud and the ability to commit fraud in the City to a level acceptable to City Council and other leaders,” Holden said.

The Council will now move into Phases II and III of the Fund Risk Assessment by increasing the contract’s value by $433,320 and lengthening it by two years with Macias, Gini & O’Connell LLP (MGO), the company in charge of the assessment.

Phase II will assess the City’s Department of Water and Power in 2017 with a budget of $285,480, while Phase III will be an assessment of the Fire, Police, Human Resources, Library Information Services, and Community Development Departments in 2018 with a budget of $147,840, according to the memo.

Though fraud like embezzlement can’t be completely prevented, controls can be put into place to reduce the risk, Holden said.

“[They’d] be looking at purchasing schemes under conflicts of interest to look to make sure that they are appropriate internal controls,” said Holden. “They are assessing the controls around the purchasing scheme to make sure the controls [over cash] are adequate to mitigate fraud risk.”

MGO will recommend instituting including dual signatures over checks, regular cash register counts, using numbered receipts and taking proper inventory of assets, according to Holden.

Phase I of the contract was awarded to MGO on October 26, 2015 for the assessment of six departments—Finance, Housing and Career Services, Human Services and Recreation, Public Health Department, Public Works Department and the Transportation Department, according to the memo.

“I’ve been managing MGO in doing the work and they have been meeting the contractual requirements and delivering some good draft reports,” Holden said. “We’re expecting to take the final report to the auditing committee in the month before the end of the year.”