Accused PERF Fraud Perpetrator Ordered To Jail Until Trial

August 28, 2003 (PLANSPONSOR.com) - The Indiana Public Employees' Retirement Fund (PERF) has filed federal charges against an ex-worker for allegedly leading an eight-person conspiracy to steal $226,873 from the fund.

Also found in James Spaulding’s vehicle during his arrest last week forallegedly leading an eight-person conspiracy to steal money from the fundwas a semiautomatic handgun and ammunition. However, police have only begun the investigation into what Spaulding’s plans may have been, according to an Indianapolis Star report.

This came out Wednesday in testimony to US Magistrate Judge Kennard Foster, who called Spaulding a “worm” that moved from the pension fund to an architectural firm to the Eli Lilly and Co. credit union, allegedly stealing money and identities along the way.

“These are economic crimes of violence,” said Foster, who ordered Spaulding held in the Marion County Jail until he stands trial. For the victims, Foster said, “It’s an emotional personal hardship.” Foster declined to release Spaulding, after discovering he was carrying the weapon when he was arrested. “That means you’re prepared,” Foster said.

Federal and state authorities – who have spent more than a year investigating the pension fund –

are now working to notify those people on Spaulding’s list and attempting to capture two others charged in the conspiracy. However it was only S paulding that worked for the fund.

Fund Arrest

Spaulding was arrested following an investigation by PERF officials into corruption at the state’s fund. Spaulding’s arrest represented the latest in a series of moves the state pension fund – which was labeled by Wilshire as one of the nation’s five weakest recently – is taking to better protect the pension money of more than 500,000 public employees, retirees and their families.

According to the report, Spaulding worked as a temporary employee at the fund from January 2002 to July 2002, where the accusation of altering members’ accounts and causing $226,773 worth of checks to be cut from the fund in the names of his friends arose.

However, the fraud may not have stopped there. Citing federal court documents, the report says that Spaulding went to work as a runner for Fanning/Howey Associates, an architectural and engineering company in Indianapolis. He resigned in March 2003 after a company investigation accused him of fraudulent use of a company credit card and the theft of a binder containing copies of employees’ driver’s licenses.

Then in May 2003, hewent to work at the Eli Lilly Federal Credit Union, where he had access to a database containing personal information about 147 bank employees. Spaulding was fired July 9 after a company investigation accused him of using three prepaid Visa cards without approval. He also has forgery, theft and identity deception charges pending in Marion County for using the identity of an employee at the engineering firm and making and cashing his own payroll check from the credit union.

Treacherous Trio

With the arrest, Spaulding became the third ex-fund worker within one year to face federal charges. Currently, former temporary employee, Shaunna Stone – who worked at the agency for eight months – is currently awaiting federal trial on charges that she stole the identities of two public employees and bilked three others out of nearly $11,000 (SeeAnother Indiana Pension Worker Accused of ID Theft).

Adding to the fray is that Stone had previously worked in the same benefits department headed by convicted identity thief Walter Kevin Scott, who resigned from his job last August after his criminal past was revealed to state officials (See Probe Continues into Former Pension Benefits Officer ). Scott is also facing charges of embezzling money from his former employer, Cook Inc., a manufacturer of medical devices.

In addition, the fund’s new managers, led by Executive Director Craig Hartzer and deputy Bruce Kimery, have discovered former pension managers overlooked small but important details. Among them:

  • Four years after Mark Webb quit as executive director of the fund, his electronic signature appeared on the 55,000 checks that went out each month.
  • Fund officials had remote access to members’ accounts, which could be accessed away from the controlled state offices.
  • Mail to pensioners was never locked up; instead it used to sit in the public lobby where anyone could steal it.

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