Fraud, Illegal Spending Uncovered at Correctional Facility in Southern Ohio

Fraud and misuse of public funds plagued a southern Ohio correctional facility, where state auditors and investigators found employees forged receipts, stole property and illegally spent thousands of tax dollars across the country on liquor, hotels and a strip club.

A special audit of the STAR Community Justice Center in Scioto County determined 11 directors and employees benefited from $20,090 that was spent improperly, and findings for recovery were issued in that amount. About half the amount, $10,523, stems from prohibited spending during 20 conferences, training seminars and meetings in cities including Las Vegas, Reno, Orlando and Pittsburgh.

“These employees used conferences as a cover for their self-indulgent vacations,” Auditor Yost said. “While the amounts may not be the highest we’ve seen, the egregious nature of what transpired is simply appalling – and at a correctional facility, no less.”

In September 2013, STAR spent $5,560 on airline tickets and registration for six employees to attend a conference in Reno, Nevada. While lodging in Columbus the night before their flight, the employees spent $154 on 44 beers plus a $50 tip – both prohibited expenditures – at a restaurant using a STAR credit card issued to former Deputy Director Josh Saunders. This portion of the credit card bill was paid from STAR’s family fund, an account intended for employee gifts and comprised of jeans day money and vending commissions.

The employees flew to Reno a day early and spent $797 on meals and lodging. Interviews revealed none of the six employees attended the conference in its entirety, but instead went only to sessions they felt were relevant. Several employees, including Executive Director Charles E. Philabaun III, traveled to Lake Tahoe while the conference was in progress. One employee told investigators he attended only two sessions and skipped an entire day to play in a poker tournament with a co-worker.

Investigators learned similar behavior was common during the audit period, spanning July 1, 2011 to July 13, 2015. They also discovered STAR lacked a policy regulating credit card use. Employees would charge personal expenditures to STAR credit cards and reimburse the justice center for the amounts they deemed unrelated to its operations.

Among the improper charges were thousands of dollars for alcohol, taxis in the early morning hours when transportation was already provided, travel costs for family members, and excessive meal and lodging costs. Credit card statements also showed two transactions totaling $170 at a Columbus strip club, for which no receipts were submitted. Saunders told investigators he used his STAR credit card at the club after a Christmas party with STAR Intake Director John Adkins and a director from another facility.

“This kind of irresponsible spending is the very reason why credit card policies exist,” Yost said. “Allowable expenditures are determined by policy and state law – not the card holders.”

During a review of credit card transactions, auditors concluded more than a dozen receipts were forged and submitted to the Scioto County Auditor as documentation for expenditures. Many were produced by Saunders, who admitted to creating them when original receipts could not be obtained from vendors.

Business Director Sharon Hart told investigators she and a co-worker used a website to create five receipts for purchases made by Philabaun and STAR Fiscal Director James T. Holt. Afterward, Hart told Saunders she created fake receipts and refused to do it again. Saunders allegedly responded that he was proud of her.

Hart said: “Many times Mr. Saunders told me I needed to stop being so black and white and that there was a whole world of gray that needed to be considered. …All of this led me to feel my job/position would be in jeopardy if I didn’t find the world of gray.”

STAR terminated Saunders from his position in April 2015 for performance reasons. The following July, he sued Philabaun and STAR’s governing board for unlawful termination. He also sent a letter to the Auditor of State’s office accusing Philabaun of wasting and potentially misspending STAR funds.

While fulfilling a records request submitted by a law firm representing Saunders, STAR employees realized he had purchased personal items with his STAR credit card and forged receipts. They also discovered he never returned STAR equipment, including an iPad Mini, laptop and accessories.

Philabaun notified STAR’s governing board, which conducted an internal investigation and contacted the Scioto County Sheriff’s office. The case was referred to the Ohio Bureau of Criminal Investigation, which collaborated with the Auditor of State’s office on a special audit launched on Sept. 17, 2015.

In total, the special audit issued $20,090 in findings against the following individuals:

  • Deputy Director Josh Saunders - $12,042
  • Executive Director Charles Philabaun - $5,965
  • Director John Adkins - $471
  • Director Matthew McClellan - $368
  • Business Manager Sharon Hart - $627
  • Director Cary Williams - $161
  • Director Shannon Bishop - $157
  • Fiscal Director James T. Holt - $74
  • Adam McPheters - $85
  • Chris Kimbler - $85
  • Danny Reynolds - $55

“Of all places, the fact that these improper expenditures occurred at a correctional facility is particularly alarming,” Yost said. “The leaders of these facilities need to set a good example for inmates trying to get their lives back on track.”

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