Theft probe centered on council candidate
Bonnie Beckstein would be the mayor of Grand Junction now if the second-term politician hadn’t abruptly quit her City Council post in the spring of 2011.
Now Beckstein wants her job back.
Two years ago, hazy allegations of a “financial discrepancy” followed Beckstein, a bookkeeper and accountant, as the Mesa County Sheriff’s Department investigated whether she or her employer of 30 years, accounting firm Baldwin & Associates CPAs, committed any crimes related to charges assessed to the firm’s largest client.
After more than a yearlong inquiry, investigators determined someone at the accounting firm funneled at least $350,000 into the firm by overcharging Rocky Mountain Wireline Service for tax work.
As Beckstein mounts another run for public office, one question still lingers.
Who stole the money?
AN INVESTIGATION, A SETTLEMENT
A substantial body of evidence against Beckstein, Samuel Baldwin and his company emerged after Beckstein’s puzzling departure from the council on April 1, 2011.
Beckstein penned in her resignation letter that she was leaving because of “significant changes” in her personal life. At the time, Baldwin was quick to point out that Beckstein had been fired a few weeks prior.
Life went on for the City Council, and current council member Laura Luke was appointed to fill Beckstein’s vacancy. Beckstein, Luke and Martin Chazen are vying for the District D seat in April’s election.
But for more than a year after Beckstein stepped down, Mesa County Sheriff’s Department Investigator Mike Piechota delved into a 4-year-long pattern of embezzlement with an account managed by Baldwin and Beckstein. The case surfaced thanks to a vigilant and persistent effort of a former bookkeeper at Baldwin & Associates who later was hired by Rocky Mountain Wireline Service. That company, in turn, hired another private certified public accountant to conduct a forensic audit, a process that uncovered years of mismanagement in a payroll account it entrusted to Baldwin’s company.
The Sheriff’s Department has since closed the case. Baldwin & Associates reached a civil settlement in December 2011 to pay its former client $350,000. Baldwin, in documents obtained by The Daily Sentinel through a Colorado Open Records Act request, accused Beckstein of the wrongdoing, as well as padding her paychecks with unapproved bonuses and extra money for insurance benefits.
The information is contained in a 60-page report of the investigation, a narrative of Beckstein’s unemployment hearing, her termination letter and the settlement.
Partly because of the settlement, the Mesa County District’s Attorney’s Office declined to press charges. Jim Alvillar, an attorney for Rocky Mountain Wireline Service and himself a former prosecutor, twice during the investigation questioned why the case wouldn’t be prosecuted. Money had been stolen, a fact that was not disputed, he reasoned.
“Human greed never fails to surprise me,” Alvillar said in a recent interview with the Sentinel. “The things that people do that can wreck their lives — for what? You’re doing it in your backyard. Some things that happen never fail to amaze me.”
More than a few people were flummoxed when Beckstein threw her hat in the ring in late January, seeking election in April. Questions persisted. Why did she quit? What about the allegations?
Asked about her sudden departure and the investigation, Beckstein told the Sentinel in early February that she “needed time to take care of my family.”
Beckstein since has started her own business, B.J. Accounting Services. Her middle name is Jean.
“As far as I know, I was never part of that investigation,” she said. “They never called or anything.”
That, however, stands in contrast to the investigation’s report. In it, Beckstein retained an attorney two days after the case was transferred from the Grand Junction Police Department to the Mesa County Sheriff’s Department. An investigation by the Police Department would have been a conflict of interest, with Beckstein serving as mayor pro tem, or second-in-charge behind the mayor.
“He told me she might consider assisting with the investigation only if she was assured no charges will be filed against her,” Piechota wrote, summing up a statement by Beckstein’s attorney, Vince Felletter.
Felletter, speaking on Beckstein’s behalf last week, told the Sentinel that Beckstein was not aware of an investigation or the resulting settlement.
“I don’t think it would be fair to draw any inference between Bonnie and her former company because they decided to settle,” he said. “They did something that they felt they needed to reimburse their client for. That’s not what Bonnie did. In my experience practicing law, if there are no charges, apparently no crime was committed.”
Beckstein never gave an interview to the Sheriff’s Department, though Piechota called and asked her for one. Felletter returned the call saying she would not comment, the Sheriff’s Department said.
