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HomeMy WebLinkAbout1130 ColellaIn Re: Maureen Colella STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 File Docket: X -ref: Date Decided: Date Mailed: Before: Daneen E. Reese, Chair Austin M. Lee, Vice Chair Louis W. Fryman John J. Bolger Frank M. Brown 97- 050 -C2 Order No.1130 7/13/99 7/20/99 This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding a possible violation of the Public Official and Employee Ethics Law, Act 9 of 1989, P.L. 26, 65 P.S. §401 gt seg. , by the above= named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegation(s). Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." An Answer was filed and a hearing was held. The record is complete. Effective December 15, 1998, Act 9 of 1989 was replaced by the Public Official and . Employee Ethics Act ( "Ethics Act "), Act 93 of 1998, Chapter 11, 65 Pa.C.S. §1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending matters under that Act. This adjudication of the State Ethics Commission is issued under Act 93 of 1998 and will be made available as a public document thirty days after the mailing date noted above. However, reconsideration may be requested. Any reconsideration request must be received at this Commission within thirty days of the mailing date and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §21.29(b). A request for reconsideration will not affect the finality of this adjudication but will defer its public release pending action on the request by the Commission. The files in this case will remain confidential in accordance with the Ethics Act. Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor subject to a fine of not more than $ 1,000 or imprisonment for not more than one year. Confidentiality does not preclude discussing this case with an attorney at law. Colell %, 97- 050 -C2 Page 2 I. ALLEGATION: Maureen ColeIla, a public official /public employee in her capacity as a Tax Collector for Homestead Borough, Allegheny County, and in her capacity as a Tax Collector for Steel Valley School District, Allegheny County, violated Section 1103(a) of the Ethics Act when she diverted tax payments received in her capacities as tax collector for her personal control and by converting tax payments received in her official capacities to her personal use. H. FINDINGS: A. Pleadings 1. On May 4, 1998, a letter was forwarded to Maureen Colella, by the Executive Director of the State Ethics Commission informing her of a modification to the previously issued notice of investigation. a. Said letter was forwarded by certified mail, no. Z 041 456 141. 2. Periodic notice letters were forwarded to Maureen ColeIla in accordance with the provisions of the Ethics Law advising her of the general status of the investigation. 3. The Investigative Complaint was mailed to the Respondent on October 7, 1998. 4. Maureen Colella (Nee Sharbaugh) served as the tax collector for Homestead Borough, Allegheny County, Pennsylvania. a. She served in this position since approximately 1984. b. Colella's office was originally located in the Homestead Borough Municipal Building at 1705 Maple Street, Homestead, Pennsylvania. 5. As the Homestead Borough Tax Collector, ColeIla was responsible for the collection of real estate taxes, business privilege taxes and mercantile fees. 6. ColeIla was also responsible for the collection of taxes due the Steel Valley School District. a. These taxes included real estate taxes for property in Homestead Borough due the Steel Valley School District. 7. Municipal tax collectors utilize a tax duplicate to effectuate the collection of taxes. 8. A tax duplicate is an official list of all properties and persons taxable in a specific year. a. The duplicate indicates the amount of tax due and contains places for the recordation of payments of taxes and disposition of unpaid taxes. 9. The taxing district must make settlement with the tax collector for the current year's duplicate before a duplicate of any succeeding year can be delivered to the tax collector. Cole 97- 050 -C2 Page 3 10. Tax collectors are required to keep accurate records and accounts of all funds collected as taxes. a. The tax collector must record each tax payment on the duplicate by marking such as paid with the amount and the date opposite the taxpayer's name. b. The report must be filed within sixty (60) days after the close of each calendar year and must include the following information: 1. Number of taxables; 2. Salary received as tax collector and as treasurer, if applicable; 3. Compensation received in dollars; 4. Total gross amount of compensation received; 5. Itemized list of expenses payable directly by taxing districts. 11. The tax notice issued by the tax collector must contain the following information. a. Date of the tax notice. b. Rate or rates of taxation. c. Valuation and identification of the real property of the taxpayer. d. The total amount of taxes the taxpayer owes for the current year. e. A statement the taxes are due and payable. f. A request for payment of the taxes. g. Statement of the time and place where taxes can be paid. h. Dates for discount, face and penalty periods. 12. Jordan Tax Service would then deliver the tax blotter to the tax collector who would make any changes, exonerations, additions or amendments in addresses to the county blotter, as instructed by the Allegheny County Property Assessment Board. a. Upon reassessing property values in the borough of Homestead, the Allegheny County Property Assessment Board would forward official change orders listing said property reassessments to Colella. 13. As part of preparing the tax duplicate for Homestead Borough, Jordan Tax Services, Incorporated would also prepare a recapitulation of the real estate taxes due the Borough of Homestead for the year in question. That recapitulation would include the real estate valuation as certified by the county assessor, the mileage rate, the tax at face value due the Homestead Borough Tax Collector, a discount of two percent (2 %) on all taxes levied, and a net tax due Homestead Borough based on the ColeIla, 97- 050 -C2 Page 4 assumption that every taxpayer would take advantage of the two percent (2 %) discount. a. The recapitulation was provided to the tax collector for each year that Jordan Tax Services was on contract with the borough. 14. The County Property Assessment Board votes to certify the assessed valuation for each year for the particular municipality in question. 15. As tax collector, Maureen ColeIla was responsible for issuing tax notices to residents of Homestead Borough and was also responsible for the receipt of tax payments. 16. Residents of Homestead Borough paid taxes both by the United States Postal Service System as well as in person. a. Tax payments were made both by check and in cash. 17. During Maureen Sharbaugh Cole!la's term as tax collector, Homestead Borough's tax collection rate decreased from 95% in 1988 to 70% in 1993. 18. Tomasic's reports also indicated that the 1995 monthly deposit reports submitted by ColeIla to the borough were subsequently revised by ColeIla in 1996. 19. Tomasic prepared a similar annual audit and financial report for the year 1996. 20. Records of Integra Bank indicate that account number 3410021475 is a personal account in the name of Joseph A. ColeIla and Maureen Sharbaugh, 238 18th Avenue, Homestead, Pennsylvania. a. Joseph A. ColeIla is the spouse of Maureen Sharbaugh ColeIla. 21. Account number 3410021475 is the personal account of Joseph A: ColeIla and Maureen Sharbaugh at the Integra Bank, Pittsburgh, Pennsylvania. 22. Maureen Sharbaugh ColeIla, as previously noted, also served as the tax collector for the Steel Valley School District. a. Steel Valley School District utilizes the services of three (3) different tax collectors for the various regions that comprise the school district which include Homestead, West Homestead and Munhall. 23. Maureen ColeIla maintained monthly handwritten deposit reports which consisted of the names and amount for each taxpayer who had paid their taxes in the Steel Valley School District. 24. In addition to serving as the Steel Valley School District and Homestead Borough Tax Collector, Maureen ColeIla was employed by the following entities during the noted years: a. Century III Chevrolet, January 1, 1994 through March 15, 1996 CoIeIIa, 97- 050 -C2 Page 5 b. Monroeville Dodge, February 1996 through September 1996. 25. In July of 1995, Maureen and Joseph ColeIla entered into an agreement to purchase a time share unit in Sarasota, Florida. a. The time share unit was located at the Lime Tree Beach Resort in Sarasota, Florida. b. The CoIeIlas entered into an agreement on July 8, 1995, to purchase unit no. 1 15A for the forty -first (41st) week of the year. c. Said purchase would allow the CoIeIlas to utilize this particular condominium unit on the noted week for each of the years after the transaction occurred. 26. The total purchase price for the condominium time share unit was $3,000. a. The CoIeIlas were also responsible for paying an annual common expense assessment of $335.28 which was subject to increase from time to time. 27. The funds that were utilized by CoIeIIa to purchase the time share unit in Sarasota, Florida, did not flow through any of the various bank accounts utilized by the CoIeIlas. a. Said time share unit was purchased with cash. B. Testimony 28. Lynnette Mariner is the Secretary for Homestead Borough (Borough). a. Mariner is responsible for records, billings, general payments, meeting minutes and personnel matters. b. Mariner was Tax Collector in 1997 for a one year period after ColeIla left. c. While Colella's tax collection office was in the Borough building, ColeIla had a desk, filing cabinets, and a safe. (1) Only CoIeIIa had the combination to the tax collector's safe. (2) ColeIla was in the tax collector's office two or three days a week for certain hours. (3) In mid 1996, CoIeIIa moved the tax collector's office from the Borough building to her house. d. The tax duplicate is a book which lists all of the taxpayers and the tax amounts. (1) The listing is alphabetical for the taxpayers. (2) Businesses are listed separately. Cole Ila, 97- 050 -C2 Page 6 (3) The tax duplicate was prepared by Jordan Tax Service and was given to the tax collector or placed on her desk if she were not present. (4) The tax duplicate is kept in the tax collector's safe in Homestead Borough. (5) The tax duplicate is used to manually record tax payments which is done by the tax collector. (6) In mid '1996 there was a general awareness that the 1995 tax duplicate was missing. e. When persons paid their taxes to Cole Ila, she gave them a receipt. (1) Checks or cash would be placed by ColeIla in a cash drawer. (2) Deposits were made almost daily by ColeIla. f. When persons wanted to pay their taxes and ColeIla was not present, checks would be taken by Borough personnel and a borough receipt would be given. (1) The payments would be inserted into an envelope labeled as either Cole Ila or tax payment and placed on Colella's desk or in the borough safe. g. Cash payments for taxes would not be taken when ColeIla was absent. h. When Mariner was Tax Collector in 1997, her collection rate was about 85 %. (1) Payments in cash are marked with an "X" in the tax duplicate. _ (2) Mariner was Tax Collector for both the Borough and Steel Valley School District (District). I. Mariner, CoIeIIa, and Council President had keys to the Borough office. j. After CoIeIIa moved the tax office into her house, persons who came into the Borough building to pay taxes were given directions to ColeIla's house. (1) Any tax payments received through the mail at the Borough were forwarded to Cole[la's -house. 