News and Press Releases

Former university president indicted for embezzling $1.5 million

FOR IMMEDIATE RELEASE
March 31, 2011

KANSAS CITY, Mo. – Beth Phillips, United States Attorney for the Western District of Missouri, announced today that the former president and CEO of Kansas City University of Medicine and Biosciences (KCUMB) has been indicted by a federal grand jury for embezzling more than $1.5 million from the university. The alleged fraud scheme included unauthorized compensation payments as well as reimbursements from the university for personal expenses and fraudulent charitable contributions. The indictment also charges her with tax violations and money laundering.

            Karen L. Pletz, 63, of Kansas City, Mo., was charged in a 24-count indictment that was returned under seal by a federal grand jury in Kansas City, Mo., on Wednesday, March 30. Pletz was the president and CEO of KCUMB and was a member of the board of trustees of KCUMB from 1995 until December 2009. The federal indictment was unsealed and made public today following Pletz’s initial court appearance.

            The federal indictment describes a scheme in which Pletz embezzled from KCUMB by wrongfully receiving $1,525,791 in payments from the osteopathic medicine and life sciences school.

The federal indictment charges Pletz with 16 counts of stealing from the university, one count of attempting to interfere with the administration of internal revenue, three counts of making false statements on tax returns and four counts of money laundering.

Unauthorized Pay: $1,409,500

            The federal indictment alleges that Pletz wrongfully obtained $1,409,500 from KCUMB in unauthorized additional pay for herself from October 2002 to December 2009. Pletz allegedly caused minutes of KCUMB Executive Committee meetings to be created when the meetings did not actually occur. Minutes for nine meetings were allegedly created, at which the only business ever reported was to purportedly authorize payments to Pletz. These payments were sometimes referred to as “leadership stipends” or “leadership compensation,” the indictment says, and were usually in the form of $65,000 lump sum payments.

Travel And Entertainment Reimbursements: $50,291

            The federal indictment alleges that Pletz submitted numerous fraudulent vouchers to receive reimbursements from KCUMB. These vouchers allegedly claimed business purposes for expenditures, when in reality the expenditures were for her personal travel and entertainment.

The indictment alleges that in 2007 Pletz received reimbursements for personal travel to Harbor Beach Marriott Resort in Fort Lauderdale, Fla., to visit her parents; to Four Seasons Hotel in Jackson Hole, Wyo., to visit a friend; and to Wild Dunes Resort, Isle of Palms in Charleston, S.C., to visit high school friends. Pletz allegedly received an $11,846 reimbursement for items purchased at a Vera Wang boutique at Halekulani Hotel in Honolulu, Hawaii. Pletz allegedly did not declare the $50,291 total income she received from KCUMB as a result of these reimbursements on her federal income tax returns.

According to the indictment, Pletz received a total of $1,074,917 in unreported income from disallowed travel and entertainment claims, which led to a tax loss to the United States of at least $280,000.

Charitable Reimbursements: $65,000

            The federal indictment alleges that Pletz signed and filed tax returns for 2003 through 2006 in which she falsely claimed itemized deductions for charitable contributions that she did not make. In reality, the indictment says, KCUMB – not Pletz – actually made the contributions. According to the indictment, Pletz claimed $565,628 worth of fraudulent charitable deductions to such organizations as the United Way, Lyric Opera, the Deron Cherry Foundation, Boys and Girls Clubs and Truman Medical Center.

            Among those fraudulent charitable contributions, the indictment says, was $65,000 in contributions to Benedictine College in Atchinson, Kan., actually made by KCUMB. Pletz allegedly received reimbursements from KCUMB for those contributions over a three-year period, but failed to report the $65,000 as income.

In February 2004, the indictment says, Pletz pledged $20,000 to Benedictine, and requested that Benedictine use her home address for all correspondence regarding the gift. In March 2004, Pletz allegedly submitted to KCUMB a claim for reimbursement for $20,000, attaching to the claim a copy of her personal check in the amount of $20,000, made payable to Benedictine College. KCUMB paid Pletz $20,000. However, according to the indictment, Benedictine never received Pletz’s personal check and the check never cleared her bank account. In June 2004, at Pletz’s direction, Benedictine charged Pletz’s KCUMB credit card $10,000 in two installments. Pletz allegedly claimed this $20,000 donation as a charitable contribution deduction on her 2004 tax return, but did not claim the $20,000 income she received from the fraudulent reimbursement. This scheme was repeated in 2005 with another $20,000 fraudulent claim for reimbursement for KCUMB’s contribution to Benedictine, the indictment says, and in 2006 with a $25,000 fraudulent claim for reimbursement for KCUMB’s contribution to the college.

Money Laundering

            The indictment charges Pletz with four counts of money laundering related to monetary transactions in criminally derived property, with the funds having been derived from an unlawful activity. On four separate occasions, Pletz allegedly transferred funds obtained by theft from her bank account to American Express or, on one occasion, to an individual for the purchase of antiques.

Forfeiture

            The indictment also contains a forfeiture allegation, which would require Pletz to forfeit to the government any property derived from the proceeds of the alleged offenses, including a 2002 Lexus convertible and $39,337 from her bank account, which were seized by federal agents on Oct. 7, 2010, when they executed seizure warrants under a federal civil forfeiture, as well as an $830,000 money judgment and Pletz’s condominium on the Plaza.

            Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

            This case is being prosecuted by Assistant U.S. Attorneys Kate Mahoney and Linda Parker Marshall. It was investigated by the Federal Bureau of Investigation, IRS-Criminal Investigation and the U.S. Department of Education, Office of Inspector General -- Investigations.

(Download Indictment )

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