Indiana Pension Audit Nears Completion

Forrest Bowman Jr., the attorney brought on to oversee the audit work of accounting firm Crowe Chizek, said that by the time the audit draws to a close, every penny of the fund that servesnearly 500,000 public employees and their families would be accounted for, according to an Indianapolis Star report.

News of the end of the audit has been a long time in coming.   T hen-Governor Frank O’Bannon originally ordered the audit in August 2002, the need for which arose when the state’s $10 billion pension fund was labeled one of the worst in the nation by Wilshire in 2002 when PERF was embroiled in controversy over the arrests of former employees were stealing form the fund’s coffers.  

New Deal

Immediately following these very public black eyes, PERF brought in new management that immediately 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.

Sine that time, former PERF chief benefits officer (CBO) and convicted identity thief Walter Kevin Scott was sentenced to 10 years in prison in December 2003 for embezzling more than $600,000 from a former employer and misusing another person’s Social Security number.   In all, Scott pleaded guilty to one count of misusing a Social Security number, two counts of bank fraud and 20 counts of illegal monetary transactions.  He was also ordered by US District Judge Sarah Evans Barker to pay $1.3 million in restitution (See Former PERF CBO Scott Gets 10 Years Behind Bars ).

Prior to Scott’s sentencing, in September 2003, one of Scott’s former employees, Shaunna Stone, pleaded guilty to a single count of bank fraud and 13 counts of misusing the Social Security numbers of other people.  Additionally, Stone admitted stealing $22,586 and seven identities from the fund (See  Former Indiana Pension Worker Pleads Guilty to Fraud Charges ).  Stone had previously worked in the same benefits department headed by Scott.

Also in September a federal indictment was handed down against another former PERF employee, James Spaulding, for allegedly leading an eight-person conspiracy to steal $226,873 from the fund, which ultimately led to his arrest in August (See  Accused PERF Fraud Perpetrator Ordered To Jail Until Trial ).  The theft was orchestrated during Spaulding’s temporary employment for the fund from January 2002 to July 2002, where the accusation of altering members’ accounts and causing checks to be cut from the fund in the names of his friends arose.

PERF has since modified its background check policy so that it covers every current and new worker.  Also, new fund officials have embraced employee loyalty, by awarding 30 workers a total of $104,486 in annual raises in 2003 at a time when few other state employees are getting additional money in their paychecks. 

The pension fund is paying for the audit: $765,260 for Crowe Chizek and $98,940 for Bowman, who is working on the final report.