|By Peter Franceschina, South Florida
Sun-SentinelMcClatchy-Tribune Business News
Nov. 9, 2006 - The former controller of the Palm Beach County Convention and Visitors Bureau stole at least $1.5 million over the past three years and left the tourism agency with a $750,000 tax liability, according to information presented Wednesday to the agency's executive committee.
Several of the agency's board members were learning the scope of the theft, which came to light Oct. 23. They had sharp questions for President and CEO Warren "Mac" McLaughlin, who flew to a trade show in London last week in the middle of the scandal. Lee Davis, the vice president of finance who hired the former controller and was her supervisor, also faced questioning.
The board members wanted to know how such a wide-ranging pattern of theft, much of it involving tax dollars, could have gone undetected so long.
They didn't get an answer, other than that appropriate financial controls were not followed.
Developer Llwyd Ecclestone, a board member who is on the executive committee, said Palm Beach County officials were disturbed by the revelations and seeking explanations. He hinted that McLaughlin would take the heat, but McLaughlin doesn't work for the county. The tourism agency is a private entity governed by its board, but it has a contract with the county and is largely funded through the county's hotel bed tax, about $9.6 million this year.
"Deal with the county very gingerly -- they are not a happy camper," said Ecclestone, who was critical of McLaughlin for leaving for London when board members were kept in the dark about the theft. "There's a lot of blame -- they're looking at Mac as CEO."
The details surrounding the theft will be presented this morning to members of the Tourist Development Council, who are appointed by county commissioners. The council oversees the county's contract with the Convention and Visitors Bureau to provide tourism services, but it does not oversee the bureau's finances, said Charles Lehman, executive director of the council.
"I was shocked that this kind of crime could go on undetected for so long," Lehman said. "It's very obvious that some basic accounting rules were not being followed."
The theft was discovered a little more than two weeks ago when bank officials called the bureau about some financial irregularities involving Donna M. Duffer, the bureau's controller, according to a synopsis of events put together by McLaughlin and the bureau's attorney.
When confronted with evidence of forged checks, Duffer allegedly admitted to it, according to the report. She was fired and escorted from the bureau's offices, police were notified and Davis, the finance vice president, began piecing together financial records. West Palm Beach police are investigating. Duffer's attorney said Duffer stole from the bureau to cover for a gambling problem.
By Oct. 29, a Sunday, Davis said he identified $1.4 million in missing funds, but several executive committee members said they were never informed of that figure, or the final figure of $1.55 million missing, until Wednesday's executive committee meeting.
"This is unconscionable in my opinion," said executive committee member Dennis Grady, president of the Chamber of Commerce of the Palm Beaches.
McLaughlin defended the decision not to inform board members about the scope of the theft because a final number had not been established. "We were still in the situation of evaluating it," he said.
The county has hired an outside accounting firm to review the bureau's books, and the county's internal auditor also is investigating. The executive committee has established a working group to monitor the progress, review the bureau's financial controls and recommend changes.
Davis, who submitted his resignation effective in December before the theft came to light, said that Duffer controlled the bureau's checks and bank statements and that he did not review them to make sure they were reconciled. He said he hired Duffer in October 2000 from the firm that audits the bureau's books annually. No irregularities were discovered in those audits, he said.
Lehman said Duffer not only wrote herself checks, but was able to go into the bureau's computer system and make the bank balances appear correct.
"The system of checks and balances wasn't bad, it was just completely ignored," said Lehman, adding the theft would have been difficult for auditors to catch. "She was that good. She was very good and very devious at hiding all of this stuff."
Duffer, 54, was promoted to controller in October 2003, but the theft began earlier, in June, Davis said. Of the $1.5 million that has been identified as missing, about $400,000 of that was fees paid to the bureau by its business members. That account was virtually emptied, Davis said.
One of the ways Duffer was stealing was by not paying the payroll taxes on the bureau's roughly 55 employees, which created an obligation to the IRS of about $750,000, Davis said.
The only background check on Duffer before she was hired was a reference from the bureau's auditing firm, Davis said. No credit or criminal background checks were done, he said. Public records show Duffer has been hit with several small court judgments for unpaid credit card debt, and her bank account was garnished for a time in 2001 to repay one card company.
Duffer's attorney, Sue Foreman, said Duffer developed a gambling problem in recent years and spent heavily using online betting operations. She said Duffer, who is married, didn't know how much money she had stolen.
"I know this whole thing has completely devastated her, believe me," Foreman said. "She has a tremendous amount of remorse. This has basically destroyed their lives. Apparently it was an addiction, a very sad one under these circumstances. They have lost everything."
Staff Writers Sally Apgar and Josh Hafenbrack contributed to this report.
Peter Franceschina can be reached at [email protected] or 561-228-5503.
Copyright (c) 2006, South Florida Sun-Sentinel
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