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