29. William Linnet, Jr. is the President and owner of Jordan Tax Service. a. Jordan Tax Service is a current and delinquent tax collection agency. b. Current real estate tax bills are prepared by Jordan Tax Service and submitted to the tax collector. Colella, 97- 050 -C2 Page 7 9. (1) Jordan picks up a blotter from the County Assessor's Office which contains assessments of all properties in the governmental body. (2) The blotter is delivered to the tax collector to make any change orders. (3) After the blotter with change orders is picked up from the tax collector, Jordan prints the tax bills. (a) There are two printings, one is the tax duplicate and the second is the counterfoil which is an extra copy for the tax office. (b) The individual tax bills are bundled and delivered to the tax collector for stuffing into envelopes. (I) A tax bill is a two -part document, the first part is the original bill and the second part is a duplicate which gets bound with all duplicates to form the tax duplicate. c. When the tax duplicate is bound, Linnet certifies to the total amount of the tax bills and delivers the tax duplicate to the tax collector. d. Jordan has tax receipts printed which would be for individual persons who pay their taxes together with office copies and a counterfoil. e. Linnet did a certification for the 1996 tax duplicate for Homestead Borough. (1) The Borough Auditor requested a copy of Linnet's certification /recapitulation. (2) Linnet received from the Auditor a different copy of the 1996 certification /recapitulation. (a) The County assessment was reduced by one million dollars. (I) This copy would indicate that there were less taxes to collect. (b) When Linnet's certification left his office, it had the higher assessed valuation. f. Tax collectors have custody of tax duplicates. The tax duplicates books may not have been delivered personally to ColeIla but someone in the municipal office. h. When Jordan delivers a tax duplicate, and a tax collector is not present to accept it, the tax duplicate is given to a secretary to give to the tax collector. Colella, 97- 050 -C2 Page 8 30. Leslie Rowlands is an accountant employed by Jordan Tax Service. a. Rowlands personally delivered the tax duplicate to . Homestead Borough in 1996. 31. Matthew Vilcek is a former Special Investigator for the State Ethics Commission. a. Vilcek is a graduate of Indiana University with a degree in business administration, major in accounting. b. Vilcek is a Certified Public Accountant since September 15, 1997. c. Vilcek was the Investigator in charge of the ColeIta investigation. (1) The investigative goal was to determine whether any monies were missing from Homestead Borough or Steel Valley School District. (2) The investigation encompassed the years 1994 through 1996. d. Vilcek determined the amount of taxes collected by taking the total assessments times the mileage rate decreased by change orders and decreased by the amount on the delinquency list to get a remainder. (1) The above remainder was compared to deposits of tax payments made by ColeIta. (a) The rule of conservatism was used as to deposits made by Colella. (I) For tax payments in the discount period, 2% was added to increase the amount of deposit. (ii) For tax payments in the penalty period, the penalty was not deducted. (b) The remainder Tess deposits would indicate a loss of funds to the Homestead Borough. (I) Exhibits 49 through 51 are loss calculations for Homestead Borough for 1994 through 1996. (2) For 1994, the total face value of real estate taxes was $406,416.24 Tess delinquencies of $61,943 with remainder of $344,473.24. (a) Collections were $302,748.60. (b) The loss to the Borough was $41,724.64. (3) The loss to the Borough for 1995 was $44,156.90. (4) The loss to the Borough for 1996 was $18,57[71.43. Colella, 97- 050 -C2 Page 9 q. e. Vilcek did a transactional history of the accounts in the name of Colella /Sharbaugh (maiden name), or her mother or her spouse as set forth in Exhibit 59. f. Exhibit 47 is a chronological listing and Exhibit 48 is a category listing of financial transactions by Colella from January 2, 1994. A check in the amount of $1,176 from Prudential Realty Company dated May 3, 1995 was deposited into the personal account of Cole Ila and not subsequently disbursed to the Borough. h. A check in the amount of $846.72 of the Standard Mortgage Company was deposited into the personal account of ColeIla and not subsequently disbursed to the Borough. I. Two checks payable to the Steel Valley School District, one from Prudential Realty Company in the amount of $2,376.50 and a second from Standard Mortgage in the amount of $1,711.08 did not go into Colella's personal account. g. j. The only disbursement by Colella to the Borough or the District were personal in nature and not related to a tax collector function. k. Cole Ila or her spouse deposited their income into personal accounts. I. The altered recapitulation for 1996, which understates the valuation by 1 million dollars, would result in no loss on paper to Homestead Borough. m. For the three year period, 1994 through 1996, ColeIla deposited $38,946.35 in cash into her personal accounts. n. The total income earned by Colella and her spouse for 1994 through 1996, net of tax, was $73,658.72, as confirmed by income tax returns. (1) The total deposits into the ColeIlas' personal accounts for that three year period was $128,832.47. (a) There is a disparity of $55,174 between the income earned by the ColeIlas and the above deposits. o. ColeIla and her spouse purchased a time share, with $300 cash deposit and a balance by a cashier's check, purchased with cash, of $2,706. p. For the taxes paid to the Borough for 1997, with Lynette Mariner as Tax Collector, $17,923.52 was paid in cash. During the relevant time period, Robert Tomasic did an audit as to the Borough and attempted to reconcile discrepancies as to tax payments. (1) Unreconcilable differences caused Tomasic to question ColeIla. ColeIla, 97- 050 -C2 Page 10 (a) ColeIla then issued a revised report that she collected more taxes but such figures could not be reconciled by Tomasic with bank statements. r. Vilcek and State Ethics Commission Special Investigator Rodney George interviewed ColeIla on March 3, 1998. (1) When Colella was shown how two checks from Prudential Realty Company and Standard Mortgage were deposited into her personal account with no corresponding checks to the Borough/ District, Colella admitted she used the funds to pay for her personal obligations. (2) When CoIeIIa was asked about a finding by a CPA firm that approximately $38,000 was missing from the school district for 1995 and 1996, CoIeIIa admitted using $100 - $150 per week of tax payments for purchasing personal items such as groceries. (a) The tax payments were used directly as opposed to being deposited and then expended. (b) With approximately $38,000 missing and thousands of dollars in cash deposited into her personal accounts, CoIeIIa admitted: " If it's [tax payments] missing, then I must have took it." (3) When Colella was asked about Tomasic's audit, CoIeIIa admitted she altered records to conceal her actions. (a) An example of an alteration would be Colella changing a person who paid his /her taxes from a delinquent to a late _ payor of taxes. (4) The interview of CoIeIIa was not recorded on tape. (5) The tax duplicates were not used by Vilcek because CoIeIIa told him that she altered those records. (6) CoIeIIa as tax collector made deposits of some tax payments. 32. Robert Caruso is the Deputy Executive Director and Director of Investigations of the State Ethics Commission. a. Caruso supervises the daily activities of the Investigative Division of the Commission. b. The preliminary inquiry as to Colella began on August 22, 1997. c. A full investigation was approved by the Executive Director on October 15, 1997. d. Two ninety day extensions were requested and authorized by the Commission. ColeIla, 97- 050 -C2 Page 11 e. Caruso reviewed Cole!la's charge accounts with Kaufman's, J.C. Penney, Bank One, Lazarus, Discover, and Fashion Bug Plus to determine how payments were made to the accounts. (1) Some credit payments have corresponding debits from a ColeIla bank account; other payments were not made from a Cole Ila bank account. (2) $ 14,488 was paid on charge accounts of ColeIla that did not emanate from any of Cole!la's bank accounts. (a) On some days, such as March 28, 1994 and January 26, 1995, ColeIla made multiple payments to various charge card accounts. (3) Caruso reviewed ATM transactions of ColeIla from January, 1994 to December, 1996. (a) After deducting point of service and credit card purchases, the balance would be cash withdrawals which totaled $4,595. (b) The cash withdrawals did not correlate in time or amount with credit card payments. 