Auditors believe Marble City School Superintendent Larry Couch used an outside bank account that should have been closed 10 years ago as the tool to conceal deposits and expenditures of school funds totaling $948,202.35, according to the audit.
Couch, 55, of Vian was charged in August in state court with embezzlement of public funds in connection with using $100,000 in school money for a personal land deal. The embezzlement charge ultimately led to the revocation of Couch's credentials, which Couch has since appealed.
Couch has been employed with the school district for more than 25 years and for more than 15 years as the superintendent.
The charge against Couch came after a board member, Ramon Bolin, questioned school expenditures in May 2007. Bolin took his concerns to Sequoyah County Treasurer Trica Yates who conducted her own inquiry, which led to the discovery of the missing school funds.
Those questions were then taken to Sequoyah County District Attorney Jerry Moore's office, who asked the State Auditor and Inspector's Office to conduct an investigative audit of school records.
In June, a search warrant was served at the school for financial documents and records, and the examination of nearly a decade of school records began.
AUDIT RELEASED
The findings of the 49-page audit were released to the public Friday, along with an audit summary that details years of alleged abuse of school funds.
According to a press release issued by the auditor's office, money intended for a variety of school programs, including Head Start, obesity and Native American language programs, and even money for air conditioners at the school was allegedly misused.
"...The details of an audit performed with the combined efforts of the Oklahoma State Auditor & Inspector's Office and Sequoyah County District Attorney and his investigators show the money being deposited into a bank account used by former Marble City School Superintendent Larry Couch for his personal benefit," according to the press release.
The auditor's office praised Bolin and Yates for coming forward to Moore when they identified a questionable land transaction, which sparked the audit.
After Couch allegedly admitted to investigators that he stole $100,000 from the school for the land transaction, Moore requested the auditors and investigators dig into school transactions from March 1998 through November 2007.
"In a word, what they uncovered is astounding. School funds diverted by Couch to his personal benefit are in the hundreds of thousands of dollars," Acting State Auditor Michelle Day said.
"I commend the work of the State Auditor's Office. They were completely professional and thorough as we worked through what has been a difficult time in our community," Moore said. "I am currently working with federal authorities to determine what additional charges should be filed in this matter.
"We must protect the children of our community and that includes making sure that the money that is to fund their education is actually used for that purpose."
According to the audit summary, auditors found a bevy of financial inconsistencies and alleged wrongdoings, including that Couch allegedly used funds diverted from the school to an outside bank account to pay over $640,000 in personal credit card debt, among other things.
BOARD MEMBER WEIGHS IN
Ramon Bolin, who is in his second year on the Marble City School Board and is now the board president, said he viewed the audit report earlier in the week and called what he saw "overwhelming."
"It is unbelievable that this could happen in this small school," Bolin said. "The amount is almost a million dollars.
"Just think of what the school could've been - what we could've done with the kids with that million dollars."
Bolin said the school must now focus on getting that money back and looking toward the future.
"I think all this is behind us," he said.
Bolin pointed out that the audit report was well done and easily understandable.
"I'm glad it's over. I'm glad it's out," he said, referring to the audit report.
When asked how he felt about being credited for uncovering the wrongdoing at the school, Bolin was humble, saying he didn't think he did much.
"I think Ms. Yates probably did more than I did. I just asked a question. With her help, she brought it all to light. It just went from there," Bolin said.
When Bolin had initially questioned expenditures at the school, after being newly-elected to the board, he met resistance from Couch and others.
After reviewing the report and seeing the alleged scheme, Bolin said, "It just seems like it was the part of an arrogant person."
Fourth Scoufos, Couch's attorney, said Friday that he hasn't seen the audit report and couldn't comment.
USED ILLEGAL ACCOUNT
The audit summary, as part of the special audit report, includes the following findings:
- Couch used $100,000 of school impact aid to purchase real property for himself and his wife.
- An outside bank account, Organization of Rural Elementary Schools (ORES), that should have been closed in 1998 remained open and from March 1998 through June 2007 was used as a tool to conceal the deposits and expenditures of Marble City School funds. "We question deposits totaling $948,202.35," the audit says.
According to the audit report, auditors found that ORES was used to launder money from the school.
ORES is a membership organization consisting of various dependent schools in Oklahoma. In 1992 an ORES account was opened at a local bank in Vian. The signature card on the account reflected Couch and former Moffett School Superintendent Bill Horton.
