The former Franklin County Schools finance director who resigned last summer amid an FBI investigation is facing charges related to embezzlement of more than $1 million, according to school district officials.
The finance director, Lesley Wade, allegedly stole an estimated $1.5 million from the school district spanning numerous years dating to at least 2011, Superintendent Mark Kopp told The State Journal on Monday. He said that Wade has reached a plea agreement with the FBI but that the school district doesn’t know the details of the agreement.
Kopp told The State Journal last summer that the FBI contacted the school district on June 25 regarding an investigation involving Wade. Records show that she resigned the same day, June 26, that she was suspended with pay.
Kopp said Monday that an FBI agent called him on June 25 to say “we are investigating your finance director for embezzlement,” after she allegedly deposited a check to an account at Commonwealth Credit Union from the school district. The credit union then contacted the FBI about the suspicious check.
The FBI agent did not respond to a request for comment by press time.
The agent told the superintendent that other FBI agents would be at the FCS board office later that morning to question Wade, according to Kopp. When agents arrived, they interviewed the finance director in private. Wade reportedly “admitted to everything that they questioned her about,” Kopp said.
Assistant Superintendent Sharla Six said the agents spoke with the school district’s human resources director about Wade while at the board office. The finance director then left and did not return to the office. Wade was suspended with pay, pending a personnel investigation, which is board policy.
The next day, the school district met with FBI agents and reviewed financial records. Then FCS began conducting its own personnel investigation. With help from Community Trust Bank, the school district was able to go back and find other fraudulent checks, which it turned over to the FBI. Kopp said that the bank “was very helpful” in working with school employees and the FBI in the review.
Kopp alleged that Wade committed embezzlement by creating fake invoices from real vendors that the school district worked with. The school district sometimes gets multiple invoices at a time from a company, so Wade could make a fake invoice to include among the real ones. A corresponding check would be cut and Wade would doctor the check to change the name and address, sometimes to her own.
Auditors told Kopp that the district's annual audit did not catch the theft, as audits do not specifically look for fraud and only a portion of checks are pulled for review, he said. The fraudulent checks would also have had a verifying invoice and purchase order regardless.
Kopp said that since Wade was bonded, the school district has already received $600,000 from the company that bonded Wade and FCS will continue to seek the remainder of the allegedly stolen money, which will go into the school district’s general fund, once a final amount is determined. Kopp said that FCS is seeking the rest of the amount that Wade allegedly stole through a fraudulent employee clause in the district’s insurance coverage. The district also will work with the FBI and federal prosecutors to seek restitution from Wade.
The $1.5 million is not a final number, Kopp said. Some forensic accounting from the FBI has yet to come back to the school district, and available bank records only go back to 2011. Wade was the only FCS employee involved in the embezzlement, according to Kopp.
Wade became finance director for FCS in 2017, after serving as the interim director. She worked for the school district for 19 years, holding multiple roles in the finance department.
“We are going to prosecute this to the fullest extent of the law,” Kopp told The State Journal.
The superintendent declined to comment further last summer because of the sensitivity of the investigation and advice from legal counsel. The school district was given clearance last week from the FBI to discuss the investigation, Kopp said.
After Wade’s resignation, the school district hired Randy Cutright as interim finance director. Shane Smith became the finance director later that summer. Kopp said the school district has taken several steps to revise its bookkeeping policies, including more segregation of duties and cross training within the finance department. The superintendent said that one positive to come from the matter is that stronger safeguards are in place, and he’s confident that those safeguards will detect fraudulent employees if necessary in the future.
“We are going to be made whole again. We are getting this money back. We’ve already received a large chunk of it back. And we’ve put steps in place to make sure this doesn’t happen again,” Kopp said.
Inadequate segregation of duties was cited in FCS' most recent audit, which uncovered writing of checks that were not valid expenditures. After last month's school board meeting, The State Journal requested copies of the checks cited by the auditor as "not valid budgetary expenditures," but the school district sent back a letter saying that it was unable to provide the copies.
To learn more about the checks, The State Journal submitted an open records request for “copies of all correspondence, including email, between RFH CPAs and Consultants and Franklin County Schools administrators and central office staff from May 1, 2019 to present.” The Kentucky Open Records Act allows citizens to request public documents from public entities.
The request was denied last week in a letter from the school board’s lawyer, Grant Chenoweth of Lawrenceburg. He said the request was not properly framed and was too broad. He said the district had identified responsive documents, but “they all appear to fall within the preliminary documents exceptions,” adding that a "subset" of the records are exempt from disclosure for “being related to a law enforcement activity or otherwise administrative adjudication, the disclosure of which would interfere with or otherwise negatively affect the investigation, prosecution or administrative adjudication.”
The State Journal has made a subsequent request for financial documents maintained by the district during the period covered by the audit and Wade's resignation, and parts of that open records request are to be fulfilled, pending further coordination between the newspaper and the school district.
The allegations against Wade have been difficult on employees, as she wasn’t just a trusted co-worker but a friend, Kopp said.
“Everyone admired and trusted this person, and the betrayal of that trust was incredibly difficult for all of us to deal with,” he said.
FBI spokesman Timothy Beam said in an email Monday to The State Journal that the agency is “not able to comment on this at this point.”
Gabrielle Dudgeon, a spokeswoman for the U.S. Attorney’s Office for the Eastern District of Kentucky, said the Department of Justice prohibits “commenting on the potential existence of investigations. We cannot confirm or deny the existence of investigations until they are made public.”