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Home My WebLink About1361 WaltersIn Re: Cynthia Walters File Docket: X -ref: Date Decided: Date Mailed: Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Daneen E. Reese Donald M. McCurdy Paul M. Henry Raquel K. Bergen 03 -040 Order No. 1361 2/28/05 3/14/05 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 Act, Act 9 of 1989, P.L. 26, 65 P.S. § 401 et seq., as codified by Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., 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 not filed and a hearing was waived. The record is complete. A Consent Agreement and Stipulation of Findings were submitted by the parties to the Commission for consideration. The Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement was subsequently approved. Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending matters under Act 93 of 1998. 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 Chapter 11 of Act 93 of 1998. 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. Walters, 03 -040 Page 2 I. ALLEGATIONS: That Cynthia Walters, a (public official /public employee) in her capacity as Secretary/ Treasurer of Jefferson Borough, Greene County, violated Sections 1103(a) and 1104(a) of the State Ethics Act (Act 93 of 1998) 65 Pa.C.S. § §1103(a) and 1104(a) when she used the authority of her office for a private pecuniary gain of herself and /or a member of her immediate family when she converted borough funds for the private use of herself and /or members of her immediate family through the issuance of borough checks to her spouse for work/services not actually performed; when she authorized an increase in compensation to herself as the borough secretary /treasurer without council's approval; when she authorized payments to herself from the borough account for the use of her home as the borough office without council's approval; and when she failed to file Statements of Financial Interests for calendar years 1999 through 2003. II. FINDINGS: 1. Cynthia Walters served as the Secretary /Treasurer of Jefferson Borough, Greene County, from July 1, 1987, through June 26, 2003. a. Walters had no set number of hours to work in her position. b. Walters was terminated as Secretary /Treasurer at the June 26, 2003, special meeting of borough council. 2. As the borough secretary /treasurer, Walters was responsible for the following duties, among others: a. Preparation of meeting agendas, bill lists to be approved by board; b. Maintenance of all borough financial records including checking accounts, certificates of deposit including making deposits /withdrawals; c. Prepare checks for payments; d. Signature authority on all borough accounts; e. Taking minutes at the monthly meetings; f. Retention and preservation of borough documents /records; g. Receiving and forwarding complaints to council; h. Recommending purchases /contracts to the borough council; and Various administrative duties, etc. 3. While serving as secretary /treasurer, Walters conducted the daily operations of the borough from her home. a. Walters' home mailing address was PO Box 241, Jefferson, Pa 15344. b. Jefferson Borough financial records documented the borough mailing address as PO Box 241, Jefferson, Pa 15344. 4. Walters maintained all borough records at her residence with the exception of antiquated records which were stored in the Jefferson Borough American Legion Walters, 03 -040 Page 3 building. a. Walters had sole control and physical custody of all borough records and finances (i.e. bank statements, cancelled checks, check registers, checkbooks, etc.) at her residence. b. Individuals wishing to review borough records were required to make an appointment with Walters to do so. 5. A seven - member council and mayor govern Jefferson Borough. a. Borough council holds one meeting per month on the first Monday of the month. b. Voting at council meetings normally occurs in group "aye /nay" fashion. 1. Council president does not normally vote on motions presented. 2. The mayor votes only in the case of a tie. 6. Walters was the only individual who worked for the borough on a consistent basis as an employee. a. Jefferson Borough did not employ a public works department, road crew, or any other employees on a consistent basis. 7 Jefferson Borough hires independent contractors to complete all work required in the borough. a. Typical work includes the plowing and ashing of borough streets and alleys, cleaning drains, repair and replacement of street signs, etc. 8. Lonny R. Walters is the spouse of Cynthia Walters. a. Lonny Walters resides with Cynthia Walters in Jefferson Borough. 9. Lonny Walters is the owner /operator of Lonny Walters Welding and Fabricating, PO Box 241, Jefferson, Pa 15344. a. Lonny Walters performs contracting type work, including snow removal and street maintenance. 10. Lonny Walters previously served on Jefferson Borough Council from January 1982 through December 31, 1997. a. Lonny Walters served as president of borough council from January 1990 through December 1997. b. Cynthia Walters served as the borough secretary /treasurer during Lonny Walters' entire length of service on the board. 11. Jefferson Borough contracted with Lonny Walters from the early 1980's through 1997 while Lonny Walters served on borough council for snow removal, street maintenance, and general repairs. a. Lonny Walters continued to perform work for the borough after his term Walters, 03 -040 Page 4 expired in 1997. 12. While serving on council, council informed Lonny Walters at monthly meetings of the need to complete various projects in the borough. a. Lonny Walters occasionally informed council about projects he felt needed addressed in the borough. b. Formal votes for Lonny Walters to complete the desired work did not normally occur. c. Work totaling over $500.00 for which Lonny Walters was utilized was not publicly bid. 13. During the time that Lonny Walters was serving as a Jefferson Borough Councilperson, he received $102,241.00 in payment from Jefferson Borough for services performed from 1994 through 1997 from the borough General Fund and Highway Aid Fund. a. Lonny Walters received $77,216.00 from the borough General Fund and $25,025.00 from the Highway Aid Fund. b. Lonny Walters received payment from both funds by submitting one invoice for work on borough alleys (paid from the General Fund) and one invoice for work performed on borough streets (paid from the Highway Aid Fund). 14. In or about 1998, the Department of the Auditor General conducted an audit of the Jefferson Borough Liquid Fuels Fund (Highway Aid Fund) for 1994 and 1995 and questioned payments made from that fund to Lonny Walters. a. The Auditor General's Office determined that payments from the Liquid Fuels Fund totaling $17,260.00 in 1994 and 1995 to Lonny Walters violated Section 1404 of the Borough Code regarding borough officials' interests in any purchase made, contract entered, or money expended by the borough of more than $1,000.00 in any calendar year. b. On October 1, 1998, correspondence was sent to Cynthia Walters from the Commonwealth of Pennsylvania Department of Transportation, Bureau of Municipal Services, indicating that Jefferson Borough was required to reimburse the Liquid Fuels Tax Fund in the amount of $17,260.00. 15. On September 22, 1998, the Investigative Division of the Pennsylvania State Ethics Commission initiated a full investigation of Lonny Walters in association with his performing contracting services for Jefferson Borough. a. The investigation concluded on September 14, 1999, through the issuance of an Investigative Complaint to Lonny Walters. 16. State Ethics Commission Order No. 1143 regarding Lonny Walters was decided on November 22, 1999, by the Commission which found the following: a. Lonny Walters, as the President of Jefferson Borough Council, Greene County, violated Section 1103(a) of the Ethics Act when he used the authority of his office for a private pecuniary benefit to himself as to payments he received for providing snow removal and road maintenance services for the borough. Account Number Account Name Account Address Approved/ Unapproved Account 71100105 Jefferson Borough General Fund PO Box 241, Jefferson, Pa 15344 Approved 71100236 Jefferson Borough Highway Aid Fund PO Box 241, Jefferson, Pa 15344 Approved 71105889 Jefferson Borough General Account PO Box 241, Jefferson, Pa 15344 Unapproved 71105870 Jefferson Borough Highway Aid Account PO Box 241, Jefferson, Pa 15344 Unapproved Jefferson Borough General Fund Certificate of Deposit PO Box 241, Jefferson, Pa 15344 Approved Jefferson Borough General Fund Certificate of Deposit PO Box 241, Jefferson, Pa 15344 Approved Jefferson Borough General Fund Certificate of Deposit PO Box 241, Jefferson, Pa 15344 Approved Walters, 03 -040 Page 5 b. Lonny Walters violated Section 1103(f) of the Ethics Act when he entered into contracts to perform snow removal and road repair services to the borough when such contracts were $500.00 or more and were not awarded through an open and public process. c. Lonny Walters was directed to make payment through the Commission to Jefferson Borough in the amount of $17,260.00 within 30 days of the date of mailing of the Order. d. By way of check dated March 21, 2000, in the amount of $17,260 Lonny Walters made payment in compliance with the order of the Commission. 17. From July 1998 through June 30, 2003, several bank accounts existed in the name of Jefferson Borough as shown below: a. Accounts categorized as "Unapproved" represent accounts that borough council did not authorize and were [sic] unaware existed. b. All borough accounts were initially through Laurel Bank; however, management of the bank changed hands in approximately November 2000 to Promistar Bank and in approximately February 2002 to First National Bank. 18. Cynthia Walters, in her capacity as Secretary /Treasurer, maintained the accounts described in Finding No. 17. 19. Jefferson Borough Certificates of Deposits were continuously re- invested until a closing withdrawal occurred on January 8, 1999, with the certificate of deposit under account number 100106125. a. Certificate of Deposit Account Number 71061567 was issued on March 19, 1997, with a $30,403.57 initial deposit and was closed on June 20, 1997, with a $30,767.58 withdrawal. b. Certificate of Deposit Account Number 71063903 was issued on June 19, Deposit Date Deposit Amount Existing Balance New Balance 02/01/99 $2,500.00 $906.25 $3,406.25 03/29/99 $1,000.00 $1,447.30 $2,447.30 12/01/99 $3,000.00 $429.13 $3,429.13 01/27/00 $4,000.00 $- 136.83 $3,863.17 Walters, 03 -040 Page 6 1997, with a $30,767.58 initial deposit and was closed on December 29, 1997, with a $31, 654.57 withdrawal. c. Certificate of Deposit Account Number 100106125 was opened on December 29, 1997, with a $29,154.57 initial deposit and was closed on January 8, 1999, with a $25,320.56 withdrawal. 1. The $2,500.00 difference in the initial deposit amount from CD number 71063903 and CD number 10010625 was deposited into the borough general fund (account number 71100105). 2. Two additional withdrawals from CD number 100106125 totaling $5,000.00 were deposited into the borough general fund (account number 71100105) during the life of the CD. 20. On January 7, 1999, Cynthia Walters opened two new accounts at Laurel Bank without the knowledge or approval of borough council. a. Walters opened account number 71105889 under the title "Jefferson Borough General Account" with an $8,060.56 initial deposit. 1. Walters was the only authorized signatory on the account. b. Walters opened account number 71105870 under the title, "Jefferson Borough Highway Aid Account" with a $17,260.00 initial deposit. 