33. Rodney V. George is a former Special Investigator for the State Ethics Commission. a. George accompanied Vilcek to interview Cole Ila. b. ColeIla was questioned about two checks for tax payments that went into her personal account. (1) ColeIla stated that she would take tax payments and then split up the tax payments by issuing two checks to the school district and borough. (2) When ColeIla was questioned as to the two checks, where no corresponding checks were drawn from her account, ColeIla admitted using the checks for personal use. c. As to tax payments, ColeIla admitted: "If it's missing, then I must have took it." C. Stipulations If the following persons identified in Findings 34 -41 were called as witnesses, they would testify as follows: 34. Graig Mruzak is the Comptroller of Prudential Realty Company. a. Exhibit 11, Page 1, is a check in the amount of $1,176 issued by Prudential Realty Company to Maureen C. Sharbaugh, tax collector, with the noted address on the check on or about the date of 5/3/95 in payment of real estate taxes that are evidenced on Exhibit 11, ColeIla, 97- 050 -C2 Page 12 Page 3, to Homestead Borough for property located in Homestead Borough. (1) The property is identified on the receipt as Lot 130, Block K- 239. The statement date is the discount. The statement date is March 16th, '95. b. A separate check was issued on September 6th, 1995, in the amount of $2,376.50; that check was issued for payment of real estate taxes on the same property, 130/K -239 - that's the lot and block number - that was located in Homestead Borough in payment of the Steel Valley School District taxes and that the records of the exhibit, Page 11 -3, speak for themselves in terms of the amounts, dates received. c. One check, Exhibit 11, page 1, in the amount of $1,176 was deposited into Maureen Cole!la's account, an account owned and possessed by her. d. Specific payments, one to the Borough for the taxes and one to the Steel Valley School District, were for the taxes on the same property. 35. Michael Foreman is an employee of the Pennsylvania Department of Community and Economic Development formerly known as the Department of Community Affairs. a. He was primarily involved in the preparation of a document called The Tax Collector's Manual, which is contained in the record as Exhibit 38, which is also contained as part of the Maher Duessel audit file which is Exhibit .60. b. Municipal tax collectors utilize a tax duplicate to effectuate the collection of taxes. c. A tax duplicate is an official list of all properties and persons taxable in a specific year. (1) The duplicate indicates the amount of tax due and contains places for the recordation of payments of taxes and disposition of unpaid taxes. d. The tax duplicate is prepared by the taxing district. (1) The duplicate indicates the amount of tax due and contains places for the recordation of payments of taxes and disposition of unpaid taxes. e. The taxing district must make settlement with the tax collector for the current year's duplicate before a duplicate of any succeeding year can be delivered to the tax collector. f. Tax collectors are required to keep accurate records and accounts of all funds collected as taxes. Colella, 97- 050 -C2 Page 13 (2) The report is to list all taxes collected for the taxing district for the reported period. Said report is also to list the names of the taxpayers and amounts collected from each, including any discounts and penalties and the report must carry a total of all taxes collected for the reporting period. Each tax collector must file an annual report with the Department of Community Affairs, and the Clerk of Court of Common Pleas. g. (1) The tax collector must record each tax payment on the duplicate by marking such as paid with the amount and the date opposite the taxpayers name. A tax collector is required to make periodic reports to the taxing district such being due by the tenth day of each month for the previous month's activities. (3) The report must be filed within sixty (60) days after the close of each calendar year and must include the following information: (a) Number of taxables. (b) Total amount of taxes of each type appearing on duplicates. (c) Amount of taxes of each type collected, separately for current and delinquent taxes. (d) Amount of money handled as treasurer of a jurisdiction, if applicable. (e) Salary received as tax collector and as treasurer, if applicable. (f) Percentage of commission received. (g) Compensation received in dollars. (h) Total gross amount of compensation received. (I) Itemized list of expenses payable out of gross compensation as tax collector and treasurer. (j) Itemized list of expenses payable directly by taxing districts. The tax notice issued by the tax collector must contain the following information. (1) Date of the tax notice. (2) Rate or rates of taxation. (3) Valuation and identification of the real property of the taxpayer. (4) Occupation valuation of the taxpayer, if any. (5) The several amounts of real and personal property and personal taxes the taxpayer is billed for the current year. ColeIla, 97- 050 -C2 Page 14 (6) The total amount of taxes the taxpayer owes for the current year. (7) A statement [of] taxes - -- due and payable. (8) A request for payment of the taxes. (9) Statement of the time and place where taxes can be paid. (10) Dates for discount, face and penalty periods. h. The local tax collection law establishes the following discount and penalty schedule: (1) Discount: at least 2% if the whole amount of the tax is paid within two months after the date of the tax notice. (2) Payment at face: the full amount of tax if paid during the two months following the end of the discount period. (3) Penalty: up to 10% added to the face amount for all taxes not paid within four months after the date of the tax notice. These procedures are the generally accepted and required process in the operation of a local tax collector's office in the Commonwealth of Pennsylvania. j. He would have no knowledge as to whether the Respondent received or reviewed that manual. 36. John Yaklich serves as the business manager for the Steel Valley School District. a. The Steel Valley School District uses three tax collectors for collecting taxes in the three municipalities that comprise the School District. These municipalities are Homestead Borough, West Homestead, and Munhall. b. Maureen ColeIla is the tax collector for Homestead Borough property. Each tax collector deposits tax remittances into the School District's general fund. She was the tax collector during the times relevant to the proceedings before this Commission. c. Each tax collector deposits tax remittances into the School District's general fund and is to provide the business office with deposit tickets to evidence the amounts deposited. d. Jordan Tax Service provides the Steel Valley School District with printed tax bills and statements and a tax duplicate and receipts on an annual basis. The process used for doing such is the same as used for the Borough taxes as testified by Linnert. e. The taxes were collected by ColeIla at her office in the Homestead Borough facility when it was located there and then at her home after she moved her office to that location. Colella, 97- 050 -C2 Page 15 f. Colella maintained the tax records for the Steel Valley School District in her position. Steel Valley School District employs the firm of Maher Duessel to conduct the annual general purpose financial statement audits. The School District would generally attempt to reconcile the tax collector's accounts in addition to what Maher Duessel would do. h. Yaklich personally attempted to compare paid lists; that is, lists of taxpayers who had paid their taxes, which had been submitted by Colella on a monthly basis with the deposit reports and receipts that she also furnished. J• g. I. He was unable to do so and developed what he called a discrepancy list, which was a list of individuals who were neither on the paid list nor the delinquency list. These were individuals for whom he had no accounting. Colella did not respond to Yaklich's attempts to obtain explanations regarding the individuals on the discrepancy list. Colella stopped submitting the paid lists in December of 1996. k. The School District was able to reconcile the accounts for the other two tax collectors who served the District and found no discrepancy or missing funds in those accounts. 37. Kevin O'Neill is an employee of the Standard Mortgage Corporation located in Atlanta, Georgia. a. The Standard Mortgage Corporation was responsible for paying the real estate taxes in Homestead Borough and in the Steel Valley School District on behalf of property owners Alvin J. and Geraldine Barone for the following property - Lot /Block 130 -K -268. b. Exhibit 12, page 1 through page 5, which are Standard Mortgage Company checks issued to the Steel Valley School. District, which is page 1 of the exhibit, in the amount of $ 1,711.08 for the payment of property taxes on the previously identified lot and block parcel. c. Exhibit 12, page 2, is a separate check paid for the same tax year in the amount of $846.72, said check being dated 5/31/95, for the payment of taxes to Homestead Borough for property taxes on the same lot and block and property number for the same tax year. d. These two checks evidenced separate payments as required by law for the property in Homestead Borough, one payment being to Steel Valley School District as a separate payment identified on page 1, the second payment being to Homestead Borough as a separate payment for the same year being identified on page 2. e. Pages 3 and 4 of the Exhibit 12 are internal documents of the Standard Mortgage Company evidencing their issuance of these checks for the lot and block and parcel number identified for the same tax year. Colella, 97- 050 -C2 Page 16 f. Page 5 is a copy of the receipt identifying the lot, block, and parcel number which evidences that a separate payment was made to the Steel Valley School District for the payment of the taxes on the noted property for the year in question. (1) The very last entry identified as Alvin J. and Geraldine Barone. The amount is listed, and that amount corresponds with $1,711.08 to the check paid separately to the Steel Valley School District. 