Louisiana Legislative Auditor 2015 NSAA Forensic Report Award Submission
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Louisiana Legislative Auditor 2015 NSAA Forensic Report Award Submission TABLE OF CONTENTS Page 2015 Entry Form ..............................................................................................................................2 Summary of Criteria ........................................................................................................................3 New Orleans Traffic Court Investigative Audit Report ...................................................................5 New Orleans Traffic Court Investigative Audit Press Release ......................................................69 United States Attorney’s Office of the Eastern District of Louisiana Press Release.....................72 TheAdvocate.com: Audit Details Alleged Bilking of N.O. Traffic Court .....................................74 TheAdvocate.com: Federal Trial Starts for Former New Orleans Traffic Court Accountant .......77 TheAdvocate.com: Vandale Thomas Found Guilty of Stealing from N.O. Traffic Court ............81 TheAdvocate.com: N.O. Traffic Court $1.1 Million in the Red ....................................................85 Vandale Thomas’ Indictment .........................................................................................................88 State Auditor Testimony ..............................................................................................................107 Vandale Thomas’ Sentencing Date ..............................................................................................119 National State Auditors Association 2015 Excellence in Accountability Awards ENTRY FORM Name of project: New Orleans Traffic Court State submitting entry: Louisiana Office: Louisiana Legislative Auditor – Investigative Audit Services State contact person: Brent McDougall Phone number: 225-339-3904 Email address: [email protected] Please indicate the award type you are submitting for: Performance (small) Number audit hours (must be less than 2,500 hours) Performance (large) Number audit hours (must be 2,500 hours or more) Forensic Report X Special Project Each entry must be submitted in unprotected PDF format only to Sherri Rowland at [email protected], and should include the following: • Completed entry form. • A write-up (maximum of 2 pages) identifying the report/project performed and the result. • A copy of the formal report or project. • Additional information such as copies of newspaper articles, legislation or policy changes that resulted from the report or project. Additional materials too large to email (e.g., video of a news item) should be submitted on a CD/DVD/thumb drive. Six (6) copies of the CD/DVD/thumb drive must be received by Sherri Rowland at NSAA prior to the submission deadline. CDs/DVDs/thumb drives should be mailed to Sherri at 449 Lewis Hargett Circle, Suite, 290, Lexington, KY 40503. Please note: • It is solely the submitter’s responsibility to ensure that all materials are received by Sherri Rowland prior to the submission deadline. • To be considered for an award, all documents must be submitted electronically in PDF format. (See exception above for materials too large to email.) Note: Links to documents on a website will not be accepted. • PDF documents must not be protected in any manner that would prevent printing or require a password to access the documents. Protected documents will be disqualified. The entry must be e-mailed to Sherri Rowland at [email protected] and received no later than 5:00 p.m. EST on Friday, February 27, 2015. Submissions received after the deadline will not be accepted. You will receive a confirmation e-mail confirming your entry was received. If you have not received confirmation within two business days, please contact Sherri directly at (859) 276-1147. New Orleans Traffic Court Summary of Criteria 2015 NSAA Awards Program • Forensic Report Award Category Synopsis Methodology n July 2014, the Louisiana Legislative Auditor (LLA) issued an investigative (forensic) audit report on the New Orleans To discover Mr. Thomas’ actions and Traffic Court (Traffic Court) that identified $1,225,765 in determine the amount of his fraudulent I billings, the LLA performed the following fraudulent billings submitted by the Traffic Court’s former Chief forensic procedures: Financial Officer (CFO), Vandale Thomas, and paid to three accounting firms affiliated with Mr. Thomas between 2006 and • Analyzed contracts and records of 2011. select Traffic Court vendors; From 2006 to 2008, Mr. Thomas was able to fraudulently bill • Reconciled Traffic Court bank the Traffic Court by simultaneously working for two accounting records to accounting transactions firms, under which he created and submitted