1. Walters was the only authorized signatory on the account. c. Walters utilized the funds from CD number 100106125 (finding 19c) to open the new accounts. 1. Council did not approve or authorize Walters to redeem CD number 10010625. 21. Walters redeemed CD number 100106125 in order to satisfy the $17,260.00 reimbursement required by the Commonwealth of Pennsylvania, Department of Transportation, Bureau of Municipal Services as a result of the 1994 -1995 audit of the Liquid Fuels Tax Fund (see finding no. 14). Information supplied by Walters to the Bureau of Municipal Services showing the $17,260.00 deposit into the newly opened unapproved Highway Aid Account (account number 71105870) gave the appearance that the funds had been properly deposited into the Highway Aid Fund (account number 71100236). b. The "Highway Aid Fund" was the borough's approved Liquid Funds Account. 22. The $17,260.00 and interest generated from the Highway Aid Account (account number 71105870) was eventually deposited into the approved Highway Aid Fund (account number 71100236) on various dates to increase the available balance as shown below: a. Deposit Date Deposit Amount Existing Balance New Balance 03/29/99 $2,000.00 $1,102.51 $3,102.51 01/25/00 $1,500.00 $388.73 $1,888.73 03/06/00 $1,000.00 $2,251.48 $2,351.48 03/31/00 $2,000.00 $ -95.92 $1,904.08 02/08/01 $2,031.04 $631.49 $2,662.53 Deposit Date Deposit Amount Existing Balance New Balance 03/06/00 $2,000.00 $928.67 $2,928.67 10/23/00 $5,682.62 $323.08 $6,005.70 Walters, 03 -040 Page 7 a. No activity occurred in the Highway Aid Account from October 24, 2000, through October 31, 2001, with the exception of minimal interest accrued and service charges incurred. b. The Highway Aid Account (account number 71105889) was closed on or about October 31, 2001. 23. The $8,060.56 and interest generated from the General Account (account number 71105889) was subsequently deposited into the General Fund (account number 71100105) on various dates to increase the available balance as shown below: a. No activity occurred in the General Account from February 9, 2001, through May 30, 2003, with the exception of minimal interest accrued and dormant fees incurred. 24. From January 1998 through June 2003, after he terminated his service as borough councilperson, Lonny Walters continued to contract with Jefferson Borough for maintenance and service type issues. a. The majority of services performed pertained to snow removal, plowing and ashing, etc. b. Occasional services of replacing street signs, cutting weeds, tar and chip road preparation, etc. also occurred. 25. Formal votes of council approving Lonny Walters to complete the required work occurred infrequently. a. Minutes of council meetings note council members agreeing to inform Lonny Walters that work needed done. b. Cynthia Walters often stated to council that she would inform Lonny Walters regarding what council wished to have addressed in the borough. 26. From July 1998 through June 2003, Cynthia Walters and Lonny Walters received legitimate income on a consistent basis from the following sources: a. Cynthia Walters: 1. Jefferson Borough- Secretary /Treasurer 2 Southwestern Pennsylvania Water Authority (SPWA)- Customer Service Representative Bank Name Account Operating Authorized No. Dates Si • natories National City 26 -15746 12/16/82 to Walters /Lonny Walters 02/11/99 First National Bank Of 71101773 06/02/95 to Walters /Lonny Walters Pa* 06/30/03 First National Bank Of 71520716 01/07/99 to Walters /Lonny Walters Pa* 06/30/03 First National Bank Of Pa 90020490 11/29/02 to Walters 06/05/03 Walters, 03 -040 Page 8 b. Lonny Walters: 1. Lonny Walters Welding and Fabrication c. Income received was deposited into various personal accounts held by the Walters'. 27. From July 1998 through June 2003, Cynthia Walters maintained signature authority over at least four accounts utilized by the Walters' for personal and business matters as shown below: * = Accounts 71101773 and 71520716 listed with First National Bank of Pennsylvania were originally opened with Laurel Bank which changed to Promistar Bank prior to First National Bank assuming management. a. Account numbers 26- 15746, 71520716, and 90020490 were utilized as personal checking accounts. 1. Account number 71520716 opened at First National Bank replaced account number 26 -15746 held at National City Bank. b. Account number 71101773 was utilized as Lonny Walters' business account. 28. From at least June 1998 through May 2003, Lonny Walters utilized numbered invoices with "Lonny R. Walters, PO Box 241, Jefferson, Pa 15344, 412- 883 -2155, Specializing in: Welding & Fabricating -Truck & Trailer Repair" pre - printed on the invoices for billing purposes. a. Lonny Walters submitted invoices to his wife Cynthia Walters as the borough secretary /treasurer for all services performed for the borough during this period. b. Lonny Walters typically billed Jefferson Borough on a monthly basis. 29. Cynthia Walters, as the borough secretary /treasurer, had sole control and custody over Jefferson Borough finances. a. Cynthia Walters maintained custody of the borough financial records, including borough checkbooks, at her home residence. b. Cynthia Walters was responsible for the completion and distribution of all checks to be issued. 30. From July 1, 1998, through June 30, 2003, Cynthia Walters, as borough secretary, issued twenty -eight checks to Lonny Walters from the borough General Fund Check No Date Posted Amount Account No Signatories Invoice No. 2742 7/7/1998 $350.00 71100105 Cynthia Walters/ George Shipley - 2770 9/14/1998 $980.00 71100105 Cynthia Walters/ Patricia Lemley 2784 1109 11/27/1998 $300.00 71100236 Cynthia Walters/ Patricia Lemley - 1111 1/12/1999 $80.00 71100236 Cynthia Walters/ Patricia Lemley - 2833 1/12/1999 $80.00 71100105 Cynthia Walters/ Patricia Lemley - 1112 2/4/1999 $600.00 71100236 Cynthia Walters/ George Shipley 2949 2845 2/4/1999 $600.00 71100105 Cynthia Walters/ George Shipley 2950 1119 4/16/1999 $480.00 71100236 Cynthia Walters/ George Shipley - 2884 4/16/1999 $480.00 71100105 Cynthia Walters/ George Shipley - 1138 1/4/2000 $495.00 71100236 George Shipley /* 3214 3017 1/4/2000 $495.00 71100105 Cynthia Walters/ George Shipley 3215 1142 2/9/2000 $787.50 71100236 Tim Phillips /* 3221 3032 2/9/2000 $787.50 71100105 Cynthia Walters/ Tim Phillips 3222 1147 3/7/2000 $540.00 71100236 Tim Phillips /* 3245 3045 3/7/2000 $540.00 71100105 Cynthia Walters/ Tim Phillips 3246 1170 1/4/2001 $630.00 71100236 Tim Phillips /* - 3202 1/4/2001 $630.00 71100105 Cynthia Walters/ Tim Phillips - 1172 2/21/2001 $1,125.00 71100236 Tim Phillips /* - 3212 2/21/2001 $1,125.00 71100105 Cynthia Walters/ Tim Phillips - 3253 4/16/2001 $1,320.00 71100105 Cynthia Walters/ Tim Phillips - 3389 12/10/2001 $140.00 71100105 Cynthia Walters/ Jennifer Knight - 3412 1/8/2002 $200.00 71100105 Cynthia Walters/ Tim Phillips - 3425 2/5/2002 $500.00 71100105 Cynthia Walters/ Tim Phillips 3692 3481 5/8/2002 $300.00 71100105 Cynthia Walters/ Tim Phillips 3702/ 3747 3579 12/3/2002 $100.00 71100105 Cynthia Walters/ Tim Phillips 3851 Walters, 03 -040 Page 9 (account number 71100105) and the borough Highway Aid Fund (account number 71100236) totaling $17,965.00 for legitimate services performed which were deposited into the personal bank accounts which both Cynthia and Lonny Walters had signature authority. Check No Date Posted Amount Account No Signatories Disposition of Funds 1101 7/3/1998 $245.00 71100236 Cynthia Walters /* Deposit Acct. # 2615746 2736 7/3/1998 $355.00 71100105 Cynthia Walters /* Deposit Acct. # 2615746 2744 7/17/1998 $840.00 71100105 Cynthia Walters /* Deposit Acct. # 2615746 1103 8/18/1998 $325.00 71100236 Cynthia Walters /* Deposit Acct. # 2615746 2756 8/18/1998 $325.00 71100105 Cynthia Walters /* Deposit Acct. # 2615746 1105 9/1/1998 $480.00 71100236 Cynthia Walters /* Deposit Acct. # 2615746 Check No Date Posted Amount Account No Signatories Invoice No. 3599 1/7/2003 $900.00 71100105 Cynthia Walters/ Tim Phillips 3860 3622 3/14/2003 $2,400.00 71100105 Cynthia Walters/ Tim Phillips 3910/ 3911 3660 5/8/2003 $1,000.00 71100105 Cynthia Walters/ Tim Phillips 3918 Total $17,965.00 Walters, 03 -040 Page 10 * = Second signature on the check could not be determined due to poor photocopying quality. a. Fifteen of the checks issued by Walters were supported by numbered, pre- printed invoices from the business records of Lonny Walters Welding and Fabricating. b. Thirteen additional checks issued by Walters without corresponding invoices were determined to have been issued for legitimate services performed. c. Only legitimate income was deposited into Lonny Walters's business account. d. Cynthia Walters' signature as the borough secretary /treasurer is present on twenty -three of the twenty -eight checks issued. 31. Checks outlined in Finding No. 30 issued to Lonny Walters by Cynthia Walters, in her capacity as secretary /treasurer, were deposited into Lonny Walters's business account (account number 71101773), deposited into the Walters' personal account at National City Bank (account number 26- 15746), or cashed at First National Bank. a. Due to poor photocopy quality the disposition of check number 1109 could not be determined. 32. From July 1, 1998, through June 30, 2003, Cynthia Walters used her position as borough secretary /treasurer to prepare and issue 156 checks payable to Lonny Walters from the borough General Fund (account number 71100105) and the borough Highway Aid Fund (account number 71100236) totaling $122,240.00 when no work was actually performed for Jefferson Borough as shown below: Check No Date Posted Amount Account No Signatories Disposition of Funds 2766 9/1/1998 $475.00 71100105 Cynthia Walters /* Deposit Acct. # 2615746 2773 9/21/1998 $655.00 71100105 Cynthia Walters /* Deposit Acct. # 2615746 1106 9/28/1998 $520.00 71100236 Cynthia Walters /* Deposit Acct. # 2615746 2786 10/5/1998 $425.00 71100105 Cynthia Walters/ Patricia Lemley Deposit Acct. # 2615746 1107 10/13/1998 $455.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 2615746 2789 10/16/1998 $490.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 2615746 2802 11/12/1998 $920.00 71100105 Cynthia Walters/ Patricia Lemley Deposit Acct. # 2615746 1110 12/7/1998 $270.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 2615746 2814 12/7/1998 $270.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 2615746 2849 2/16/1999 $440.00 71100105 Cynthia Walters/ George Shipley Cashed Check at Bank 1114 2/17/1999 $685.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1116 3/2/1999 $340.00 71100236 Cynthia Walters/ George Shipley Cashed Out - Knight's Market 2865 3/8/1999 $380.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2867 3/10/1999 $325.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1117 4/1/1999 $1,780.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2879 4/1/1999 $1,820.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2897 5/7/1999 $365.00 71100105 Cynthia Walters/ George Shipley Cashed Check at Bank 1121 5/12/1999 $460.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2899 5/21/1999 $955.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2912 6/10/1999 $610.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2914 6/14/1999 $370.00 71100105 Cynthia Walters/ George Shipley Cashed Out - Knight's Market 1124 6/18/1999 $485.00 71100236 George Shipley/ Patricia Lemley Deposit Acct. # 71520716 2926 7/1/1999 $855.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1126 7/7/1999 $650.00 71100236 George Shipley/ Patricia Lemley Deposit Acct. # 71520716 2931 7/7/1999 $2,390.