Horton and Couch served as president and treasurer of ORES from 1992 through 1998. In 1998 the organization elected a new president and treasurer. Horton stated that he no longer had any connection with ORES after May 1998.
Former and current treasurers of ORES indicated that when ORES elects a new president, they also elect a new treasurer, according to the audit report. When a new president and treasurer are elected, a new ORES bank account is opened. The previous treasurer should then close out the ORES account and forward the funds to the new treasurer and president who will then deposit those proceeds into the new ORES account.
"Based on the information provided by former ORES president Bill Horton, former ORES treasurer Jackie Grass and current ORES Treasurer Randy Rountree, the ORES account managed by Couch should have been closed in April 1998," the audit report states. "Instead, this account was used as a tool to conceal the deposits and expenditures of Marble City School funds for purposes other than what was intended."
- The source of the money deposited into the ORES account was comprised of: $791,608.28 of Marble City School warrants; about $109,489.57 of checks from the Cherokee Nation payable to the school; and $47,104.50 checks from miscellaneous sources payable to the school.
- It appears that three methods were used in which warrants were issued from the school, payable to various vendors, and ultimately deposited in the ORES account. The three methods identified were payments issued to non-existent vendors, payments issued to vendors in excess of the amount owed, and payments issued to vendors in which the vendor never received payments.
- The intended purpose of the Cherokee Nation checks to the school included the prevention of diabetes and overweight programs, motor vehicle tax allocations, and a Cherokee language immersion program.
- Some of the miscellaneous checks deposited into the ORES account included but were not limited to $5,922.77 from the Cookson Hills Community Action for reimbursements of meals for the Head Start program, $1,871.21 e-rate reimbursement funds, and a $1,000 donation from the Wal-Mart Foundation.
- From July 1999 through June 2007, 138 ORES checks totaling $869,373.03 were written from this account. Of those checks, 137, totaling $854,873.03, included forged signatures of the former ORES president.
- The ORES checks were used to pay the following: $641,171.26 for credit cards owned by Couch or his wife; $85,000 was paid for land purchased by Couch; $1,228.06 was paid for personal indebtedness; $4,730 was paid for a tractor; $8,106.60 was paid for miscellaneous expenditures.
VEHICLES, OTHER ITEMS UNCOVERED
According to the audit summary, Couch also allegedly used vehicles without board authorization, as well as purchased items not on school inventory.
- Couch was provided use of vehicles that cost $161,157.40.
- The school issued a $10,408.36 warrant to teacher's retirement system on behalf of Couch without the knowledge or approval of the board.
- A 2002 Chevrolet truck was disposed of without the board's approval.
- Documents supporting a 2006 van purchase for $48,500 were altered to conceal the purchase of a 2006 dual-wheel truck, which was not listed on school inventory.
- A 1999 van purchased by the school was converted for personal use without the board's knowledge or authorization.
- A tractor and mower purchased by the school may have been used for personal use. An altered invoice made it appear the school purchased one mower for $12,552.00 when two mowers had been purchased. A $21,550.00 Kubota Tractor was not listed on the school's inventory. The tractor and mower appeared at the school after the audit began.
- The school has not maintained inventory records for assets and has little or no procedures to adequately insure purchased items are received by, and for use of, the school.
- The school paid the superintendent $1,941.37 as reimbursement for equipment rental that was used for his personal use.
- Other questionable expenditures paid by the school include $2,127.00 paid in advance for the superintendent and his wife to attend a conference in Arizona, $254.09 paid for rib-eye steaks for "food for a meeting," $4,800 paid to the superintendent without any supporting documentation.
LACK OF INTERNAL CONTROLS
The audit investigation also found a lack of internal controls at the school, including the failure to present warrants to the board for signatures wherein facsimile signatures were used; the failure to give proper notice to a board member of a special meeting; the failure to take executive session meeting minutes.
- From school years 2002-3 through 2006-7 the school received about $1.4 million in impact aid. "We question whether all of the children claimed are eligible to be counted by the school as federally connected," according to the report.
- The issues addressed by the State Board of Education during a certificate revocation process are separate and in addition to the findings in this report.
Last month, information from a federal affidavit was used to obtain a search warrant for Couch's home and safe deposit box. The FBI descended on Couch's home to serve the warrant, seizing computers, bank statements, credit card statements, and various other documents, according to court records filed in January in federal court in Muskogee.
Couch is currently awaiting a preliminary hearing in the state embezzlement case, which was put on hold in December awaiting the audit results.