Initially, Beckstein said she was unclear about why she was let go from Baldwin & Associates and attributed it to “changes in the company.”
“I really don’t know what was going on,” she told the Sentinel a few weeks ago.
Beckstein’s termination letter, dated Feb. 27, 2011, states otherwise. In it, Baldwin blames her for “knowingly and willfully” overcharging a client’s payroll taxes and placing the money in other accounts. It states she was questioned multiple times but did not disclose the situation to management, “thus causing irreparable harm to her employer.”
Further, Baldwin asserted that Beckstein paid herself an unauthorized bonus of $4,500 in early 2009, did not cut back her compensation by 20 percent in 2010 when all employees were required to do so and increased a health care reimbursement for herself by roughly $1,000 to $1,500 a year.
Beckstein refused to the sign the document, according to a handwritten note in the margin.
After her firing, Beckstein applied for unemployment benefits but was denied by the state. In an April 19, 2011, hearing, an officer with the Colorado Department of Labor and Employment described her behavior at her job as “gross misconduct.” In the hearing, Baldwin and his attorney, Gene Dackonish, told the officer that Beckstein had awarded herself bonuses and they blamed her for knowingly diverting more than $478,000 of a client’s funds into Baldwin’s operating funds and sometimes into the firm’s accounts payable.
“The claimant does not deny that she engaged in these behaviors. The claimant asserts that she had authorization for these various transactions from the employer,” the report reads. “The hearing officer is not persuaded by this assertion. It is clear from the testimony and the evidence presented that the claimant was engaging in behaviors that were not authorized by the employer and did not meet standard industry practices. As a result she was discharged.”
Beckstein worked for Baldwin for 31 years, acting as office manager and taking charge of payroll accounts. That included payroll accounts for the firm, including her own paychecks. She earned $50,000 a year.
EYE ON THE BOOKS
All of this may have gone uncovered if not for the combination of a watchful bookkeeper and a lucky hire.
Bookkeeper Karen Ewall worked under Beckstein at Baldwin’s firm from 2008 to 2010, then was hired part time to do payroll in house for Rocky Mountain Wireline Service. According to the Sheriff’s Department’s investigation, Ewall knew there was a discrepancy with the payroll accounts that Baldwin & Associates prepared for Rocky Mountain Wireline Service, first noticing at the end of 2008 that figures from the client company’s W-2 forms did not match up. Rocky Mountain Wireline Service had never been charged the correct tax rate, and in 2008, Baldwin & Associates had overcharged its client $224,426, she determined.
Ewall showed Piechota the spreadsheet with the figures that she presented to Beckstein. Beckstein wrote a note in the margin that Baldwin would get approval from Dave Chepko, owner of Rocky Mountain Wireline Service, to add $8,000 to their payroll checks to account for the overbilling. Later, Ewall was directed, in another note, to reduce checks by $8,000 per payroll period, as approved by Chepko. The memo appeared signed by Baldwin, Ewall said.
Ewall told Piechota she believed both Beckstein and Baldwin knew about the charges.
“I asked if she had any guesses as to what happened to the overcharged amounts,” Piechota asked Ewall, according to his investigation. “KC (Ewall) said she felt the money was withdrawn and taken. KC said Baldwin was having financial problems both personally and professionally. I asked KC how she knew that. KC said because (of) talk around the office.”
After starting work for Rocky Mountain Wireline Service, Ewall asked her new boss, Chepko, about the overcharges and the agreement.
“... He knew nothing about any of this,” the report said. “He did not know about the overcharge, the “agreement” to start crediting RMWS $8,000 per pay period, or the “agreement” to stop the crediting.”
Chepko repeated that statement to Piechota.
“David said Sam has never spoken to him about this incident and he has never agreed to anything with Sam’s firm,” the report said.
In an attempt to get to the bottom of things, Chepko hired Shannon Morgan, a certified public accountant, to conduct a forensic audit. Morgan determined that Rocky Mountain Wireline Service had been overcharged $333,917 through paying extra payroll taxes between 2007 and 2010.
In addition, when employees at Rocky Mountain Wireline Service knew Beckstein was coming by to use their accounting computer, a screen shot function was activated to monitor her activities on the computer.
“That was how they knew it was Beckstein doing the adjustments,” Morgan told Piechota.