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2941 8/5/1999 $910.00 71100105 Cynthia Walters/ Deposit Acct. # Walters, 03 -040 Page 11 Check No Date Posted Amount Account No Signatories Disposition of Funds Patricia Lemley 71520716 2943 8/17/1999 $450.00 71100105 Cynthia Walters/ Patricia Lemley Cashed Out - SPWA 1130 9/2/1999 $860.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2955 9/2/1999 $1,020.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2959 9/9/1999 $1,280.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2960 9/24/1999 $735.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2971 10/4/1999 $675.00 71100105 Cynthia Walters/ Patricia Lemley Deposit Acct. # 71520716 1132 10/5/1999 $635.00 71100236 George Shipley/ Patricia Lemley Deposit Acct. # 71520716 2974 10/18/1999 $635.00 71100105 Cynthia Walters/ Patricia Lemley Deposit Acct. # 71520716 1134 11/5/1999 $760.00 71100236 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2984 11/5/1999 $1,240.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 2986 11/5/1999 $935.00 71100105 Cynthia Walters/ George Shipley Cashed Check at Bank 2987 11/15/1999 $595.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1136 12/6/1999 $1,240.00 71100236 George Shipley/ Patricia Lemley Deposit Acct. # 71520716 3000 12/6/1999 $875.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 3002 12/20/1999 $305.00 71100105 Cynthia Walters/ George Shipley Cashed Out - SPWA 3004 12/20/1999 $755.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1137 12/24/1999 $565.00 71100236 George Shipley /* Deposit Acct. # 71520716 3014 1/6/2000 $675.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1140 1/7/2000 $930.00 71100236 George Shipley /* Deposit Acct. # 71520716 3020 1/25/2000 $1,050.00 71100105 Cynthia Walters/ George Shipley Deposit Acct. # 71520716 1144 2/15/2000 $1,065.00 71100236 Jennifer Knight /* Deposit Acct. # 71520716 1145 2/22/2000 $385.00 71100236 Jennifer Knight /* Deposit Acct. # 71520716 3034 2/22/2000 $970.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3048 3/7/2000 $845.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 1148 3/13/2000 $1,540.00 71100236 Jennifer Knight /* Deposit Acct. # 71520716 Walters, 03 -040 Page 12 Check No Date Posted Amount Account No Signatories Disposition of Funds 3049 3/13/2000 $780.00 71100105 Cynthia Walters/ Jennifer Knight Cashed Check at Bank 3062 3/31/2000 $1,830.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1150 4/5/2000 $1,840.00 71100236 Tim Phillips /* Deposit Acct. # 71520716 3072 4/10/2000 $8,600.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3065 4/20/2000 $870.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3082 5/4/2000 $1,280.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1152 5/12/2000 $490.00 71100236 Tim Phillips /* Deposit Acct. # 71520716 3083 5/12/2000 $680.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3085 5/26/2000 $625.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3096 6/5/2000 $765.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3098 6/8/2000 $1,640.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1154 6/15/2000 $790.00 71100236 Tim Phillips /* Deposit Acct. # 71520716 3101 6/20/2000 $945.00 71100105 Cynthia Walters/ Tim Phillips Unknown 3112 7/5/2000 $3,450.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3115 7/14/2000 $580.00 71100105 Cynthia Walters/ Jennifer Knight Cashed Check at Bank 1158 7/20/2000 $900.00 71100236 Jennifer Knight /* Deposit Acct. # 71520716 3114 7/20/2000 $810.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3126 8/3/2000 $765.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3128 8/8/2000 $1,245.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3130 8/21/2000 $465.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3132 8/28/2000 $925.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3144 9/1/2000 $1,570.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3146 9/14/2000 $1,170.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3158 10/4/2000 $1,460.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3161 10/19/2000 $885.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 1163 10/27/2000 $840.00 71100236 Jennifer Knight/ Deposit Acct. # Walters, 03 -040 Page 13 Check No Date Posted Amount Account No Signatories Disposition of Funds Tim Phillips 71520716 3171 11/14/2000 $925.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1166 11/27/2000 $625.00 71100236 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3182 11/27/2000 $915.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3186 12/11/2000 $625.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1168 12/18/2000 $545.00 71100236 Tim Phillips/ Jennifer Knight Deposit Acct. # 71520716 3204 1/4/2001 $750.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3206 1/11/2001 $965.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3208 1/22/2001 $680.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3221 2/5/2001 $565.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3225 2/8/2001 $945.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3226 2/20/2001 $720.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3238 3/6/2001 $450.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 1176 3/12/2001 $450.00 71100236 Tim Phillips /* Deposit Acct. # 71520716 3241 3/15/2001 $745.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3259 4/30/2001 $125.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3271 5/7/2001 $450.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3273 5/14/2001 $1,075.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3275 5/21/2001 $480.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3290 6/8/2001 $850.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3295 6/14/2001 $760.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3297 6/25/2001 $475.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3310 7/5/2001 $490.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3311 7/6/2001 $565.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3313 7/9/2001 $790.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3315 7/13/2001 $530.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank Walters, 03 -040 Page 14 Check No Date Posted Amount Account No Signatories Disposition of Funds 3317 7/23/2001 $650.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3326 8/6/2001 $530.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3330 8/10/2001 $640.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3331 8/20/2001 $300.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3344 9/7/2001 $350.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3346 9/12/2001 $435.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3348 9/20/2001 $620.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3359 10/15/2001 $350.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3360 10/22/2001 $300.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3371 11/13/2001 $430.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3374 11/16/2001 $300.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3375 11/19/2001 $975.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3386 12/6/2001 $690.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3391 12/10/2001 $450.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3396 12/11/2001 $680.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3398 12/19/2001 $400.00 71100105 Cynthia Walters/ Jennifer Knight Deposit Acct. # 71520716 3400 12/24/2001 $325.00 71100105 Cynthia Walters/ Jennifer Knight Cashed Check at Bank 3413 1/18/2002 $450.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3415 1/25/2002 $660.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3427 2/12/2002 $275.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3428 2/20/2002 $400.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3444 3/18/2002 $400.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3445 3/20/2002 $350.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3461 4/10/2002 $460.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3465 4/15/2002 $820.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3466 4/25/2002 $755.00 71100105 Cynthia Walters/ Deposit Acct. # Walters, 03 -040 Page 15 Check No Date Posted Amount Account No Signatories Disposition of Funds Tim Phillips 71520716 3476 5/7/2002 $350.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3484 5/10/2002 $925.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3486 5/15/2002 $490.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3487 5/24/2002 $430.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3498 6/3/2002 $830.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3501 6/12/2002 $1,250.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3502 6/18/2002 $460.00 71100105 Cynthia Walters/ Tim Phillips Cashed Check at Bank 3504 6/24/2002 $1,200.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3518 7/15/2002 $860.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3520 7/31/2002 $760.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3533 8/12/2002 $1,000.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3536 8/19/2002 $460.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3537 8/28/2002 $460.00 71100105 Cynthia Walters/ Tim Phillips Cashed Out - SPWA 3548 9/4/2002 $580.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3553 9/9/2002 $520.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3555 9/16/2002 $520.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3556 9/30/2002 $345.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3464 10/17/2002 $250.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3632 3/18/2003 $425.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3635 3/27/2003 $420.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3664 5/13/2003 $1,650.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 3665 5/27/2003 $475.00 71100105 Cynthia Walters/ Tim Phillips Deposit Acct. # 71520716 Total $122,240.00 Walters, 03 -040 Page 16 * = Second signature on the check could not be determined due to poor photocopying quality. 33. None of the 156 checks Cynthia Walters made payable to Lonny Walters are Walters, 03 -040 Page 17 supported by business records of Lonny Walters Welding and Fabrication. a. Cynthia Walters's [sic], as the borough secretary /treasurer signed 139 of the 156 checks issued. b. The second signatures on Check Nos. 1137, 1140, 1144, 1145, 1148, 1150, 1152, 1154, 1158 and 1176 totaling $8,955 could not be confirmed as being signed by Cynthia Walters due to the poor quality of bank photocopies. 34. From at least July 1998 through June 30, 2003, Cynthia Walters fabricated and submitted invoices for payment by the borough in the name of Lonny Walters when no work was performed for the borough. a. Cynthia Walters prepared false invoices which were labeled "Lonny Walters, P.O. Box 241, Jefferson, PA 15344." b. The generic invoices were different than the numbered, pre - printed invoices being utilized by Lonny Walters for business dealings at that time. c. Cynthia Walters, in her capacity as borough secretary /treasurer, would then include the fake invoices as part of borough bills to be paid and include the invoices on bills to be approved for payment by the council. 35. Cynthia Walters, as Jefferson Borough secretary /treasurer, generated checks from both the borough General Fund (account number 71100105) and Highway Aid Fund (account number 71100236) made payable to Lonny Walters. a. Cynthia Walters then forged the signatures of various council representatives on the checks issued as payment for the fraudulent invoices. 