Connie Jean Smith Pleads Guilty in U.S. Federal Cour
The United States Attorney's Office announced that during a federal court session in Great Falls on August 10, 2010, before U.S. Magistrate Judge Keith Strong, CONNIE JEAN SMITH, a 51-year-old resident of Poplar, pled guilty to theft from an Indian tribal organization and conspiracy to obstruct a federal audit. Sentencing has been set for October 21, 2010. She is currently released on special conditions.
In an Offer of Proof filed by Assistant U.S. Attorney Carl E. Rostad, the government stated it would have proved at trial the following:
In the later part of 2008 and the early part of 2009, Fort Peck Tribal officials retained the services of a Certified Public Accountant to conduct a review of the Credit Program's finances in anticipation of a year-end audit. The accountant quickly identified excessive loans and discovered that the Credit Program employees and some of their relatives had excessive outstanding short term loans, suggesting that tribal monies had been embezzled, misapplied, or converted to the use of tribal and federal employees of the loan program, and their families.
As of June 2009, the total amount of outstanding short term loans was $1,675,088. Approximately 48% of this amount (over $800,000) were loans to Credit Program employees and their families. An investigation by the Department of Interior's Office of Inspector General determined that almost half of all loans were fraudulent.
The Bureau of Indian Affair's (BIA) Branch of Credit maintained oversight of the Fort Peck Credit Program until June 2008, when this Branch was transferred to the Office of Indian Energy and Economic Development (OIEED), Division of Capital Investment, Office of the Assistant Secretary for Indian Affairs. The OIEED transferred administrative oversight of the Fort Peck Credit Program to the Fort Peck Tribes in December 2008 and as of that date the Credit Program was strictly a tribal function. The Fort Peck Credit Program maintains three separate bank accounts with Independence Bank, Poplar, Montana. These bank accounts are dedicated to the Short Term Loan account, the Revolving Credit Fund account and the Entrepreneurial Loan account.
Prior to the transition of oversight authority in December 2008, the Fort Peck Credit Program was staffed with six employees consisting of two federal employees and four subordinate tribal employees. Loan applications were reviewed by a three member Credit Committee who had authority to approve or deny the application pursuant to the Plan of Operations.
From August 12, 1999, to May 29, 2009, hundreds of fraudulent checks exceeding $1 million were issued from the checking accounts of the Fort Peck Tribal Credit Department to a maximum of $2,000, to qualifying tribal members. The checks were the consequence of a fraudulent scheme whereby all six of the Credit Program employees conspired to steal money from the Tribal Credit Department by securing unauthorized loans and direct payments for themselves. These disbursements purport to represent legitimate loans, overtime payments, and miscellaneous reimbursements to the employees when, in fact, the employees had far exceeded the maximum loan amount threshold of $2,000 and their salary was paid separately through the Tribe's Payroll account. In many cases, the employees circumvented the approval authority of the oversight board - the Credit Committee - by falsely representing that approval for the disbursement had been obtained. To further solidify their conspiracy, the employees often split the proceeds of the checks with each other.
The Tribal Credit Program initially operated with $1.5 million provided to them by the Department of the Interior through the U.S. Direct Loan Fund. The Direct Loan Fund was created to promote access to capital and increase economic opportunity of American Indians. The Direct Loan created and funded the tribal re-lending program, whereby loans repaid by tribal members would be used to repay the Direct Loan and ultimately create a reserve sufficient to make the Credit Program a viable operation. The Credit Program repaid their U.S. Direct Loan in 1996, and the funds in their account since that time are tribal monies.
During the period of the Indictment, SMITH was an employee of the Fort Peck Tribal Credit Department, including service as the Accounts Maintenance Clerk responsible for the accurate reconciliation of the program's balance sheets. She began her employment at the Credit Program in November 1999 as an Administrative Clerk. At the time of her dismissal in July 2009, she was responsible for the maintenance of financial reports, bank statements and canceled checks.
Four employees had check signing authority on the Credit Program bank accounts - Toni Greybull (former Supervisory Credit Manager who passed away in March 2008), co-defendants S.P., P.B. and E.R.B., as did the three members of the Credit Committee. In some occasions loan applications were completed. In most cases, no loan documents could be located to support the disbursements to these employees. The conspiracy further evolved to include the issuance of loan checks to family members of the Credit Program employees, including their husbands, siblings and children.
The investigation identified 85 disbursements from the Credit Program checking accounts payable directly to SMITH between August 2002 and February 2009 that total $69,736. Most of these payments were recorded as short term loans purportedly issued in her name (60 short term loans / $61,988). Twenty-five disbursements ($7,748) were recorded as miscellaneous expenses and purport to represent bonuses, accounts receivable reimbursements and overtime payments directly payable to SMITH. The investigation determined that no W-2 was ever issued to SMITH, nor were any of the standard deductions withheld from these payments.
In addition, the investigation identified $28,232 in additional disbursements from the Credit Program as short term loans in the names of her mother and sister. Internal records from the Credit Program revealed 38 short term loans and three miscellaneous checks payable to SMITH's husband in the amount of $37,338.
The scheme was in danger of discovery in September 2007 when the BIA conducted a program review of this Tribal Credit Program. When interviewed, SMITH and the other employees admitted that immediately prior to this internal review they changed the names on their loan files to conceal the short term loans they had issued themselves. The employee names were replaced with the names of deceased tribal members to prevent the discovery of the excessive disbursements during the federal review. Two federal employees - the BIA Regional Credit Officer and another BIA employee (review team) - were assigned to conduct the program review amidst complaints by the Tribal Chairman that the BIA Agency officials refused to disclose information concerning loan recipients to the Tribal Executive Board. The internal review team met with Greybull, S.P. and P.B. during their review. Altered records were provided to the BIA review team which concealed both long term and short term loans obtained by the Credit Program staff. By switching the loan account names, the Credit Program employees were able to reduce the outstanding short term loan balance by $550,000 and thereby concealing their thefts. In addition, the review team was provided with an altered list of long term loans which omitted $112,659 in long term loans obtained by the staff and/or their family members. The investigation further confirmed that SMITH and her husband obtained a long term loan from the Credit Program in the amount of $52,294. Repayment records reflect an outstanding balance of $17,657.
In December 2008, federal oversight of the Tribal Credit Program was discontinued and the two federal employees were reassigned. The mid 2009 year-end audit referred to above was conducted by the Tribe's accountant and prompted the federal investigation by the Office of Inspector General. Both the accountant and the federal investigators found that collection action on the outstanding loans was nearly non-existent. In some instances, loan files contained no accompanying/supporting documentation denoting approval for the issuance of the loan or details on the repayments terms of the loan.
In July 2009, SMITH and the other three tribal employees were interviewed by the Tribe's Chief Financial Officer wherein they admitted to obtaining excessive unauthorized loans from the Credit Program. All four tribal employees, as well as federal employee P.B., subsequently admitted to federal investigators their participation in the fraud scheme and further identified the disbursements to which they were not entitled to receive.
SMITH faces possible penalties of 5 years in prison, a $250,000 fine and at least 3 years supervised release for each charge.
The investigation was conducted by the U.S. Department of the Interior - Inspector General's Office.
A copy of the Offer of Proof can be obtained by contacting Sally Frank at (406) 247-4638.