Did state miss warning signs in employee fraud case? - WCAX.COM Local Vermont News, Weather and Sports-

Did state miss warning signs in employee fraud case?

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She's accused of using her position to falsify a claim and steal state funds to shop online. Now, the former Vermont state employee is the subject of a fraud investigation.

"This is a case where we had faith in an employee and it turned out that it was betrayed. And we have to make sure that this doesn't happen again," Bill Duchac said.

Duchac heads the Office of Risk Management-- essentially the state's insurance company. He says he learned of the allegations Monday after a whistleblower from Michigan alerted Vermont authorities that an employee tried to buy his $6,000 guitar online with a check cut from state coffers.

"That was my biggest concern, that she wasn't who she said she was, that it was a fake check. I didn't want to put in my account," Ron Ratledge said. "She said she could get it out of her retirement fund if I was willing to take a check. She says she pays for items this way all the time."

The employee was the sole liability claims adjuster within the office, investigating property damage claims against the state and determining payouts. The office handles about 400 of these claims a year and shells out around $6 million in settlements. Any payout over $15,000 requires manager approval.

"I am aware of the work that we do to investigate every claim. We don't just process claims without justification," Duchac said.

WCAX News is not releasing her name because right now, she's not charged.

Investigators are now looking into whether she falsified a liability claim and paid the eBay vendor with that state payout.

"But it should have raised flags," Vt. Auditor Doug Hoffer said.

Hoffer says the treasurer's office is supposed to mail checks directly to claimants, but in this case, they allowed the worker to send it out herself.

"It's a deviation from normal practice," Hoffer said. "And whenever that happens that should trigger a question in your mind: why does she want the check back? We always send the checks out. Is there something going on here?"

Hoffer says the state has strong safeguards in place, but staffers must follow protocols for the system to work.

"It's not a fortune, but it doesn't have to be a fortune to be a big deal," Hoffer said. "The problem is if people aren't aware of and knowledgeable about or follow internal control, you leave yourself open to risk. That's what they did."

April 1 was the employee's last day at the Office of Risk Management. The colonel of the Vermont State Police says so far there have been no arrests made in the case.

Duchac says the office is now looking at how internal controls can be tightened.

"This is a brand new investigation," Duchac said. "The state police are going to the parts that they do. We actually have plans to take it even further to look at... [possibly] how did this happen?"

Duchac stresses the office is taking the allegations seriously and vows the internal investigation will be comprehensive.

Again, no arrests have been made and no criminal charges filed.

Hoffer says fraud prevention is about education. He recommends periodic audits where random claims are scrutinized, work his office doesn't do. And he warns independent fraud audits can be expensive.

Related Story:

Police investigation: Was a Vt. employee shopping with taxpayer money?

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