1. Walters routinely forged the signatures of council members Shipley, Lemley, Phillips and Knight on checks made payable to Lonny Walters. b. Analysis conducted by the Pennsylvania State Police concluded that the signatures of Shipley, Lemley, Phillips, and Knight on illegitimate checks made payable to Lonny Walters shared similarities with the signature of Cynthia Walters. 1. Analysis by the Pennsylvania State Police concluded that signatures on some of the checks made payable to Lonny Walters were inconsistent with actual council member signatures and displayed consistencies with Walters handwriting. c. Personal review of the checks by Shipley, Lemley, Phillips, and Knight confirm that their respective signatures had been forged on the checks issued to Lonny Walters. 36. Check nos. 1148, 1150, 3062, 3072, 3112 (finding no. 32) totaling $17,260 issued by Cynthia Walters between March 13, 2000, and July 5, 2000, and made payable to her husband Lonny Walters total the amount of the restitution the State Ethics Commission directed Lonny Walters make to the borough and were in reality a reimbursement for restitution imposed upon him by the State Ethics Commission. a. Lonny Walters made restitution by check dated March 21, 2000, in the amount of $17,260. 37. Checks payable to Lonny Walters prepared by Cynthia Walters were then signed Walters, 03 -040 Page 18 by Cynthia Walters and deposited into the Walters' personal accounts at National City Bank; or cashed at Laurel, Promistar, or First National Bank, Knight's Market, or the SPWA. a. The disposition of check number 3101 could not be determined. b. Cynthia Walters deposited the majority of the checks she prepared into a personal account at National City Bank. c. None of the checks issued for bogus services were deposited into Lonny Walters' business account. 38. Debits made from the accounts over which Cynthia Walters had signature authority include payments of personal expenses. 39. As secretary /treasurer, Cynthia Walters normally supplied council members with a meeting packet for review two to four days in advance of the monthly meetings. a. The packet consisted of the meeting agenda and the previous month's minutes. b. No bill list was included in the packet for review. c. No invoices to be paid were provided in the packet for review. 40. Although council president was to control and direct council meetings, Walters normally carried out these actions. a. Council members did not normally question or challenge Walters' actions or explanations at council meetings. 1. If questioned on an issue, Walters replied in generalities and would not provide specific information. b. Walters was trusted by council members due to her length of service as secretary /treasurer. 41. Walters read the monthly bills incurred by the borough to council at each monthly meeting. a. Walters did not make a bill list available for council to review. b. Walters did not bring actual invoices received to the monthly meetings for review by council. 42. Checks brought to the meetings by Walters for signature were pre- addressed and reflected payments to be made per the list of bills read. a. Walters' signature was normally on the checks when presented for the second signature at the meetings. b. The second signature authorizing the check was normally obtained prior to or during the meeting. 43. Signature authority over approved borough accounts (the General Fund and Highway Aid Fund) lies with council president, vice - president, and the secretary/ treasurer. a. Approved borough accounts require two live signatures of any combination Walters, 03 -040 Page 19 of the three authorized signatories. b. Jefferson Borough does not utilize name stamps. 44. Walters gave no treasurer's report or specific information on the borough's financial status to council on a routine basis. a. Questions regarding the borough's financial status typically resulted in Walters deflecting the question to the next meeting or providing only a general statement about borough finances. b. Walters did not provide specific financial information or figures to council. 45. From July 1998 through June 2003, Cynthia Walters realized a private pecuniary gain of $122,240.00 as a result of her preparation and submission of false invoices and her subsequent issuance of checks from Jefferson Borough accounts made payable to Lonny Walters, her husband. a. Walters fabricated invoices to support checks written. b. Walters forged the signature of various council members necessary for the checks to be negotiated. c. These checks were either cashed or deposited into personal accounts over which Walters had signature authority. d. The borough funds converted by Cynthia Walters were thereafter utilized for her personal purposes. THE FOLLOWING FINDINGS RELATE TO WALTERS AUTHORIZING HERSELF AN INCREASE IN COMPENSATION AS THE BOROUGH SECRETARY /TREASURER WITHOUT COUNCIL APPROVAL 46. Walters' salary, as the borough secretary /treasurer, as approved by borough council was $100.00 per month. a. Borough council established Walters's salary at the June 1, 1987, regular meeting where Walters was appointed as the secretary /treasurer. b. Walters's salary changed from $94.55 to $94.75 in net wages between December 1998 and January 1999. 1. No explanation for the fluctuation could be determined. 47. Walters issued herself one check per month as payment for her salary as the borough secretary /treasurer. a. Walters signed as an authorized signatory all checks issued to her for secretary /treasurer wages. b. Walters presented her check monthly at council meetings to council president or vice - president for its required second signature. 48. Beginning in January 2000, Walters increased her salary as the borough secretary/ treasurer without authorization of borough council. a. Walters increased her salary by $100.00 per month. Walters, 03 -040 Page 20 b. Walters did not initially issue herself the extra one hundred dollars in wages every month. c. Walters typically issued herself a check for one hundred dollars in excess wages (i.e. $194.75) every third month from January 2000 until June 2001. d. No increase in wages was authorized by council. 49. Beginning in June 2001 and continuing through May 2003 Walters issued herself checks totaling $194.75 on a monthly basis in her position as borough secretary/ treasurer. a. These increases in wages were never approved by council. 50. In order to increase her salary without council approval, Walters would consistently read her monthly salary at council meetings during the reading of the monthly bills presented for approval. a. Walters consistently read her monthly salary as $100.00 at council meetings. b. Walters would then issue payments to her in the amount of $194.75. 51. The checks Walters prepared and submitted to council for signature were in the amount of $94.75. a. Walter's [sic] concealed the additional one hundred dollar payment by altering the actual check after it had been signed by the borough president or vice - president. b. Walters presented the check to council president or vice - president already completed with $94.75 numerically documented in the amount box and "Ninety -Four & 75/100" written on the amount line. c. After receiving the required signature, Walters added the numeral "1" in front of the "94.75" in the amount box and wrote One Hundred" in front of the "Ninety Four & 75/100" on the amount line. 52. From July 1998 through May 2003, Walters issued herself fifty -nine checks representing her wages as secretary /treasurer totaling $8,589.05 as shown below: a. Of the fifty -nine total checks issued, thirty checks totaling $5,842.50 were written for $100.00 in excess of the amount council had approved for Walters's salary. b. Only $2,842.50 of the $5,824.50 represented legitimate salary due to Walters in her secretary /treasurer position. c. Walters altered thirty (30) checks resulting in $3,000.00 in salary payments which she was not approved to receive. 53. Listed below are the fifty -nine (59) checks Walters issued herself as salary payments between July 1998 through May 2003, including the thirty (30) checks she altered resulting in $3,000 in unapproved payments which were deposited into the personal accounts of Cynthia Walters at First National Bank of PA. Check No. Date Posted Amount Signatories Excess Payment Account No. Disposition of Funds 2730 7/13/1998 $94.55 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2753 8/10/1998 $94.55 Cynthia Walters/ George Shipley $0.00 71100105 Unknown 2763 9/8/1998 $94.55 Cynthia Walters/ Patricia Lemley $0.00 71100105 Cash Out - SPWA 2780 10/13/1998 $94.55 Cynthia Walters/ George Shipley $0.00 71100105 Deposit Acct. # 2615746 2798 11/17/1998 $94.55 Cynthia Walters/ Patricia Lemley $0.00 71100105 Cashed Out - Knight's Market 2810 12/8/1998 $94.55 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2825 1/8/1999 $94.75 Cynthia Walters/ Patricia Lemley $0.00 71100105 Deposit Acct. # 71520716 2841 2/3/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Unknown 2858 3/5/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2876 4/13/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Unknown 2894 5/6/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2908 6/10/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2922 7/7/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2939 8/5/1999 $94.75 Cynthia Walters/ Patricia Lemley $0.00 71100105 Cashed Check at Bank 2953 9/9/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2968 10/7/1999 $94.75 Cynthia Walters/ Patricia Lemley $0.00 71100105 Cash Out - SPWA 2981 11/5/1999 $94.75 Cynthia Walters/ George Shipley $0.00 71100105 Cashed Check at Bank 2995 12/8/1999 $94.75 Cynthia Walters/ Patricia Lemley $0.00 71100105 Cash Out - SPWA 3012 1/6/2000 $194.75 Cynthia Walters/ George Shipley $100.00 71100105 Cashed Check at Bank 3029 2/11/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3041 3/14/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3066 4/5/2000 $194.75 Check Not Available $100.00 71100105 Unknown 3079 5/4/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Deposit Acct. # 71520716 3092 6/9/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3108* 7/6/2000 $194.75 Cynthia Walters/ Jennifer Knight $100.00 71100105 Cash Out - SPWA Walters, 03 -040 Page 21 Check No. Date Posted Amount Signatories Excess Payment Account No. Disposition of Funds 3124 8/10/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3140* 9/8/2000 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3154 10/6/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3169 11/8/2000 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3180* 12/7/2000 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3196 1/4/2001 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3215 2/13/2001 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Cash Out - SPWA 3234* 3/6/2001 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3251 4/3/2001 $94.75 Cynthia Walters/ Tim Phillips $0.00 71100105 Deposit Acct. # 71520716 3267 5/14/2001 $94.75 Cynthia Walters/ Jennifer Knight $0.00 71100105 Cash Out - SPWA 3284* 6/7/2001 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3306* 7/6/2001 $194.75 Cynthia Walters/ Jennifer Knight $100.00 71100105 Cash Out - SPWA 3325** 8/9/2001 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3340** 9/10/2001 $194.75 Cynthia Walters/ Jennifer Knight $100.00 71100105 Cash Out - SPWA 3356* 10/4/2001 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3368* 11/9/2001 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3382 12/7/2001 $194.75 Cynthia Walters/ Jennifer Knight $100.00 71100105 Cash Out - SPWA 3406 1/15/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3422 2/8/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3436* 3/14/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3451 4/9/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3480 5/13/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3496 6/10/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3512 7/3/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit - WBSA* 3530 8/12/2002 $194.75 Cynthia Walters/ $100.00 71100105 Cash Out- Walters, 03 -040 Page 22 Check No. Date Posted Amount Signatories Excess Payment Account No. Disposition of Funds Tim Phillips SPWA 3545 9/9/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3564 10/15/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3575 11/5/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3581 12/5/2002 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3595 1/13/2003 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3607 2/20/2003 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA 3620 3/5/2003 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3644 4/10/2003 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Deposit Acct. # 71520716 3656 5/8/2003 $194.75 Cynthia Walters/ Tim Phillips $100.00 71100105 Cash Out - SPWA TOTAL $8,589.05 $3,000.00 Walters, 03 -040 Page 23 a. Single asterisks after check numbers document checks where "Sec. Sal. 100" is documented in the "explanation" section of the check. 