38. Robert J. Tomasic is a certified public accountant from Pittsburgh, Pennsylvania. a. For the years 1993 through 1996 inclusive, Robert J. Tomasic was engaged by Homestead Borough to prepare an independent audit of the financial statements and condition of Homestead Borough. (1) As a result of said engagement, Tomasic, in each of the noted years, prepared an annual audit and financial report. b. In the annual audit and financial report prepared by Tomasic for the year 1995, the Independent Auditor's Report issued to the mayor and the Homestead Borough Council, noted that because of the inadequacy of the real estate tax collector's records, he was unable to form an opinion regarding the amount of real estate taxes collected and reported in the financial statements. c. The annual report prepared by Tomasic for the year 1995 noted that the monthly reports submitted by the real estate tax collector for the Borough did not list the names of taxpayers and the amounts collected from each. (1) Tomasic further noted that: the real estate tax duplicate for 1995, which was to be kept by the tax collector, was not available for the audit; the monthly report submitted by the tax collector did not list the names of the taxpayers and amounts collected from each; the tax collector did not provide all of the tax receipts contained in the tax duplicates; and the number of tax receipts actually provided was 814 d. Tomasic's reports also indicated that the 1995 monthly deposit reports submitted by Colella to the Borough were subsequently revised by ColeIla in 1996. (1) The revised submission indicated as follows: 1995 Taxes collected at face 1995 Taxes unpaid at face 1994 Taxes collected in 1995 Original Reports_ $285,186 $115,885 $ 7,404 Revised Reports $245,853 $155,218 $ 69,257 (2) Cole!la's revisions to her 1995 deposit reports were not able to be reconciled to bank statements by Tomasic. ColeIla, 97- 050 -C2 Page 17 e. Because of the missing documentation, Tomasic was unable to form an opinion as to whether all of the monies owed the Borough for real estate taxes were collected and paid to the Borough. f. Tomasic prepared a similar annual audit and financial report for the year 1996. (1) For 1996, Tomasic, once again, noted that due to the inadequacy of real estate tax collector's records, he was unable to express an opinion regarding the amount of real estate taxes collected as reported in the financial statements. (2) Tomasic noted that the monthly reports submitted by the real estate tax collector did not list the names of taxpayers and amounts collected from each. (3) Tomasic further noted that the prior year's duplicate must be settled prior to the issuance of the next year's duplicate, per the Pennsylvania Local Tax Collection Law. There was no documentation to show that this procedure was followed and the 1996 duplicate was issued regardless of the failure to document that the 1995 duplicate was settled. Based upon the low tax collection rate reported by ColeIla and the missing documentation evidenced in the annual audit reports, a more in -depth review of Colella's accounts was conducted. h. Exhibit 17 are annual audit and financial reports for Homestead Borough prepared by him for the years 1995 and 1996, which are in the record. g. I. As part of his audit work during these years he reviewed and compared and reconciled deposits made into the bank for Homestead Borough regarding taxes collected with the information provided by ColeIla and observed that most of the deposits made into the bank accounts for those years was made by check as opposed to cash. j. This was different from other years where he audited the Borough and found that there were more cash deposits being made into the accounts than during these two years. 39. Elizabeth Krisher is a graduate of the University of Pittsburgh, 1985, with a bachelor's in economics, summa cum laude. She passed the C.P.A. exam in August of 1985. a. Her first employment was with Ernst and Young, where she remained for six years. She thereafter became employed with the firm of Maher Duessel in 1991. Maher Duessel's primary engagements are with governmental entities. She has worked on audits of nonprofit corporations as well as governmental entities and Maher Duessel specializes in government at the local level. (1) Ninety percent of Maher Duessel's clients are local government entities. She has performed audits based upon agreed upon Colella, 97- 050 -C2 Page 18 procedures, as well as annual audits, statements of financial condition, or general purpose financial statements. b. She is familiar with and has worked with documents that are typically found at the local governmental level, including general ledgers, receipt and disbursement journals, tax duplicates, tax receipts, bank records, payroll registers, and ledgers. c. Maher Duessel was the firm that conducted the audit of the Steel Valley School District general purpose financial statements from at least 1991, the time that Krisher became employed with that firm. d. As part of conducting the audit of the general financial statement, Maher Duessel would review limited aspects of the tax collector's office. e. This review would include all three tax collectors, those being Munhall, Homestead, and West Homestead, each year that Maher Duessel was engaged to do the general audit of the financial statement. f. For the year 1995, Maher Duessel was engaged to do this audit but they were also engaged to specifically review the three tax collectors' offices for the 1995 tax levy year and issue an opinion statement regarding those levies. For that year this would result in the issuance of four separate reports. Maher Duessel did do the general purpose financial statement as well as the reports for the two tax collectors' offices in Munhall and West Homestead without finding any irregularities or unreconciled differences or missing money. h. They were unable to do the audit for the tax collector's office in Homestead Borough, Maureen Colella's office, because they were unable to get together with Cole Ila to obtain the records and to interview her. Cole Ila would not return calls and would not see her. This took place primarily during the summer of 1996. I. At the same time John Yaklich at the Steel Valley School District was attempting to reconcile the 1995 tax levy on his own. Generally, the School District would send a form to all tax collectors which it wanted the tax collectors to fill out. Yaklich attempted to compare paid lists with receipts and deposit reports furnished by Cole Ila but was unable to do so. As a result, Yaklich came up with what they called a discrepancy list. j. Cole Ila was asked to explain why the discrepancies were on a list; however, they were unable to obtain a response. Her attempts to deal with ColeIla culminated in December of 1996 when she sent a letter to Yaklich outlining the failed attempts to meet with ColeIla. k. Exhibit 26, pages 2 and 3 is that letter and outlines in chronological order, the attempt to contact ColeIla and the results of those attempts. Exhibit 26, pages 2 and 3. g. Colella, 97- 050 -C2 Page 19 L On December 18th, she was finally able to meet with Colella for approximately two hours at her home. Colella told her this is all the time she had available on that day. She advised Colella that she needed to see all the records. She already had in her files the assessed valuation information and a detailed printout of deposits which she had received from the School District. m. The tax collector had possession of the duplicates and all other records at her home. She received the tax duplicates for the Steel Valley assessments from Colella at her house. n. Krisher has audited other tax collectors' offices and it is customary for the tax collectors for whom she had conducted audits to maintain possession of these type of records. o. Because she only had two hours, she picked out samples of individuals who paid their taxes and was going to send out confirmations, but she never had the opportunity to do that because of subsequent events. p. They informed Mr. Yaklich that they would be unable to comply with the timing deadline set up for the 1995 audit that they had agreed to do on the tax collector's office because of the delays that had been occasioned and because they now had other clients' business that had to be completed. In March of 1997, Krisher received a call from the School District and as a result of that call the scope of the audit changed to include both the 1995 and 1996 levies. Krisher was able to meet with Colella regarding the changed audit scope on April 3rd, 1997, but, once again, was only there for a few hours. r. Krisher had been given 'a copy of Mr. Yaklich's ledger which included the discrepancy list previously noted. This list was _ comprised of people who were neither on the delinquency lists or the paid lists. s. Krisher brought a fax machine to use as a copies and another person with her so that they could make the best utilization of the time and receive copies of documents. When she was at Colella' house- in December, deposit slips were bundled in a certain way that she specifically recalls. When she returned in April, she once again reviewed the bundled deposit slips and determined that the bundles had been changed and were now bundled in a different method. Krisher then obtained from the bundles the July 1995 deposit receipts and also reviewed the July 1990 paid list that had been given to her by Yaklich. t. Krisher then determined or found eight people on the July paid list for which there were no deposit receipts. When looking at the receipts, she found receipts for eight new people for whom there had previously been no receipts. These eight new people were on Yaklich's discrepancy lists. The receipts were stamped in a different color ink. q. Colella, .97- 050 -C2 Page 20 (1) The effect of this was that ColeIla had now accounted for individuals on the discrepancy list for which there were previously no receipts. (2) In her opinion, it appeared as though individuals for whom there had been receipts had been utilized with the same amount of taxes to account for people for who there were previously no receipts. u. Betsy Krisher, CPA, was the Audit Manager in charge of the attestation engagement with the Steel Valley School District. (1) Krisher is employed by Maher Duessel, a CPA firm. v. On April 3, 1997, Krisher met with Colella at Cole[la's residence to review real estate tax records. Colella allowed Krisher to review the documents for approximately 1.5 hours. w. Krisher's process included reconciling the deposit reports (identified above), as prepared by ColeIla, to the tax receipt copies kept by ColeIla. (1) Krisher had determined that a sample testing would be completed for the month of July 1995 for which month the noted comparison would be made. (2) ColeIla was aware, prior to the time that Krisher arrived to do the comparison, that Krisher would be reviewing records for the month of July 1995 for the Steel Valley