billings to the Traffic and invoices related to Mr. Thomas from 2006 to 2011, which included Court for duplicate or similar accounting services. During this analyzing and reconciling thousands time, these two firms billed the Traffic Court $1.7 million and of transactions from accounting paid Mr. Thomas more than $1.2 million. reports and the general ledger; In addition, from 2008 to 2011, Traffic Court contracted directly • Analyzed invoices for services with Mr. Thomas to act as Traffic Court CFO, during which allegedly provided by Mr. Thomas to time Mr. Thomas was paid $759,065 in excess of the maximum multiple government agencies and amount allowed under his contracts. Mr. Thomas obtained these private clients to determine the total overpayments by: number of hours he claimed to work each month; • invoicing the Traffic Court for working in excess of 24 • Subpoenaed records of select Traffic hours a day; Court vendors; • billing at a higher hourly rate than his contract allowed; • Interviewed current and former • preparing and delivering his own vendor checks to check employees of the Traffic Court and the signors for approval; City of New Orleans; • removing internal controls that segregated accounting • Interviewed current and former duties; vendors of the Traffic Court and the City of New Orleans and obtained • performing all accounting data entry and reconciliation documentation of the work they duties; and provided; • backdating accounting entries for payments to himself or • Collected and analyzed digital data his business. and e-mail from Traffic Court and City of New Orleans computers that During our audit, we worked with the Federal Bureau of was used as evidence to support the Investigation (FBI) and the United States Attorney’s Office of fraudulent payments reported in our the Eastern District of Louisiana (USAO). In October 2014, forensic audit report; and Mr. Thomas was convicted by a federal jury on 11 counts of • Reviewed Traffic Court policies theft, money laundering, and structuring transactions to evade and federal and state laws and reporting requirements. This report served as the basis for the regulations that were applicable to our prosecution’s case. investigation. Louisiana Legislative Auditor • Page 1 • New Orleans Traffic Court Significance of the matter on entity’s Focus of the recommendations services and the financial outcome on addressing and preventing The Traffic Court amassed a cumulative deficit of the issue in the future $1.1 million by the end of 2013. Had Mr. Thomas’ frauds been prevented, the Traffic Court could have As part of our findings, we recommended ended 2013 with a surplus in excess of $300,000. that Traffic Court develop detailed written policies and procedures to segregate Usefulness of the forensic report accounting functions, provide an adequate to law enforcement and the system of internal control, and ensure payments for vendors meet all contractual management of government requirements. Moreover, we suggested that Traffic Court establish accounting controls After identifying the methods Mr. Thomas used to to ensure that adjusting entries are properly defraud the Traffic Court, we contacted the FBI and authorized and valid; ensure vendors USAO and worked with them in concluding our and professional service providers have investigation. Our work was used by the USAO to valid, written contracts prior to providing indict and, ultimately, convict Mr. Thomas on three services; require all vendors to identify all counts of theft, three counts of money laundering, sub-contractors; and to seek legal advice and five counts of structuring transactions to evade as to the appropriate actions to be taken reporting requirements. Mr. Thomas’ restitution and regarding former vendors and the recovery sentencing hearing is scheduled for April 8, 2015. of funds related to improper payments. Unique outcomes or other changes In response to our forensic audit, the Traffic Court: • hired an SOFE-Certified Financial Examiner; • began transitioning to a new financial management system; • began a systematic analysis of business operations; • began requiring all vendors to identify sub-contractors; • segregated accounting functions, • created and implemented a credit card • implemented new purchasing policies and policy; and procedures; • implemented a new case management • began reconciling vendor invoices to program. contractual requirements; • created controls to ensure accounting entries are not improperly adjusted; Results of the engagement Our forensic audit of the Traffic Court discovered and reported fraudulently-billed expenses totaling $1,225,765. In addition, our work was used by the USAO to indict and, ultimately, convict Mr. Thomas on three counts of theft, three counts of money laundering, and five counts of structuring transactions