1. Walters completed the explanation section prior to the presentation of the check for its second signature. 2. The completed explanation gave the appearance that the amount documented on the check, prior to alteration, was legitimate. b. Double asterisks after check numbers document checks where "Sec. Sal 100" and "Off. Rent 100" or "Office 100" was documented in the explanation section of the check. 1. Walters added the "Off. Rent 100" or "Office 100" in the explanation section after the second signature had been obtained. 2. The additional $100.00 noted in the explanation section justified the total amount of the check if the check was ever audited or reviewed. 3. Council never approved any type of rent payment to Walters for use of her home as the borough office. c. Check number 3512 was deposited into the Waynesburg Borough Sewer Account. 1. No explanation for the deposit into this account could be determined. d. The disposition of check numbers 2753, 2841, 2876, and 3066 could not be determined. 54. From January 2000 through May 2003, Cynthia Walters used the authority of her public position to obtain a private pecuniary gain of $3,000.00 as a result of altering Walters, 03 -040 Page 24 payroll checks from Jefferson Borough payable to her as the borough secretary/ treasurer. a. Walters increased the amount payable on various checks by $100.00 after the checks had been reviewed and signed by council members. b. Salary checks with misappropriated wages incorporated were either cashed or deposited into accounts over which Walters had signature authority. THE FOLLOWING FINDINGS RELATE TO WALTERS AUTHORIZING HERSELF QUARTERLY RENT PAYMENTS FOR USE OF HER RESIDENCE AS THE BOROUGH OFFICE WITHOUT COUNCIL APPROVAL 55. Daily borough operations were conducted from Walters's home residence. a. Council never approved any type of payment to Walters for use of her home as the borough office. 56. The Jefferson Borough elected auditors conduct the annual audit of the borough's finances. a. All information reviewed by the auditors was in Walters's physical custody and control. b. The auditors reviewed only the financial documentation which Walters provided to them. 57. In or about January or February 2003, while conducting the 2002 calendar year audit, the Jefferson Borough auditors discovered General Fund check numbers 3408, 3458, 3516, and 3577 payable to Cynthia Walters in the amount of $500.00 each. a. Documented in the "Explanation" section of check number 3408 was "Sec. Off. Rent." b. Documented in the "Explanation" section of check number 3458 was "Quarterly Of. Rent." c. Nothing was documented in the "Explanation" section of check numbers 3516 and 3577. 58. The auditors found no supporting documentation or approval by council authorizing the $500.00 rent payment to Walters in the records provided by Walters for the audit. a. Jefferson Borough Auditor Margaret Cipcic subsequently contacted Walters and requested a copy of the minutes documenting council's approval of the rent payment. 59. Approximately one day after the request, Walters provided the auditors with a copy of meeting minutes from the November 5, 2001, regular council meeting. a. Documented in the minutes was the following: The secretary asked council's consideration for paying an office fee of $500.00. Per quarter beginning next year. Terry Jackson made a motion to pay the fee and a second came from Tim Phillips. Motion Carried." Check No Date Posted Amount Signatories Account No. 3408 1/7/2002 $ 500.00 Cynthia Walters /Tim Phillips 71100105 3458 4/5/2002 $ 500.00 Cynthia Walters /Tim Phillips 71100105 3516 7/2/2002 $ 500.00 Cynthia Walters /Tim Phillips 71100105 Walters, 03 -040 Page 25 b. After receiving the minutes documenting the approval, the auditors no longer questioned rent payments issued to Walters. 60. Minutes on file with Jefferson Borough confirmed two different copies of minutes for the November 5, 2001, regular meeting. a. November 5, 2001, meeting minutes supplied to and approved by council at the December 3, 2001, regular council meeting did not document or reference any rent payment to Walters. b. The November 5, 2001, meeting minutes Walters provided to the auditors contained the motion as outlined in Finding No. 61. 61. Walters generated and supplied altered borough minutes to the borough auditors to create the appearance that council had approved a $500.00 quarterly rent payment for use of her home as the borough office. a. Councilman Terry Jackson never made a motion during the November 5, 2001, council meeting to approve a $500.00 quarterly rent payment to Walters. b. Councilman Timothy Phillips never seconded a motion to approve a $500.00 quarterly rent payment to Walters. c. Council members never voted, formally or informally, to approve a $500.00 quarterly rent payment to Walters. 62. In her capacity as borough secretary /treasurer with control over borough checking accounts, Cynthia Walters issued six (6) payments to herself totaling $3,000 which were for no legitimate purpose and not approved by borough council. 63. Walters generated the checks from the borough General Fund (account number 71100105) and forged the signature of Phillips on the checks issued to her for rent payments. a. Handwriting analysis conducted by the Pennsylvania State Police concluded that Phillips' signature on rent checks were inconsistent with Phillips' actual signature. 1. Analysis by the Pennsylvania State Police concluded that Phillips' signature on rent checks issued to Walters displayed consistencies with Walters's handwriting. b. Personal review by Phillips indicated that his signature had been forged on the six checks issued as rent payment to Walters. 64. From January 2002 through May 2003, Walters misappropriated $3,000.00 in borough funds through the issuance of unauthorized rent payments to herself as the borough secretary /treasurer which were deposited to bank accounts over which Cynthia Walters had signature authority: Check No. Date Posted Amount Signatories Account No. Disposition of Funds 3257 4/5/2001 $ 200.00 Cynthia Walters/ Tim Phillips 71100105 Cash Out -SPWA 3390 12/14/2001 $ 200.O0Jennifer Cynthia Walters/ Knight 71100105 Cash Out -SPWA Total 71100105 $ 400.00 $3,000.00 Check No Date Posted Amount Signatories Account No. 3577 11/8/2002 $ 500.00 Cynthia Walters /Tim Phillips 71100105 3600 1/13/2003 $ 500.00 Cynthia Walters /Tim Phillips 71100105 3659 5/8/2003 $ 500.00 Cynthia Walters /Tim Phillips 71100105 Total $3,000.00 Walters, 03 -040 Page 26 a. Walters's signature as the borough secretary /treasurer is present on all six checks illegitimately issued as rent payment. 65. The unauthorized rent payments deposited to Walters' personal accounts over which Walters had signature authority were thereafter used for her personal gain. 66. From January 2002 through May 2003, Cynthia Walters realized a private pecuniary gain of $3,000.00 as a result of the use of her public position to issue unauthorized rent checks from Jefferson Borough payable to Walters as the borough secretary/ treasurer. a. Walters then altered and /or fabricated borough minutes for justification and in support of rent checks she wrote to conceal her misappropriation of borough funds. b. Walters forged the signature of Council President Timothy Phillips on all six checks issued in order for the checks to be negotiated. c. Unauthorized rent checks generated by Walters were deposited into personal accounts over which Walters had signature authority. THE FOLLOWING FINDINGS RELATE TO WALTERS' CONVERSION OF ADDITIONAL BOROUGH FUNDS FOR PERSONAL USE 67. As the borough secretary treasurer, Walters had sole control and custody of borough finances. 68. In April 2001 and again in December 2001, Walters, in her capacity as borough secretary /treasurer, issued $200.00 payments to herself from the borough General Fund as shown below: a. Walters's signature as secretary /treasurer is present on both checks issued. b. No reason for the issuance of the checks is documented in the "Explanation" section of the checks. 69. Walters generated the checks from the borough General Fund (account number 71100105) and forged the signature of Council Members Timothy Phillips and Jennifer Knight on the two checks. Walters, 03 -040 Page 27 a. Analysis conducted by the Pennsylvania State Police concluded that Knight's signature on the respective checks was inconsistent with Knight's actual signature. 1. Analysis by the Pennsylvania State Police concluded Knight's signature on the checks issued to Walters displayed consistencies with Walters' handwriting. 2. The PSP analysis also concluded that Phillips' signature on the respective checks shared similarities with Walters' signature standards. b. Review by Phillips and Knight indicated that their respective signatures had been forged on the checks. 70. General Fund check numbers 3257 and 3390 payable to Walters were cashed at the SPWA. a. The misappropriated funds were utilized for the personal gain of Cynthia Walters. 71. Walters realized a private pecuniary gain of $400.00 when she issued two checks from Jefferson Borough in April 2001 and December 2001 respectively payable to Walters as the borough secretary /treasurer. a. Walters forged the signatures of Councilman Phillips and Knight on the two respective checks in order for the checks to be negotiated. b. Walters took possession of the borough funds by cashing the two checks at the SPWA. 72. In late 2002 /early 2003, council member Theresa Knight questioned Walters regarding the establishment of a budget for the borough for 2003. a. Knight had knowledge of various borough issues and procedures from information received from her daughter, who previously served on council. b. Walters initially claimed that the borough had never established yearly budgets. 1. Knight knew Walters's claim to be false. 73. Council subsequently called a special meeting on January 20, 2003, to address the development and adoption of a budget for 2003. a. Knight and Walters met approximately one -half hour prior to the special meeting to draft a preliminary budget for council's consideration. b. Walters provided all of the financial figures utilized in the preliminary budget. 1. Figures Walters provided to Theresa Knight did not accurately reflect the borough's expenses in 2002. 