School District. x. Steel Valley School District had, on several occasions prior to the April 3, 1997, audit by Krisher, mailed to Colella a copy of the discrepancy list and requested that Colella reconcile the discrepancies with her records. (1) Colella never responded to the request. (2) Steel Valley School District had provided Krisher with a copy of the discrepancy list prior to her April 3, 1997, fieldwork. y. During her fieldwork, Krisher found eight taxpayers who had been identified on the discrepancy list as having not paid their taxes who Colella now produced a receipt for. (1) These individuals had originally appeared on the discrepancy list because Colella had neither reported them on the deposit report nor the delinquency list, thus indicating that they had not paid their taxes. (2) According to the receipts provided to Krisher by Colella, the eight taxpayers for whom she now had receipts, had allegedly paid taxes in the amount of $2,751.99. z. During the same audit, Krisher reviewed Colella's deposit reports for whom Colella had reported taxpayers [as] ha[ving] paid taxes. ColeIla, 97- 050 -C2 Page 21 (1) During said review, Krisher found eight individuals on the deposit report for whom Cole Ila could not produce receipts. The total amount of taxes allegedly paid by these individuals in July 1995 was $2,751.99, the same amount for the eight individuals identified on the discrepancy list. aa. Krisher also noted that all of the tax receipts produced by Cole Ila for July of 1995 had been stamped paid in red ink with the exception of the eight receipts regarding the individuals on the discrepancy list, which were stamped in black ink. bb. Subsequent to Krisher's fieldwork, Maher Duessel received confirmation from six of the eight taxpayers identified on the discrepancy list indicating that these individuals had, in fact, paid their taxes but not on the dates specified by ColeIla. (1) The confirmations further verified that the total amount paid by these eight taxpayers, in the aggregate, was not $2,751.99. cc. The eight individuals for whom tax receipts could not be found for the month of July 1995, who were identified on Cole!la's deposit report, had, in fact, paid their taxes in the month of July in the amount of $2,751.99. dd. From the foregoing, Krisher concluded that Cole Ila had eliminated eight legitimate tax receipts regarding taxpayers who had paid in the month of July 1995 and replaced those eight tax receipts with newly created tax receipts in the same amount as those eliminated from the July report. (1) Krisher concluded that the eight newly created tax receipts related to eight individuals on the discrepancy list and such would allow Cole Ila to account for individuals who had paid their taxes but for whom no records existed. (2) Such, Krisher concluded, would allow ColeIla to account for individuals on the discrepancy list. ee. A review of the Steel Valley School District Discrepancy List for 1995/1996 indicates that said list contained 114 taxpayers. (11 The total amount of taxes represented by the individuals on the discrepancy list totaled $51,484.64. ff. Upon examination by Maher Duessel of the tax duplicate kept by ColeIla, it was determined that all of the individuals on the discrepancy list except two had paid their taxes. (1) No records of the tax payments for these individuals were maintained by Colella thus resulting in the school district not being able to determine whether - -- all taxes collected had been turned over to the school district. (2) As a result of actual confirmation letters from forty -seven of the individuals on the discrepancy list, it was determined that $19,536.74 had paid their taxes. Colella, 97- 050 -C2 Page 22 (3) No confirmations were received from the other individuals on the list. (4) Of the $19,536.74 confirmed as being paid by the forty -seven individuals on the discrepancy list, it has been determined that $15,487.00 was paid to Colella in cash. (5) As a result of the failure of ColeIla to keep records of said payments, the Borough was unaware that these individuals, who had paid Colella in cash had, in fact, paid their taxes. Krisher never asked ColeIla about the differences or discrepancies found. (1) Once she had seen these documents, she determined that there was a problem in the tax collector's office in Homestead Borough. (2) She thereafter went back and reported such to her boss. hh. As a result of this event, Maher Duessel was engaged to do an agreed upon procedures audit in order to determine a Toss calculation for Homestead Borough tax collector at the Steel Valley School District. ii. Colella resigned approximately one to two weeks after Krisher's review at ColeIIa's house. One of the main reasons they went to an agreed upon procedures process was because they could not do an audit for which they were originally engaged as to do such would need the cooperation of the tax collector and CoIeIIa was no longer thetax collector. kk. As to Exhibit 26, pages 4 through 12, those pages of the exhibit are a report which outlines the agreed upon procedures for the conduct of the review of the tax collector's office for tax levy years 1995/1996 as altered and changed into a loss calculation determination. Pages 4 through 26 outline the actual methods utilized by Krisher in issuing and going through a process called confirmations with taxpayers. The report is self - explanatory in that respect. II. Exhibit 26, pages 13 through 33, outlines on the first several pages the actual agreed upon procedures in the records to which she had access and utilized in the course of her audit. mm Exhibit A would outline the actual Toss calculation that is found on Exhibit 26, page 17, and that for the tax levy year 1995 she determined that exactly $28,219.44 was missing from the Homestead Borough /Steel Valley School District taxes. nn. Exhibit 26, page 24, outlines her analysis of the 1996 tax year levy wherein she determined that exactly $10,354 [sic] in tax funds were missing from the Homestead Borough /Steel Valley School District tax account. gg. JJ Colella, 97- 050 -C2 Page 23 oo. As to her findings that for the tax year 1996 for a certain period of time as identified on Exhibit 26, page 15, she determined that exactly $19,921.73 in additional funds above and beyond what could be accounted for were deposited into the school district account that year. (1) A similar occurrence occurred in 1995, which is identified in Item 6 on page 14 of the exhibit. That is page 26. 40. Lee Ann Ingram is a certified public accountant who obtained her C.P.A. licensing in 1996. She is a graduate of the California University of Pennsylvania with a 4.0 grade average. She received her degree of B.S. in finance with minors in accounting and economics. a. She has worked in the field of accounting throughout most of the time after her graduation. She is currently doing work for the University Drive V.A.H. Federal Credit Union and is also subcontracting as a C.P.A. with a firm known as DePretis and Ware, certified public accountants. b. DePretis and Ware is responsible for audits in compliance with N.C.U.A. guidelines in credit union situations and for nonprofit audits. c. As part of her subcontract work with DePretis and Ware, the firm was engaged by Homestead Borough to conduct or compute a loss calculation for the Borough's tax collector's office. d. As a result of the work that she performed, she issued what is identified in the record as Exhibit 25, pages 1 through 7. That report outlines the process and procedures utilized, the type of engagement for which DePretis and Ware was hired, and the results of her audit. e. As a result of her Toss calculation computation, she has delineated in the report that she was able to determine that during the years 1994, 1995, and 1996, she determined a loss in Homestead Borough taxes of $ 106,113.90. f. Ingram's findings in this respect differ from the findings of Mr. Vilcek's calculations by $1,654.93. (1) That difference is not material in accounting language, and her findings were substantially similar in her loss calculation as to those performed by Vilcek. As outlined on page 35 of her exhibit, her review of certain items that were deposited into the tax collector's account were the checks g. (1) That includes planning and performing examination in accordance with generally accepted accounting procedures, compliance with federal and state regulations, internal controls; cash and investment verification, payroll and tax verification; bank reconcilements, transaction and loan documentation ratio analysis, and verification of balance sheet and income statement accounts at audit date. ColeIla, 97- 050 -C2 Page 24 already in evidence from the Standard Mortgage Company and the Prudential Realty Company. 41. Rodney George is a former Special Investigator for the State Ethics Commission. a. Exhibit number 67 is George's resume, his background, and his qualifications. b. In July of 1997, he terminated his employment with the City of York to initiate employment with the Pennsylvania State Ethics Commission. He stayed with the Pennsylvania State Ethics Commission from that point in time, July of 1997, to July of 1998, when he took a job with the York County District Attorney's office where he is now employed. c. George substantially corroborates the testimony of Vilcek in relation to the interview of Maureen Colella on March 3rd, 1998. d. On March 3, 1998, at approximately 11:00 a.m., ColeIla was interviewed at Biondi Lincoln- Mercury car dealership located at 3690 William Penn Highway, Monroeville, PA. e. Colella was contacted in regard to an investigation alleging that Colella had deposited monies remitted to her for the payment of real estate taxes for the Borough of Homestead and the Steel Valley School District into her personal accounts under her control. f. ColeIla had been informed of the confidentiality provisions of the State Ethics Act. Present for the interview were ColeIla, Special Investigator Vilcek, and Special Investigator George. ColeIla was notified that she was not obligated to be interviewed and was notified that at any time she could consult with an attorney. Colella agreed to be interviewed. h. Colella stated that she deposited checks remitted to her for the payment of taxes into her personal account on two occasions. ColeIla advised that the taxpayers occasionally submitted to her a check as a combined lump sum statement for Steel Valley School District