The missing $500,000: Treasurer’s cashier allegedly confessed to theft, county officials say

PORT ANGELES ­– Eight months ago, when the Clallam County Treasurer’s Office discovered public funds were missing, then-cashier Cathy Betts broke down, cried and confessed to stealing at least $1,200 in public funds, county officials said this week.

The Auditor’s Office has since determined that more than $500,000 in real estate excise taxes were stolen dating back to 2004, Sheriff Bill Benedict and Treasurer Judy Scott said this week in a joint statement.

But the Port Angeles Police Department — the lead investigative agency for the case — has never interviewed Betts, and she has yet to be arrested despite her alleged confession. Scott said evidence points to Betts as the lone culprit.

On May 19 — the same day Betts allegedly confessed — Scott notified the state Auditor’s Office Fraud Division, which immediately began an investigation, and the Port Angeles Police Department, which the next morning sent a detective to the courthouse, Scott said Thursday.

Betts has moved from Port Angeles; authorities said she is not a flight risk.

Authorities are treating the case as felony first-degree theft, a charge that could mean a sentence of one to 10 years in prison and a fine of up to $10,000.

“We do not arrest people based on a confession, absent any other evidence,” Port Angeles Police Chief Terry Gallagher said Thursday.

“Whether we arrest people or not is entirely discretionary.”

Gallagher would not comment on any specifics of the case, saying it remains an open investigation.

Under state law, any known or suspected loss of public funds must be immediately reported by the responsible public agency to the state Auditor’s Office Fraud Division, spokeswoman Mindy Chambers said Thursday.

“The law only applies to the civil part of it, to our investigation,” Chambers said.

“The criminal part is a different ball game, and we don’t get involved in the decision to arrest or prosecute. That is up to the prosecutor’s office and the law enforcement folks.”

Scott defended her actions.

“I have acted responsibly,” she said. “We have notified the proper authorities through this entire procedure.”

Betts was unavailable for comment. Her lawyer, Michelle Ahrens of Port Angeles, said Thursday afternoon through an assistant that she had no comment.

Individuals and title companies pay real estate excise taxes on sale of property, homes and other real estate, and the proceeds are distributed to the cities in which the sales occur.

Betts, paid $45,000 a year for processing Treasurer’s Office transactions, was responsible for processing the excise taxes from payment to distribution.

The Treasurer’s Office was in the process of preparing to convert its computer system last May 19 when it was discovered that those tax records did not balance, Clallam County Administrator Jim Jones and Scott said.

An office employee confronted Betts, Jones said.

“When the person went over it, [the employee] said, ‘What’s this? You are out of balance,'” Jones said.

“[Betts] confessed, broke down and cried.”

What alerted the Treasurer’s Office “was an offage in her daily work,” Scott added in a separate interview.

“That’s when it was discovered. She couldn’t explain it and that’s when she confessed to taking these monies. She confessed to taking about $1,200.”

The same day the bookkeeping anomalies were discovered, Betts was placed on paid leave.

She was placed on unpaid administrative leave June 1.

Betts voluntarily resigned from her position June 22, according to a copy of her resignation letter obtained by Peninsula Daily News and an interview with county Human Resources Director Marge Upham, an account that differed from Benedict’s and Scott’s joint statement that said Betts was “terminated by the county.”

The six-sentence resignation letter does not refer to the missing money and asks that all further communication between Betts and the county take place with Ahrens.

Scott insisted the joint statement was correct.

“It was termination,” she said.

Scott said she expects the Auditor’s Office report to reveal exactly how her office’s records were “manipulated” to make it appear as though nothing was amiss.

She speculated that Betts cashed checks that covered the tax payments by withdrawing money from the office’s cash drawer and doctoring records.

Scott said this week that investigators continue to believe Betts acted alone.

Jones, a former controller, chief financial officer and security officer for First Federal, said it would not be unusual for someone embezzling money to do so on his or her own.

“It’s a heck of a lot easier for a trusted employee to embezzle money when they are all by themselves than when they have to collude with someone else,” Jones said.

“It’s much easier, and they are much more likely to get away with it for a longer period of time.”

The loss is covered by the county’s risk-pool insurance, which includes a $10,000 deductible, but the county’s insurance rates will undoubtedly increase as a result of the payout.

The county then must distribute five years of real estate excise tax payments the county owes the cities of Port Angeles, Sequim and Forks.

A Treasurer’s Office accountant now has greater oversight over the transactions, Scott said.

In addition, “dual controls” are in place under which more than one office employee follows those transactions from the time a payment is made to when a municipality receives it.

The Auditor’s Office report will be made public and referred to the state Attorney General’s Office for further review by Jan. 31.

That report “hasn’t been written yet,” Chambers said Thursday.

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Senior staff writer Paul Gottlieb can be reached at 360-417-3536 or at paul.gottlieb@peninsuladailynews.com.

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