2. Walters fabricated the figures that she provided to Knight in order to conceal the fact that she had misappropriated borough funds. Line Item Description on Audit 2002 Audit Expense Figures Walters's 2002 Expense Figures 400.00 - Legislative /Governing Body* $3,162.00 $1,434.00 405.00- Secretary $2,337.00 $1,137.00 430.00 - General Services $5,361.00 $0.00 431.00 - Cleaning of Streets $705.00 $0.00 432.00 - Winter Maintenance $1,500.00 $740.00 433.00- Traffic Control Devices $1,060.00 $225.00 434.00- Street Lighting $3,995.00 $4,280.00 435.00 - Sidewalks and Crosswalks $860.00 $0.00 436.00 -Storm Sewers and Drains $6,435.00 $0.00 438.00 -Road and Bridge Maintenance $6,143.00 $0.00 Walters, 03 -040 Page 28 c. A budget for 2003 was subsequently approved at the February 3, 2003, regular council meeting. 74. In or about May 2003, Theresa Knight received information that Walters was receiving $500.00 quarterly from the borough as compensation for utilizing her home as the borough office. 75. On May 22, 2003, Theresa Knight traveled to the Greene County Courthouse in Waynesburg, Pa and obtained copies of the 2001 and 2002 Jefferson Borough annual audit. a. Theresa Knight compared the borough's 2002 expenses as documented in the 2002 annual audit to the 2002 expenses provided by Walters for preparation of the 2003 budget. 76. Discrepancies existed between expense figures documented on the 2002 annual audit in comparison with 2002 expense figures utilized in completion of the 2003 budget including, but not limited to, those shown below: * The $500.00 quarterly rent payments to Walters were included in the Legislative /Governing Body Line Item by the borough auditors. a. The 2002 audit expense figures represent funds expended from the borough General Fund and Liquid Fuels Fund (Highway Aid Fund). 77. The 2002 expense figures provided by Walters to council for completion of the 2003 budget were altered by Walters to conceal the inappropriate payments that she made to herself and in the name of Lonny Walters. 78. After discovering the discrepancies between expenses documented on the 2002 audit and figures provided by Walters for generation of the 2003 budget, Theresa Knight mailed copies of both documents to all council members with the exception of Council President Phillips. 79. At the June 2, 2003, regular council meeting, Theresa Knight advised council that discrepancies existed with the recent audit and questioned Walters on the figures utilized. a. Walters claimed to have all the necessary information at her home to justify the figures utilized for the preparation of the budget. Walters, 03 -040 Page 29 b. Subsequent to the discussion of the audit discrepancies, council passed a motion, to hold a special meeting to discuss the audit and discrepancies. 1. The special meeting was scheduled for June 23, 2003. 2. Walters did not attend the special meeting. 3. The June 2, 2003, meeting was the last meeting Walters attended as the borough secretary /treasurer. 80. On or about June 20, 2003, and June 21, 2003, Jefferson Borough Solicitor William Davis received a total of three telephone calls from Attorney Cheryl C. Cowen, Walters's legal representative. a. Davis discussed the particulars of the call with Council President Phillips. b. Phillips subsequently contacted Theresa Knight and shared the information he had received from Davis. 81. During the June 23, 2003, special meeting the audit discrepancies and Walters's actions were the main topics of discussion. a. Phillips shared with council the information he had received from Solicitor Davis. 1. Information shared indicated the amount of funds taken by Walters for the past three years had grown to approximately $41,000.00. b. Action taken at the meeting included the replacing the solicitor and the retaining of Dennis Makel as the new solicitor. c. The June 23, 2003, special meeting was continued until June 26, 2003. 82. By way of two pieces of correspondence dated June 24, 2003, Makel advised Cowen that he was the new borough solicitor and requested that Cowen contact his office to schedule a date and time for the delivery or pick -up of all borough records from Walters. a. Makel advised that if all borough records were not returned he would petition the court for their return. 83. Cowen contacted Makel via telephone and advised that the borough records could be picked -up at Walters's residence on June 25, 2003. a. During the conversation Cowen informed Makel that Walters had admitted to stealing approximately $40,000.00 from Jefferson Borough in the last three years. 84. On June 25, 2003, Makel, Council members Barnhart, Knight, and Phillips traveled to Walters's residence to obtain borough records in Walters's possession. a. Walters supplied two file cabinets and three boxes with various borough records for pick -up. 1. Walters placed the containers in the front yard of her residence for pick -up. b. The containers' contents contained no financial records, including cancelled checks and bank statements prior to January 2003, or invoices paid by the Walters, 03 -040 Page 30 borough. 85. In correspondence dated June 26, 2003, Makel advised Cowen of the absence of borough documents from those provided by Walters and demanded all of the borough financial records from Walters within seven days. a. Makel additionally referenced Walters's prior admission (through Cowen) of stealing approximately $40,000.00 for the last three years from Jefferson Borough. 1. Makel requested a written statement from Cowen regarding the amount taken by Walters and any supporting documentation or calculations. 86. At the June 26, 2003, continuation of the special meeting, a motion was unanimously approved to terminate Walters as the borough secretary /treasurer effective immediately. 87. Makel sent additional correspondence to Cowen dated July 1, 2003, documenting information obtained from a telephone conversation between he and Cowen as follows: a. Walters had provided Makel with all borough records in her possession. b. Walters always destroyed the borough records after the conclusion of the annual audit. c. Walters was willing to pay the sum of $40,135.00 to the borough as a result of theft by Walters over the past three years. d. Walters had no supporting documentation to verify the $40,135.00 sum but "just knew" the amount she stole. e. Makel requested a response from Cowen in writing if the information documented in the letter was in any way adverse to Cowen's understanding. 1. Makel received no response from Cowen, written or otherwise, contesting the information in the correspondence. 88. The Walters's bank accounts and Jefferson Borough checks document two hundred fifty -one checks payable to either Cynthia Walters or Lonny Walters totaling $152,194.05 over the time period of July 1998 through June 2003. a. Sixty -seven (67) checks totaling $11,989.05 were payable to Cynthia Walters. b. One hundred eighty -four (184) checks totaling $140,205.00 were payable to Lonny Walters. 89. Of the $152,194.05 in Jefferson Borough checks payable to Cynthia Walters or Lonny Walters, $128,640.00 was fraudulently issued and /or misappropriated by Cynthia Walters from July 1998 through June 2003. a. Walters issued checks and forged signatures resulting in payments to her in the amount of $6,400.00 over the time period in question. b. Checks were issued with forged signatures resulting in bogus checks payable to Lonny Walters totaling $122,240.00 over the time period in question. Walters, 03 -040 Page 31 90. As the borough secretary /treasurer, Cynthia Walters was responsible for issuing IRS Forms 1099 for tax purposes to all independent contractors performing work for the borough. a. IRS Forms 1099 are to be provided to independent contractors who are paid $600.00 or more for fees, commissions, or other forms of compensation and are not employees of the borough. 91. Cynthia Walters issued Lonny Walters IRS 1099 Miscellaneous forms documenting payment from the borough in calendar years 1998, 2000, 2001, and 2002 totaling $25,694.00 as shown below: Year Amount on 1099 1998 $6,774.00 1999 (See sub finding a) 2000 $5,850.00 2001 $2,850.00 2002 $600.00 a. Walters issued Lonny Walters a IRS Form W -2 for calendar year 1999 documenting payment from the borough totaling $9,620.00. 92. Cynthia Walters underreported payments to Lonny Walters on Form 1099's for the 1998, 2000, 2001 and 2002 calendar years and the W -2 form for the 1999 calendar years. 93. Actual payments issued to Lonny Walters by Jefferson Borough from 1998 through 2003, documented through checks prepared by Cynthia Walters and issued by the borough are shown below: Actual Earnings Year per Checks 1998 $8,680.00* 1999 $29,700.00 2000 $50,940.00 2001 $26,255.00 2002 $17,360.00 2003 $7,270.00 Total $140,205.00 *Only payments from July through December included in this total. a. The above amounts include the unauthorized checks issued by Cynthia Walters made payable to Lonny Walters. 94. The inaccurate 1099's and W -2 issued to Lonny Walters resulted in under - reported payments received from Jefferson Borough on federal tax returns on Schedule C (Form 1040), Profit or Loss From Business, for years 1998 through 2003 in the amount of $107,241.00 as shown below: Amount Amount Under - Year Amount Paid Re • orted Re • orted Walters, 03 -040 Page 31 90. As the borough secretary /treasurer, Cynthia Walters was responsible for issuing IRS Forms 1099 for tax purposes to all independent contractors performing work for the borough. a. IRS Forms 1099 are to be provided to independent contractors who are paid $600.00 or more for fees, commissions, or other forms of compensation and are not employees of the borough. 91. Cynthia Walters issued Lonny Walters IRS 1099 Miscellaneous forms documenting payment from the borough in calendar years 1998, 2000, 2001, and 2002 totaling $25,694.00 as shown below: Year Amount on 1099 1998 $6,774.00 1999 (See sub finding a) 2000 $5,850.00 2001 $2,850.00 2002 $600.00 a. Walters issued Lonny Walters a IRS Form W -2 for calendar year 1999 documenting payment from the borough totaling $9,620.00. 92. Cynthia Walters underreported payments to Lonny Walters on Form 1099's for the 1998, 2000, 2001 and 2002 calendar years and the W -2 form for the 1999 calendar years. 93. Actual payments issued to Lonny Walters by Jefferson Borough from 1998 through 2003, documented through checks prepared by Cynthia Walters and issued by the borough are shown below: Actual Earnings Year per Checks 1998 $8,680.00* 1999 $29,700.00 2000 $50,940.00 2001 $26,255.00 2002 $17,360.00 2003 $7,270.00 Total $140,205.00 *Only payments from July through December included in this total. a. The above amounts include the unauthorized checks issued by Cynthia Walters made payable to Lonny Walters. 94. The inaccurate 1099's and W -2 issued to Lonny Walters resulted in under - reported payments received from Jefferson Borough on federal tax returns on Schedule C (Form 1040), Profit or Loss From Business, for years 1998 through 2003 in the amount of $107,241.00 as shown below: Year Amount Paid Amount Amount Under - Re • orted Re • orted 1998 $8,680.00 $6,774.00 $1,906.00 1999 $29,700.00 $9,620.00 $20,080.00 2000 $50,940.00 $5,850.00 $45,090.00 2001 $26,255.00 $2,850.00 $23,405.00 2002 $17,360.00 $600.00 $16,760.00 2003 $7,270.00 Total $140,205.00 $25,694.00 $107,241.00 Walters, 03 -040 Page 32 95. As the borough secretary /treasurer, Walters annually issued herself IRS Form W- 2's to document income received from the borough for tax purposes. a. W -2's Walters issued herself for calendar years 1998 and 1999 accurately reflected Walters's income from Jefferson Borough for those respective years. b. Walters issued W -2's to herself for 2000 through 2003 which under - reported her actual income from the borough. 