and Borough of Homestead real estate taxes. I. Colella advised that she would normally deposit said checks into a Mellon Bank tax collector's account, which is a general account owned by the Steel Valley School District, and then would reimburse the Borough of Homestead for its portion of the lump sum payment. j. ColeIla advised that she could not make withdrawals from the Mellon Bank tax collector's account [which] could only be used for the deposits. ColeIla offered no explanation as to exactly how she would reimburse the Borough of Homestead for lump sum payments. k. ColeIla states she deposited two checks into her personal account in order to pay off personal debts. Colella, 97- 050 -C2 Page 25 I. Colella was then questioned regarding the Steel Valley School District's independent auditor's findings which state that for 1995 and 1996, $38,519.98 is unlocated. Colella was also questioned regarding the excessive deposits of cash into her personal accounts. m. Colella admitted stealing monies remitted to her for the payment of real estate taxes and using said monies to pay off personal debts. Colella states that she would use approximately $ 100 to $150 per week of cash money remitted to either the Steel Valley School District or the Borough of Homestead for the payment of real estate taxes as spending money. (1) ColeIla states that this money would not be deposited to her personal account; however, would be used on items such as groceries, household items, haircuts, et cetera. (2) Colella also admitted that excessive deposits made into her personal account were actually monies remitted to either the Steel Valley School District or the Borough of Homestead for the payment of real estate taxes. (3) When questioned about the $38,519.98 missing from the Steel Valley School District and even greater amount missing from the Borough of Homestead, ColeIla stated that: "if it's missing, then I must have took it." (4) Colella stated that she began to steal tax remittances after her mother's death in March 1995. Colella stated that she did not have a need for extra money prior to her mother's death as her mother would provide her with an allowance to be used as spending money. (5) ColeIla advised that when questions were raised by Borough personnel regarding the records kept by ColeIla or when a _ taxpayer questioned why said taxpayer appeared on the delinquency list when said payment was actually made, Colella would attempt to fix her records in order to conceal her actions. (6) Colella admitted that she would, on several occasions, report a taxpayer's payment of real estate taxes several months after the payment actually occurred and would also indicate that said taxpayer submitted an additional amount due to a late payment penalty. (7) Colella indicated that although said taxpayer had not actually submitted a late payment penalty, Colella would purposely record said taxpayer did remit a penalty amount to avoid arousing suspicion as to why a penalty amount was not collected when a payment was recorded as received after its due date. (8) Colella stated that her most urgent debt at the time she began to steal the money was delinquent utility bills. Colella indicates that she owed money to Duquesne Light, Equitable Gas, Bell Co!eII%, 97- 050 -C2 Page 26 Atlantic, the Pennsylvania Water Company, and the Borough of Homestead. (9) Cofella indicated that she received approximately $4,000 in life insurance proceeds when her mother died and states that she did not make any payments on funeral expenses for her mother. 42. Based upon the testimony of the other witnesses, the documentary evidence and pleadings, the proffered testimony via Stipulations in Findings 34 to 41 are adopted as findings of fact. D. Documents 43. Exhibit R -1 is a photocopy of Reporting Notes of Krisher, dated December, 1996 which contain in part the following comments: a. "Despite allegations surrounding the Homestead tax collector, we determined that 95/96 Homestead tax revenue was materially accurate as recorded given - ". b. "Conclusion: Although it appears that approximately $40,000 may be missing, this amount is immaterial to District's (indiscernible) and to require any opinion modification." 44. Exhibit 9 are photocopies, in part, of the official records of the County Assessment records for the Borough for the years 1994 -97. a. The total taxable valuation for 1994 is $8,545,470. b. The total taxable valuation for 1995 is $8,395,003. c. The total taxable valuation for 1996 is $8,813,418. 45. Exhibit 10 are photocopies of the documents relating to the Recapitulation of Homestead Borough Real Estate taxes for 1996. a. Page 2 is the true and accurate 1996 Recapitulation with total tax of $423,044.06 based upon total valuations of $8,813,418. b. Page 3 is an altered 1996 Recapitulation with total valuations listed as $7,813,418 with listed total tax of $375,044.06. 46. Exhibit 11 are photocopies of checks and tax receipts for Borough and District taxes in 1995 for property 130 -K -239. a. Prudential Realty Co. check 205874 in the amount of $1,176 payable to Sharbaugh, tax collector, was deposited into her personal bank account. Exhibit 13, page 4. b. Prudential Realty Company check 206718 in the amount of $2,376.50 payable to Sharbaugh, tax collector, was deposited into the District account. 47. Exhibit 12 are photocopies, in part, of checks for the Borough and District taxes in 1995 for property 130 -K -268. Colella, 97- 050 -C2 Page 27 a. Standard Mortgage check 418594 in the amount of $846.72 payable to Borough /Sharbaugh was deposited into Cole!la's personal account. Exhibit 13, page 3. b. Standard Mortgage check 432466 in the amount of $1,711.08 payable to District /Sharbaugh was deposited into the District's account. 48. Exhibit 14 are photocopies, in part, of Integra Bank documents. a. Colella purchased with cash an Integra Bank Cashier's check C761355 payable in the amount of $2,706. 49. Exhibit 15 are photocopies of documents relating to a time share purchased by ColeIla and her spouse as to a condominium unit 115A of the Limetree Beach Resort in Florida. a. The purchase price was $3,000 with a $300 cash deposit. b. The balance due was $2,700 plus recording fee of $6. Exhibit 14. 50. Exhibit 17 are photocopies of the Annual Report and Financial Report for the Borough for 1995 and 1996. a. In the 1995 and 1996 independent auditor's (Tomasic) reports to the Mayor and Council members, he is unable to form an opinion as to real estate taxes collected due to the inadequacy of the Tax Collector's records. b. Tomasic's opinion was qualified with the financial statements prepared on a comprehensive accounting basis rather than generally accepted accounting principles due to the inadequacy of certain tax records. c. The tax collector's monthly tax reports did not list the names of taxpayers and the amount collected from them. 51. Exhibit 18 are photocopies of Borough documents. a. Page 5 is the Recapitulation for the 1995 tax with a total valuation of $8,395.003 and total face amount of tax of $402,960.14. b. Page 7 is the altered recapitulation for the 1996 Borough taxes. 52. Exhibit 25 is a photocopy of a letter from DePretis & Ware to USF &G regarding the Borough bond. a. DePretis & Ware performed a special review of the financial records of the 1994 -96 real estate tax collections for the Borough. (1) $106,113.90 is missing for the three year period. (a) The calculation was done by taking the assessed value as modified by assessment changes and reduced by delinquencies and comparing that result to taxes collected. Colella, 97- 050 -C2 Page 28 (b) The Toss in 1994 was $34,255.17. (c) The Toss in 1995 was $44,762.96. (d) The Toss in 1996 was $27,095.77. (2) . The Borough did not receive the appropriate amount of taxes collected by Cole Ila. b. Cole Ila commingled tax funds into her personal bank account. c. For 1995, ColeIla prepared two different sets of reports, neither of which could be reconciled with collections. 53. Exhibit 26 are photocopies of letters and documents of Maher Duessel relative to the tax levied on 7/1/95 and '96 by the District. a. Maher Duessel performed an analysis in accordance with the standards established by the American Institute of Certified Public Accountants. (1) For 1995, the difference between the levied tax Tess collections and delinquencies totaled $28,219.44. (2) For 1996, the difference between the levied tax less collections and delinquencies totaled $10,300.54. b. The total tax determined to be a Toss for the two years was $38,519.98. 54. Exhibit 28 are photocopies of Cole!la's W -2's from the Borough for 1993- 1996. a. ColeIIa's gross wages as tax collector were $5,500.04 per annum: - 55. Exhibit 36 are photocopies of the 1995 and 1996 state and federal income tax returns for ColeIla and her spouse. a. For 1995, the ColeIlas' gross income as reported to the IRS was $31,378 and $32,263 as reported to the Pennsylvania Department of Revenue. b. For 1996, the ColeIlas' gross income as reported to the IRS was $37,392 and $38,548 as reported to the Pennsylvania Department of Revenue. 56. Exhibit 49 is a photocopy of a loss calculation by Vilcek of the Investigative Division for the Borough for 1994. a. Total real estate tax to be collected is $406,416.24. b. Total tax less delinquency is $344,473.24. c. $302,748.60 is the amount of tax deposited by ColeIla. d. The loss to the Borough is $41,724.64 in 1994. Colella, 97- 050 -C2 Page 29 57. Exhibit 50 is a photocopy of a loss calculation by Vilcek of the Investigative Division for the Borough for 1995. a. Total real estate tax to be collected is $398,516.54. b. Total tax less delinquency is $333,914.56. c. $289,757.64 is the amount of tax deposited by Colella. d. The loss to the Borough is $44,156.90 in 1995. 58. Exhibit 51 is a photocopy of a loss calculation by Vilcek of the Investigative Division for the Borough for 1996. a. Total real estate tax to be collected is $421,757.66. b. Total tax less delinquency is $346,841.66. c. $328,264.23 is the amount of tax deposited by Colella. d. The loss to the Borough is $18,577.43 in 1996. 