Audit details missing money days before treasurer's trial

The audit showed that as much as $51,207 was missing in one month.
By LAURE CIOFFI
VINDICATOR PENNSYLVANIA BUREAU
NEW CASTLE, Pa. -- Attorneys are mum about how a new audit detailing $286,113 missing from Lawrence County will affect the upcoming trial of Lawrence County Treasurer Gary Felasco.
Opening statements are scheduled to start Monday in Franklin, Pa., for Felasco, 39, who is accused of theft, embezzlement, misapplication of entrusted property of government or financial institutions and a violation of the Pennsylvania public officials Ethics Act, based on an audit that detailed more than $40,000 missing from county funds from October to December 2003.
But a new audit detailing bank deposits and cash missing from March 2000 to December 2004 shows $286,113 missing from the county.
The audit shows a pattern of money missing during peak tax collection periods of March, April and December of each year.
Some months there were no shortfalls. Other months the shortfalls were as little as $142.
The audit shows the highest amount missing in one month was $51,207 in April 2001. But 2003 was the year with the most missing money, at $126,111. In that year there was $28,927 missing in April, $17,675 missing in May and $35,123 missing in December.
In 2004, the year Felasco was removed as the county tax claim bureau director, the year ended with a surplus of $3,004.
Questions timing
Felasco's attorney, James Ross of Beaver, Pa., questioned why commissioners released this information the week before Felasco's trial.
"My belief is there is no other reason than to impact the jury. I can't imagine why else they would release it today," he said Thursday afternoon. Ross said he had requested a copy of the audit, but had not received it.
The jury was chosen Monday in Venango County. Jurors were instructed by senior visiting Judge Michael Wherry to not read or watch anything about the case.
Senior Deputy Attorney General Anthony Krastek also had not seen the audit Thursday afternoon. He said he could not comment on how it might impact the criminal proceedings.
County commissioners instructed Nick Paolini, director of New Castle operations for auditors Packer Thomas, to give a copy of the audit to Krastek.
Commissioners also want to give the audit to the county's bonding agency and start proceedings to retrieve the money.
"I think it's our goal as stewards of the county's money to submit this to the bonding company. I'd like to do it this fiscal year," Commissioner Steve Craig said.
The county's fiscal year ends Dec. 31.
Paolini said there appeared to be no attempt to cover up the missing funds.
Discovery
Packer Thomas was hired after The Vindicator reported in March 2004 that Felasco and his wife, Jeanine, had not paid property taxes on their Cunningham Avenue home since 2000 and improper court stays were placed on the property to keep it from being sold at tax sales.
Paolini said he was looking at the court stays, but came across the shortfalls when the newly appointed tax claim director, Georgann Gall, told him there were numerous taxpayers on the delinquent list coming in with receipts proving they paid their taxes.
State police investigators contend that Felasco, who was the tax claim bureau director from 2000 to 2004, was taking cash payments for personal use and then substituting mailed checks to balance the books. Those who had mailed payments were marked as delinquent taxpayers and later deleted from the system.
"This was just being in the right place at the right time," Paolini said of his discovery.
Commissioners questioned why the yearly county audits didn't pick up on the problem.
Phillip Dennison, president of Packer Thomas, said yearly audits aren't designed to look at every bank deposit.
County Controller Mary Ann Reiter noted that her office had not received bank statements or bank deposit slips from Felasco in three years.
Dennison said one of the flaws of government is that an independently elected official, such as the treasurer, doesn't have to answer to any other office and can't be forced to comply with the county's internal controls.
"The only thing you can do is get them in the ballot box," he said.
cioffi@vindy.com