Baldwin still maintains that Beckstein was responsible for the overbilling.
“It was very disappointing but it was resolved in a civil matter,” he said in a voicemail message. “We felt that pursing anything else would not have helped the client that was harmed nor would it have helped our firm as we cleaned our house with the termination of Bonnie Beckstein.”
BALDWIN’S MONEY WOES
According to the report from Piechota’s investigation, Baldwin had the account with Rocky Mountain Wireline Services, but he and Beckstein had access to it.
Baldwin “has more work than he knows what to do with,” and his financial picture was less than rosy because he owned more than 30 houses when the real estate market bottomed out, his partner, Robert Cucchetti, told Piechota.
Also, Cucchetti said, payments on a $5 million home “ate him (Baldwin) up,” the report said.
According to the Mesa County Assessor’s Office, Baldwin last year lost to foreclosure what was listed as his primary address, a nearly 7,000-square-foot home at the base of Colorado National Monument assessed last year at $1.32 million.
Baldwin fell behind in making payments to the firm in 2008 and repaid another former partner for those costs in 2009, Cucchetti told Piechota. Baldwin also was fined $400 by the Colorado State Board of Accountancy in 2011 for failing to register a name change with the state within six months.
Cucchetti told Piechota he didn’t think Beckstein would steal the money. Cucchetti also was shocked by the two handwritten notes that mention crediting $8,000 and then stopping the $8,000 credits.
Cucchetti said he was sure Beckstein’s handwriting was on the first note, to credit the money, and Baldwin’s writing was on other note, to remove the money.
“I told him to me this showed an intent to continue to steal from RMWS,” Piechota said in his interview with Cucchetti. “Robert agreed. Robert said Samuel then was not honest with him.”
Baldwin also interviewed with the Sheriff’s Department, blaming Beckstein for overcharging Rocky Mountain Wireline Service and claiming he was not aware that the funds were helping to offset the firm’s expenses.
“Samuel said his mistake was in not having Bonnie show him the issue was fixed,” the report said. “Samuel said it was a five-minute fix. I asked why he thought Bonnie would keep the error in place. Samuel said he did not know.”
When asked, Baldwin told Piechota he received permission from Chepko to discontinue the $8,000 charge. Piechota told Baldwin that Chepko had denied this.
“Samuel suggested that Chepko ran a large business and had a lot on his mind,” the report said.
Further, Baldwin said Beckstein was taking the funds for herself, but he didn’t have any documentation to prove it.
“Samuel did not seem too interested in pursuing the matter criminally,” the report said.
Ultimately, the case was settled out of court, with Baldwin & Associates paying Rocky Mountain Wireline Services $350,000. The bulk of the settlement, $285,000, came from Cucchetti, while Baldwin paid $25,000. Baldwin also agreed to pay Rocky Mountain Wireline Service $40,000 over the next three years. The settlement also requested that the Sheriff’s Department not pursue a criminal investigation.
DA: NO CHANCE TO PROVE GUILT
There are a few reasons the case won’t appear on a local court docket, according to Mesa County District Attorney Pete Hautzinger.
Hautzinger said he couldn’t charge both Beckstein and Baldwin in one case. If he charged the two separately “they would just point their fingers at one another,” he said.
“It would be hard to prove one person’s culpability compared to the other,” Hautzinger said. “I don’t think we had any chance of proving anybody guilty. Why would we waste taxpayers’ money on two trials?”
Hautzinger said the request from the victimized company not to press charges also played somewhat of a role in the decision. He insisted politics weren’t a motivation.
“Bonnie Beckstein running had nothing to do with it,” he said. “It didn’t enter into my thinking in any way, shape or form.”
In general, the Internal Revenue Service might launch its own investigation after a fraud case meets a $40,000 threshold, IRS spokesman Bryan Thiel said.
The agency might pass up a case if it were being tried locally, Thiel said. The IRS typically investigates cases of mail fraud and wire fraud.
If convicted, federal sentencing guidelines for fraud or embezzlement in a $350,000 case would call for 27 to 33 months in prison, he said.
Still, the IRS would probably skip investigating a case if it were already resolved with a civil settlement.
“To be quite honest, when it’s paid back it makes it tough,” he said. “If they pay the money back, that might kill a case.”