59. Exhibit 53 is a photocopy of an income analysis of Vilcek of the Investigative Division as to the ColeIlas for the years 1994 -96. a. For 1994, the ColeIlas deposited their net pays totaling $17,997.89 in the bank. (1) The total bank deposits by the ColeIlas for that year was $47,451.32. b. For 1995, the ColeIlas deposited their net pays totaling $25,272.71. (1) The total bank deposits by the ColeIlas for that year was _ $47,462.56. c. For 1996, the ColeIlas deposited their net pays totaling $30,388.12. (1) The total bank deposits by the ColeIlas for that year was $33,918.59. d. For the three year period 1994 -96, the ColeIlas deposited $55,174 more in the bank than their net pays. 60. Exhibit 55 is a photocopy of a document prepared by the Investigative Division as to payments by the ColeIlas on charge accounts for the period 3/94 to 9/96. a. The payments were not made from bank accounts of the ColeIlas. b. The payments total $14,488 for the period. 61. Colella converted tax payments from the Borough and District for her personal use. Cole Ila, 97- 050 -C2 Page 30 62. Cole Ila obtained a pecuniary benefit of $135,509.48 as to tax payments she converted from the Borough and District for her personal use. a. $ 96,989.50 from the Borough in 1994 -96. b. $38,519.98 from the District in 1995 -96. III. DISCUSSION: At all times relevant to this matter, the Respondent, Maureen ColeIla, hereinafter ColeIla, was a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401, g c . /Act 93 of 1998, Chapter 11, 65 Pa.C.S. §1101, seq. The issue is whether Colella violated Section 1103(a) as to the allegations that, as a Tax Collector for Homestead Borough and the Steel Valley School District, Allegheny County, she diverted and converted tax payments received as tax collector for her personal use. Section 1103, Restricted activities. (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. §1103(a). The term "conflict of interest" is defined under the Ethics Act as follows: Section 1102. Definitions. "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. 65 Pa.C.S. §1102. Section 1103(a) of the Ethics Act prohibits a public official /public employee from using the authority of public office /employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official /public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. Colella, 97- 050 -C2 Page 31 Having noted the issues and applicable law, we shall now summarize the relevant facts. Cole Ila served as the tax collector in Homestead Borough (Borough) and Steel Valley School District (District) during the relevant time period of 1994 through 1996. The District encompasses three municipalities, one of which is the Borough. Cole Ila collected the real estate taxes for the Borough and District in the Borough building until she moved the tax office to her home in 1996. At the Borough building Cole Ila had a desk, filing cabinets and a safe as to which only she had the combination. As tax collector, Colella had certain days and hours when she came into the Borough building for the purpose of receiving tax payments. When Cole Ila was not in the Borough office and persons came to pay their taxes, Borough personnel would take a tax payment only if by check. A Borough receipt, as opposed to a tax receipt, would be given to the person. The check would be placed upon Cole!la's desk if she would be in that day; otherwise the check would be placed into an envelope labeled "ColeIla" or "tax payment" and placed in the Borough safe. Tax payments that were proffered in cash would not be accepted; the taxpayers would be told that they would have to return when ColeIla was present. During the relevant time period of Colella's service, tax collections dropped substantially and could not be reconciled for the Borough. Robert Tomasic conducted an independent audit of the financial statements of the Borough. In the audit and financial reports prepared by Tomasic for the 1995 year, an opinion could not be made as to the amount of taxes collected due to the inadequacy of Colella's records. In Tomasic's report, it is noted that ColeIla revised the 1995 tax collection figures in 1996. For the annual audit and financial report for 1996, Tomasic stated that an opinion could not be provided for that year due to the same inadequacy of Colella's records as to tax collections. Tomasic noted that ColeIla did not list the names of taxpayers and amounts collected in her monthly reports nor did she settle the prior year tax duplicate before the next year duplicate as required by law. The low tax collection rate and ColeIla's lack of documentation resulted in a more detailed examination of her accounts. The Borough engaged the services of the C.P.A. firm of DePretis and Ware to review the tax collection practices of Colella in the Borough for the years 1994 -96. Ingram, a C.P.A., on behalf of DePretis and Ware, did . an analysis of losses in tax collections by Colella for the three years. The results of the audit by Ingram reflected that $106,113.90 was missing in the three year period. Ingram performed her analysis by taking the assessed value as modified by assessment changes and reduced by delinquencies and comparing that result to taxes collected. Ingram concluded that the Borough did not receive all of the taxes collected by Cole Ila who also commingled tax funds into her personal bank account. During the investigation by the Investigative Division of this Commission, the lead investigator, Vilcek, who is also a C.P.A., did an analysis to determine whether any tax payments were missing from the Borough. The accounting approach taken by Vilcek was to obtain the total real estate valuation in the Borough Tess any change orders, as for example changes in value as a result of appeals as to valuations, times the millage rate from which the tax deficiencies (non payments) would be subtracted to arrive at the amount of taxes that should have been collected. The foregoing was compared to the amount of money actually deposited by Cole Ila as tax payments. Any difference between those two amounts was missing tax payments. Parenthetically, Vilcek used the accounting "Rule of Conservatism" in doing his analysis which favors the subject. For example, in determining the . amount of taxes collected, Vilcek did not reduce collections made in the discount period by 2% but used the face value. CoIeIIa, 97- 050 -C2 Page 32 Contrariwise, when payments were made in the penalty period, Vilcek did not decrease the amount to face value so that CoIeIIa was attributed with a maximum amount in terms of taxes collected. Vilcek determined that $41,724.64 was missing in tax payments for 1994, $44,156.90 in 1995, and $18,577.43 in 1996. The total in missing tax payments for the Borough for the three year period, as determined by Vilcek, was $104,458.97. That total amount only differs by $1,654.93 from the total loss ($106,113.90) as determined by C.P.A. Ingram. Similarly as to the District, Business Manger Yaklich could not reconcile the lists of individuals who paid their taxes with deposit reports submitted by CoIeIIa. Yaklich developed a discrepancy list of individuals as to whom there was no accounting and contacted CoIeIIa for explanations but CoIeIIa did not respond. The District which employs the firm of Maher Duessel to conduct general purpose audits, initially engaged that firm to review the collections of the offices of the three separate tax collectors for the District in 1995. CoIeIIa was asked to explain discrepancies as to tax collections but was uncooperative. Maher Duessel informed Yaklich that it could not comply with the deadline for the 1995 audit because of the delaying tactics of CoIeIIa and other pressing business. Subsequently, the District changed the scope of the audit to encompass both the 1995 and 1996 years. Krisher, a C.P.A., who handled the audit for Maher Duessel, was able to meet with CoIeIIa at one point for 1.5 hours to review tax records. Krisher in her fieldwork found that a number of individuals whose names were on the discrepancy list had paid their taxes in cash. Krisher reported her findings to Maher Duessel. As a result, Maher Duessel was engaged to determine a loss calculation for the District. Krisher conducted a review and determined that $28,219.44 was missing from the District for the tax year 1995, and that $10,300.54 was missing for the 1996 tax year. The total tax missing for the two year period amounted to $38,519.98. Separate and apart from the analysis of the tax collections for the Borough and School District, the Investigative Division did a financial analysis of the personal finances of CoIeIIa including income, tax returns, cash transactions, bank account - deposits and withdrawals, credit card transactions, ATM transactions, purchases and so forth. That analysis revealed large amounts of money and cash transactions by Colella which did not come from any legitimate source. Thus, the end result of the investigation showed large amounts of missing tax payments coupled with large amounts of money in the possession of Colella. When Colella- was interviewed by two special investigators from the Investigative Division of this Commission, she was asked about two instances where tax payments by check were deposited into her personal bank account. CoIeIIa initially responded that sometimes taxpayers would submit one check in payment of both the Borough and District taxes for which she would deposit the check into her personal account followed by the issuance of two checks from her personal account, thereby breaking the payment up for the two taxing bodies. However, when CoIeIIa was confronted with her bank records where no corresponding checks were issued after a check for taxes was deposited into her account, CoIeIIa admitted that she took tax payments for her personal use. CoIeIIa admitted using about $100 to $150 in tax payments on a weekly basis for purchasing personal items such as groceries. With tens of thousands of dollars in tax payments missing and thousands of dollars of money that was neither earned by CoIeIIa nor her spouse deposited into personal bank accounts, Colella then admitted: "If it's missing, then I must have took it." Colella, 97- 050 -C2 Page 33 Cole(la's service as tax collector ended in 1996 with the Borough secretary being appointed the tax collector for 1997. Having summarized the above relevant facts, we will note the respective positions of the parties. Colella at the hearing and in her Brief takes a " Is it not possible that - -- " approach to the missing tax payments. In particular, Colella argues that someone else took the tax payments, that she had excess cash because she purchased goods for family and friends who reimbursed her, that she had excess cash as a result of gifts, that she had other sources of income, that she remitted tax payments from her withdrawals at ATM machines, or that her purchases had no "relationship to municipal funds." ( ColeIla's Brief at p.1). Colella concludes that the Investigative Division failed to meet its burden factually and legally to establish a violation of the Ethics Act. The Investigative Division in its Brief presents a detailed factual background from the evidence developed at the hearing and argues that the elements of Section 1103(a) of the Ethics Act are met: Colella is a public official as tax collector; she used her authority of office as to the tax payments made by taxpayers; and she realized a private pecuniary benefit by converting the tax payments to her personal use. The Investigative Division concludes that ColeIla converted the tax payments based upon the following: her admission of taking the tax payments, her deposit of two checks in payment of taxes into her personal bank account, the missing tax payments coupled with ColeIla having more money in her bank accounts than for which she could account, the drop in the tax collection rate during her term as tax collector, and the altered tax records in her possession. The Investigative Division seeks restitution plus treble penalty in the total amount of $296,226.88, based upon the two checks totaling $2,022.72 in payment of taxes, $38,946 in cash deposits into personal - accounts, $14,488 in cash to pay credit accounts, approximately $15,600 in cash to buy groceries, and $3,000 in cash for the purchase of a Florida time share unit; or alternatively restitution plus treble penalty in the total - amount of $8,090.88 based upon the two checks of $2,022.72. Finally, the Investigative Division seeks a referral with a recommendation for prosecution to the Allegheny County District Attorney, the Pennsylvania Attorney General, the Federal Bureau of Investigation, the US Attorney - for the Western District of Pennsylvania and the Internal Revenue Service. Having summarized the positions of the parties, we must now determine whether the actions of Colella violated Section(s) 1 103(a) of the Ethics Act. In order to establish a violation of Section 3(a) of Act 9 of 1989, the following are requisite: a public official or public employee, a use of authority of office or confidential information, a private pecuniary benefit, and the private pecuniary benefit inuring to the public official /employee or a member of the immediate family or a business with which the public official /employee or immediate family member is associated. See, McGuire and Marchitello v. SEC, 657 A.2d 1346 (1995). We will now examine each of these elements in the context of the facts of record. Colella as tax collector was a public official. See, Allen, Order 612 -R. There was a use of authority on the part of Colella. But for the fact that ColeIla was the tax collector, she would not have been in a position to receive the tax payments for the Borough and District. The control over the tax payments was a use of authority of office by Colella. Juliante, Order 809. That use of authority of office resulted in a pecuniary benefit to Colella consisting of the tax payments she converted to personal use. The pecuniary benefit was private. To state the obvious, there is no provision in law for a tax collector to convert tax payments for personal use See, the Local Tax Collection Law, the Act of May 25, 1945, P.L. 1050, as amended, 72 P.S. Colella, 97- 050 -C2 Page 34 5511.1 et sea. Finally that private pecuniary benefit inured to the benefit of ColeIla. Accordingly, ColeIla violated Section 1103(a) of the Ethics Act when she as tax collector converted tax payments from the Borough and District for her personal use. Our reasoning follows that of the Superior Court in Commonwealth v. Favinger, 516 A.2d 1386 (1986), where it upheld the conviction of "theft by deception" as to a township bookkeeper who converted sewer and refuse payments to her personal use. One of the proffered arguments by the bookkeeper was that the evidence established that she had no more than joint access over the stolen funds. The Court in rejecting the argument noted that even though a conviction must by based upon more than mere suspicion, it is sufficient if the circumstances are consistent with criminal activity even though they might likewise be consistent with innocent behavior: Although it is true that appellant was not the only person who had access to and control over the funds when they were received by the township, the evidence established that she had exclusive control over the funds between the time of removal from the cash register and deposit in the bank. The evidence also established that appellant did not always deposit the funds in the bank immediately after removal from the cash register. Rather, she often kept the funds in her desk drawer for several days before making a deposit. There were also occasions on which she took the funds home with her, ostensibly to deposit them on the way to work in the morning. RI at 1388 ColeIla argues that just because tax payments are missing, it does not necessarily follow that she converted the tax payments to her own personal use: Although the theory underlying that statement is true, the record in this case establishes such conversion of tax payments by Colella. The Investigative Division has met its burden by establishing through clear and convincing proof several major factual elements in its investigation which totally efface Colella's arguments: the control of tax payments by Colella and her exclusive control - of tax payments in cash, the Toss of tax payments, a "net worth" analysis which shows that Colella and her spouse had more money than they earned, and numerous payments and purchases by Colella that did not correlate in either amount of money or time frame with legitimate funds of Colella and her spouse. All of these elements coalesce into the following. Yes, the money is missing and Colella took it. Colella's argument that someone else took the money fails given her control of tax payments and the financial analysis of her personal finances. Colella's other arguments border on the absurd, as for example, that she had other income which would be at odds with her income tax returns, that the cash she had was money from friends or relatives to buy merchandise for them which is unreal, considering that approximately $39.000 in cash was deposited into her personal accounts in the relevant three year period. It seems that the arguments proffered by ColeIla are as ungainly as her attempts to cover up her conversion of the tax payments: the altered 1996 Recapitulation to make it appear that there was less tax to collect, the listing of people who paid their taxes as delinquent, and on and on and on. The conduct of Colella reflects a total disregard of the public trust in favor of her own personal financial gain. It is bad enough that the immediate consequence of such conversion of taxes was a loss to the taxpayers of the Borough and District. It Colella, 97- 050 -C2 Page 35 is even more appalling that the further consequence of ColeIle's conversion resulted in a deprivation to the children of the Steel Valley School District in their educational endeavors. For Cole Ila, public office was nothing other than a means of providing financial gain to herself by taking the tax payments for personal use. We cannot simply render a decision and close the book as to such outrageous conduct. Section 1107(13) of the Ethics Act empowers this Commission to impose restitution in those instances where a public official /public employee has obtained a financial gain in violation of the Ethics Act. Further, Section 1 109(c) authorizes this Commission to impose a treble penalty equal to three times the financial gain resulting from such violation in addition to any other penalty provided by law. In this case, a financial gain has been obtained in flagrant violation of the Ethics Act, and restitution plus treble penalty is clearly warranted. Cole Ila is directed to make payment in the amount of $8090.88 ($2,022.72 x 4) through this Commission to the Commonwealth of Pennsylvania within 30 days of the mailing date of this Order. Non - compliance will result in the institution of an order enforcement action. It is clear that ColeIla converted substantial amounts of tax payments that were made in cash. Although ColeIla should be required to repay all of this money, we have imposed restitution plus treble penalty of $8,090.88 as to the checks totaling $2,020.72 that ColeIla deposited into her personal accounts. We will leave it to the courts to quantify and direct such further restitution, fines and penalties as is deemed just and appropriate. Given the egregious nature of the violation of the Ethics Act, this case will be referred to the Allegheny County District Attorney, the Pennsylvania Attorney General, the Federal Bureau of Investigation, the US Attorney for the Western District of Pennsylvania, the Pennsylvania Department of Revenue and the Internal Revenue Service with the strongest recommendation of this Commission for prosecution. IV. CONCLUSIONS OF LAW: 1. Maureen ColeIla, as a Tax Collector for Homestead Borough, Allegheny County, and as a Tax Collector for Steel Valley School District, Allegheny County, was a public official subject to the provisions of Act 9 of 1989/Act 93 of 1998, Chapter 11. 2. ColeIla violated Section 1103(a) of the Ethics Act when she as tax collector converted tax payments from Homestead Borough and Steel Valley School District for her personal use. In Re: Maureen CoIeIIa File Docket: 97- 050 -C2 Date Decided: 7/13/99 Date Mailed: 7/20/99 ORDER NO. 1130 1. Maureen CoIeIIa, as Tax Collector for Homestead Borough and the Steel Valley School District, Allegheny County, violated Section 1103(a) of the Ethics Act when she converted tax payments for her personal use. 2. CoIeIIa is directed to make payment in the amount of $8,090.88 through this Commission to the Commonwealth of Pennsylvania within 30 days of the mailing date of this Order. Non - compliance will result in the institution of an order enforcement action. 3. This case will be referred to the Allegheny County District Attorney, the Pennsylvania Attorney General, the Federal Bureau of Investigation, the US Attorney for the Western District of Pennsylvania, the Pennsylvania Department of Revenue and the Internal Revenue Service with the strongest recommendation of this Commission for a prosecution. BY THE COMMISSION, DANEEN E. REESE, CHAIR