96. Walters issued herself fraudulent W -2's documenting income from the borough as the secretary /treasurer in calendar years 2000, 2001, 2002, and 2003 as shown below: Year Amount Paid Year Amount on 1099 2000 $1,200.00 2001 $1,200.00 2002 $1,200.00 2003 $1,200.00 97. Cynthia Walters' actual earnings from Jefferson Borough from 2000 through 2003, documented through checks issued, are shown below: Year Actual Earnings per Checks 2000 $1,637.00 2001 $2,337.00 2002 $4,337.00 2003 $1,973.75 Total $10,284.75 a. The above amounts include the unauthorized excess compensation and rent payments Walters made to herself. 98. Cynthia Walters under - reported payments received from Jefferson Borough to the Internal Revenue Service on the joint IRS Form 1040 tax return filed by the Walters 2000 through 2003 in the amount of $5,448.75 as shown below: Amount Re • orted Amount Under - Re • orted 2000 $1,637.00 $1,200.00 $437.00 2001 $2,337.00 $1,200.00 $1,137.00 2002 $4,337.00 $1,200.00 $3,137.00 2003 $1,937.75 $1,200.00 $737.75 Total $10,284.75 $4,800.00 $5,448.75 Walters, 03 -040 Page 33 99. From the time period of July 1998 through June 2003 income for Cynthia Walters and Lonny Walters was under - reported to the IRS on tax reports filed in the amount of $112,689.75. a. Under - reported income included the amount of $107,241.00 regarding checks made payable to Lonny Walters from Jefferson Borough. b. Cynthia Walters under - reported income in the amount of $5,448.75 from Jefferson Borough. 100. Analysis of Walters's bank accounts and supporting documentation for the time period July 1998 through June 2003 confirmed the following information in relation to activity in all of Walters's accounts: a. The expenses incurred totaled $533,524.10 while deposits of legitimate income totaled $419,942.98. 1. Legitimate income includes income from both Cynthia Walters and Lonny Walters. c.[sic] Deposits of illegitimate income totaled $112,020.00. d. An additional $16,620.00 in illegitimate income was misappropriated but not deposited into any of the accounts. 1. The $16,620.00 was cashed at various locations. 101. The Walters' incurred expenses totaling $113,581.70 in excess of their legitimate income which could not have paid absent Walters's use of the authority of her public office to generate unauthorized payments to herself and payments made payable to her husband from the borough which were subsequently deposited into accounts over which she had signature authority. 102. Cynthia Walters destroyed borough records and documents belonging to Jefferson Borough in contradiction to mandates established by the Borough Code. a. Walters' destruction of borough records was communicated to Makel by Cowen. b. Walters' destruction of borough records was an effort to conceal her use of her public position to generate the unauthorized payments to her and those made payable to her husband. 103. Cynthia Walters was aware of the State Ethics Commission investigation regarding Lonny Walters that occurred in 1998 -1999. a. Walters was aware of the penalty imposed on Lonny Walters by the State Ethics Commission. Fund Check No. Amount General 3062 $1,830 General 3072 $8,600 General 3112 $3,450 Highway Aid 1148 $1,540 Highway Aid 1150 $1,840 Total $17,260 Walters, 03 -040 Page 34 104. As a result of the $17,260.00 fine imposed by the State Ethics Commission, Cynthia Walters obtained a loan from Second National Bank of Masontown (now Parkvale Bank) in the amount of $17,000.00 on or about March 20, 2000. a. On March 21, 2000, Walters deposited cashier's check number 02121 dated March 20, 2000, from Second National Bank of Masontown into the Walters' personal account at Laurel Bank (account number 71520716). b. Additionally deposited was $260.00 in cash. 105. On March 21, 2000, Walters obtained cashier's check number 833962 from Laurel Bank in the amount of $17,260.00 payable to Jefferson Borough. a. The cashier's check in the amount of $17,260.00 was thereafter transmitted to the State Ethics Commission and subsequently to Jefferson Borough. b. The check was deposited into the Borough General Fund (account number 71100105) on April 5, 2000. 106. In an effort to recuperate personal funds paid to the borough and intentionally circumvent the ruling and fine imposed by the State Ethics Commission, Cynthia Walters wrote checks from the Borough General Fund and Highway Aid Fund made payable to Lonny Walters as follows: 107. Check no. 3072 specifical y noted that it was for reimbursement. a. The explanation section of the check documents, "Y Reimburse." 1. The $8,600.00 amount of check number 3072 is approximately one - half of the $17,260.00 fine imposed. b. Check number 3072 was issued three days after the $17,260.00 received from Lonny Walters, in accordance with the State Ethics Commission Order, was deposit [sic] into the Borough General Fund (account number 71100105). 108. Walters issued the noted checks made payable to her husband without council's knowledge or approval. a. Council took no action to approve the checks made payable to Lonny Walters. THE FOLLOWING FINDINGS ARE RELATED TO WALTER'S FAILURE TO FILE STATEMENTS OF FINANCIAL INTERESTS FOR CALENDAR YEARS 1999 THROUGH 2003 Cal. Year Filing Year SEC Rev. Date Addressee Address City State Zip Qty. of forms mailed Date Mailed Borough SEC Secretary P.O. Box 15344- 1999 2000 01/00 Jefferson Boro 241 Jefferson PA 0241 25 01/28/00 2000 2001 SEC 01/01 Secretary, Jefferson Boro P.O. Box 241 Jefferson PA 15344- 0241 25 12/29/00 Cynthia 2001 2002 SEC 01/02 Walters, Secretary P.O. Box 241 Jefferson PA 15344- 0241 25 12/14/01 Cynthia 2002 2002 SEC 01/02 Walters, Secretary P.O. Box 241 Jefferson PA 15344- 0241 25 12/14/01 2003 2004 SEC 01/04 Reida K. Litten, Secretary P.O. Box 87 Jefferson PA 15344 45 12/08/03 2004 2005 SEC 01/05 Reida K. Litten, Secretary P.O. Box 87 Jefferson PA 15344 45 TBD Walters, 03 -040 Page 35 109. The Pennsylvania State Ethics Commission, on an annual basis, mails blank Statements of Financial Interests forms to every municipality in the Commonwealth of Pennsylvania for completion by the required deadlines. 110. Blank Statements of Financial Interests forms were mailed on an annual basis to Jefferson Borough for completion by all officials and employees required to file under the State Ethics Law. 111. Forms mailed to Jefferson Borough were mailed as follows: 112. Statement of Financial Interests filing requirements for public officials and public employees are mandated by Section 1104 of the State Ethics Act. a. Walters was required to file Statements of Financial Interests by May 1St annually in her position as Jefferson Borough Secretary /Treasurer. 113. Walters was aware of the requirement to file Statements of Financial Interests in her position as secretary /treasurer. a. Walters completed and filed a Statement of Financial Interests for calendar year 1998 on February 23, 1999. b. Walters was aware of the filing requirements as she was the direct recipient of the forms mailed to Jefferson Borough by the State Ethics Commission. 114. On August 7, 2003, a Statement of Financial Interests Compliance Review was conducted for Jefferson Borough. a. Walters had no SFIs on file with the new borough secretary /treasurer for calendar years 1999, 2000, 2001, 2002, or 2003. 115. Cynthia Walters' authorized compensation that she received during the years for which she did not file Statements of Financial Interests as required by the Ethics Law was as follows: Year Unauthorized Checks (Funds) Issued Revenue Generated % of Revenue Paid to the Walters' Illegitimate) Cynthia Walters Lonny Walters Total General State Total 1998* $0.00 $7,050.00 $7,050.00 $28,096.93 $6,359.87 $34,456.80 20.5% 1999 0.00 27, 380.00 27, 380.00 27, 023.00 12, 827.00 39, 850.00 68.7% 2000 500.00 47,295.00 47,795.00 48,373.00 3,228.00 51,601.00 92.6% 2001 1,200.00 21,285.00 22,485.00 32,510.00 6,413.00 38,923.00 57.8% 2002 3,200.00 16, 260.00 19, 460.00 32, 853.00 8,709.00 41, 562.00 46.8% 2003* 1,500.00 2,970.00 4,470.00 35, 882.00 6,298.00 42,120.00 10.6% Total $6,400.00 $122,240.00 $128,640.00 $204,737.93 $43,834.87 $248,512.80 51.8% Walters, 03 -040 Page 36 1999 $ 1,200 2000 $ 1,200 2001 $ 1,200 2002 $ 1,200 2003 $ 500 Total $ 5.300 116. The following outlines the amount of funds misappropriated by Cynthia Walters on an annual basis from Jefferson Borough as compared to the borough's annual revenue. *Notes only unauthorized checks from July 1998 through December 1998 * *Notes only unauthorized checks from January 2003 through May 2003 III. DISCUSSION: At all times relevant to this matter, Respondent Cynthia Walters (also referred to herein as "Respondent," "Respondent Walters," or "Walters ") has been a public official/ public employee subject to the provisions of the Public Official and Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S. § 401, et seq., as codified by the Public Official and Employee Ethics Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., which Acts are referred to herein as the "Ethics Act." The allegations are that Walters, a public official /public employee in her capacity as Secretary /Treasurer of Jefferson Borough ( "Borough "), Greene County, violated Sections 1103(a) and 1104(a) of the Ethics Act when she used the authority of her office for a private pecuniary gain of herself and /or a member of her immediate family when she converted Borough funds for the private use of herself and /or members of her immediate family through the issuance of Borough checks to her spouse forwork/services not actually performed; when she authorized an increase in compensation to herself as the Borough Secretary /Treasurer without Council's approval; when she authorized payments to herself from the Borough account for the use of her home as the Borough office without Council's approval; and when she failed to file Statements of Financial Interests for calendar years 1999 through 2003. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest: Walters, 03 -040 Page 37 65 Pa.C.S. § 1103(a). § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. The Ethics Act defines the term "conflict" or "conflict of interest" as follows: § 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. Section 1104(a) of the Ethics Act provides as follows: § 1104. Statement of financial interests required to be filed (a) Public official or public employee. - -Each public official of the Commonwealth shall file a statement of financial interests for the preceding calendar year with the commission no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Each public employee and public official of the Commonwealth shall file a statement of financial interests for the preceding calendar year with the department, agency, body or bureau in which he is employed or to which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Any other public employee or public official shall file a statement of financial interests with the governing authority of the political subdivision by which he is employed or within which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Persons who are full -time or part -time solicitors for political subdivisions are required to file under this section. Account Number Account Name Account Address Approved/ Unapproved Account 71100105 Jefferson Borough General Fund PO Box 241, Jefferson, Pa 15344 Approved 71100236 Jefferson Borough Highway Aid Fund PO Box 241, Jefferson, Pa 15344 Approved 71105889 Jefferson Borough General Account PO Box 241, Jefferson, Pa 15344 Unapproved 71105870 Jefferson Borough Highway Aid Account PO Box 241, Jefferson, Pa 15344 Unapproved Jefferson Borough General Fund Certificate of Deposit PO Box 241, Jefferson, Pa 15344 Approved Jefferson Borough General Fund Certificate of Deposit PO Box 241, Jefferson, Pa 15344 Approved Walters, 03 -040 Page 38 65 Pa. C. S. § 1104(a). Pursuant to Section 1104(a) of the Ethics Act, each public official /public employee must file a Statement of Financial Interests for the preceding calendar year, each year that he holds the position and the year after he leaves it. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are reproduced above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. Respondent Cynthia Walters served as the Borough's Secretary/Treasurerfrom July 1, 1987, through June 26, 2003. As Borough Secretary /Treasurer, Respondent conducted the daily operations of the Borough from her home. She maintained all Borough records at her residence with the exception of certain antiquated records. Individuals wishing to review Borough records were required to make an appointment with Respondent to do so. As Borough Secretary /Treasurer, Respondent was responsible for numerous duties including, inter alia, preparing Borough Council meeting agendas; taking minutes at the monthly meetings; preparing bill lists to be approved by Borough Council; maintaining all Borough financial records; preparing checks for payments; retaining and preserving Borough documents /records; and recommending purchases /contracts to Borough Council. As Borough Secretary /Treasurer, Respondent normally supplied Council members with a meeting packet for review two to four days in advance of the monthly meetings. Although Respondent's responsibilities included preparing bill lists to be approved by Borough Council, she did not provide written bill lists to Council for review. Rather, Respondent read the Borough's monthly bills to Council at each monthly meeting. Likewise, Respondent did not provide Council members with copies of the invoices to be paid, either in their meeting packets or at the monthly meetings. As Borough Secretary /Treasurer, Respondent had signature authority on all Borough accounts and had sole control and custody over Borough finances and financial records. Respondent kept all Borough financial records (i.e. bank statements, cancelled checks, check registers, checkbooks, etc.) at her residence. From July 1998 through June 30, 2003, the following bank accounts existed in the name of the Borough: Account Number Account Name Account Address Approved/ Unapproved Account 100106125 Jefferson Borough General Fund Certificate of Deposit PO Box 241 Jefferson, Pa 15344 Approved Walters, 03 -040 Page 39 Respondent, 'n her capacity as Secretary /Treasurer, maintained all of these accounts. The two accounts categorized as "Unapproved" were accounts that Respondent opened without the authorization or knowledge of Borough Council. For approved Borough accounts (the General Fund and Highway Aid Fund) the authorized signatories were the Council president and vice - president and the Borough Secretary /Treasurer, with live signatures of any two of the three authorized signatories being required. The following facts pertain to the allegation that Respondent converted Borough funds for the private use of herself and /or members of her immediate family through the issuance of Borough checks to her spouse for work/services not actually performed. Respondent's spouse, Lonny R. Walters, is the owner /operator of a business known as "Lonny Walters Welding and Fabricating." Lonny Walters served on Borough Council from January 1982 through December 31, 1997. Both during and after Lonny Walters' service on Borough Council, the Borough contracted with him for various services. As Borough Secretary /Treasurer, Respondent issued payments of Borough funds to her husband Lonny Walters. Some of these payments were for legitimate services performed, as detailed in Finding 30. However, from July 1998 through June 2003, Respondent realized a private pecuniary gain of $122,240.00 as a result of her preparation and submission of false invoices and her subsequent issuance of checks from Borough accounts made payable to her husband, Lonny Walters. As detailed in Finding 32, from July 1, 1998, through June 30, 2003, Respondent used her position as Borough Secretary /Treasurer to prepare and issue 156 checks payable to Lonny Walters from the Borough General Fund (account number 71100105) and the Borough Highway Aid Fund (account number 71100236) totaling $122,240.00 when no work was actually performed for the Borough. Respondent as Borough Secretary /Treasurer signed at least 139 of the aforesaid 156 checks. Respondent also forged signatures of various Council representatives on the checks so that the checks could be negotiated. These checks were either cashed or deposited into personal accounts over which Respondent had signature authority. The Borough funds converted by Respondent were thereafter used for her personal purposes. Respondent issued five of the above checks in an attempt to circumvent a ruling and order of restitution imposed upon Lonny Walters by this Commission. Specifically, on December 7, 1999, this Commission issued Order 1143 holding that Lonny Walters had violated Sections 1103(a) and 1103(f) of the Ethics Act relative to services he had performed for the Borough and directing him to pay restitution to the Borough in the amount of $17,260.00. In March 2000, Respondent obtained a personal bank loan in the amount of $17,000 and used the loan funds and $260 of other funds to pay her husband's restitution to the Borough as ordered by this Commission. However, as detailed in Finding 106, Respondent then wrote five checks (checks nos. 1148, 1150, 3062, 3072, and 3112) totaling $17,260 from the Borough General Fund and Highway Aid Fund made payable to Lonny Walters. The parties have stipulated that these checks, issued by Respondent between March 13, 2000, and July 5, 2000, were in reality a reimbursement for the restitution penalty imposed upon Lonny Walters by this Commission. Respondent issued Walters, 03 -040 Page 40 these checks without Borough Council's knowledge or approval. The following facts pertain to the allegation that Respondent authorized an increase in compensation to herself as the Borough Secretary /Treasurer without Council's approval. From January 2000 through May 2003, Respondent used the authority of her public position to obtain a private pecuniary gain of $3,000.00 as a result of altering thirty payroll checks from the Borough payable to her as the Borough Secretary /Treasurer (see, Findings 53 -54). During her entire tenure as Borough Secretary /Treasurer, Respondent's authorized compensation as Borough Secretary /Treasurer was $100.00 per month. As Secretary /Treasurer, Respondent issued paychecks to herself on a monthly basis. Respondent signed all of her own paychecks as one of the authorized signatories. She presented her monthly paychecks to Council president or vice - president for the required second signature. Beginning in January 2000, Respondent increased the amount of her paychecks as Borough Secretary /Treasurer without authorization of Borough Council. In order to accomplish this, Respondent consistently read her accurate, $100 monthly salary at Council meetings during the reading of the monthly bills for approval. Respondent presented her paychecks to Council president or vice - president already completed with the accurate net amount of her wages, $94.75, numerically documented in the amount box and "Ninety -Four & 75/100" written on the amount line. After receiving the required second signature, Respondent altered the checks by adding the numeral "1" in front of the "94.75" in the amount box and One Hundred" in front of the "Ninety Four & 75/100" on the amount line. For some of these checks, Respondent also made various notations in the explanation section, prior to or following alteration, in order to give the appearance that the checks were legitimate. These increases in Respondent's compensation were never approved by Council. Respondent's alteration of thirty of her paychecks resulted in her receiving $3,000.00 of unauthorized salary payments. The paychecks that included misappropriated wages were either cashed or deposited into accounts over which Respondent had signature authority. The following facts pertain to the allegation that Respondent authorized payments to herself from the Borough account for the use of her home as the Borough office without Council's approval. From January 2002 through May 2003, Respondent misappropriated Borough funds and realized a private pecuniary gain in the amount of $3,000.00 as a result of using her public position as Borough Secretary/Treasurer to issue unauthorized rent checks from the Borough payable to herself for use of her home as the Borough office. Borough Council never approved any type of payment to Respondent for use of her home as the Borough office. As detailed in Finding 64, Respondent issued six checks (checks nos. 3408, 3458, 3516, 3577, 3600, and 3659) for unauthorized rent payments to herself from the Borough General Fund (account number 71100105); signed all six checks as Borough Secretary Treasurer; forged the signature of Council President on all six checks in order for the checks to be negotiated; and then deposited the funds into personal bank accounts over Walters, 03 -040 Page 41 which she had signature authority. The unauthorized rent payments were thereafter used for Respondent's personal gain. In or about January or February 2003, when the Borough auditors discovered four of these checks, Respondent was asked to provide a copy of the minutes documenting Council's approval of the rent payment. Respondent then generated and supplied altered /fabricated Borough minutes to the Borough auditors to create the appearance that Council had approved a $500.00 quarterly rent payment for use of Respondent's home as the Borough office. The following facts pertain to Respondent's conversion of additional Borough funds for personal use. As detailed in Finding 68, in April and December 2001, Respondent, in her capacity as Borough Secretary /Treasurer, issued two $200.00 payments to herself from the Borough General Fund (account number 71100105). Respondent's signature as Secretary/ Treasurer is present on both checks issued (checks nos. 3257 and 3390). Respondent forged the signatures of Council Members Timothy Phillips and Jennifer Knight on the two checks. Both checks were cashed, and the misappropriated funds in the amount of $400.00 were utilized for the personal gain of Respondent. The following facts pertain to the allegation that Respondent failed to file Statements of Financial Interests for calendar years 1999 through 2003. In her position as Borough Secretary /Treasurer, Respondent was required to file Statements of Financial Interests by May 1 annually. Respondent was aware of the requirement that she file Statements of Financial Interests in her position as Borough Secretary /Treasurer. On August 7, 2003, a Statement of Financial Interests Compliance Review was conducted for the Borough. Respondent had no Statements of Financial Interests on file with the new Borough Secretary /Treasurer for calendar years 1999, 2000, 2001, 2002, or 2003. The following facts pertain to Respondent's underreporting to the Internal Revenue Service (IRS) of payments of Borough funds to herself and her husband. As Borough Secretary /Treasurer, Respondent was responsible for issuing IRS Forms 1099 for tax purposes to all independent contractors performing work for the Borough. On 1099 Forms and a W -2, Respondent underreported Borough payments to Lonny Walters for the 1998, 1999, 2000, 2001 and 2002 calendar years as detailed in Findings 91 -93. Respondent also issued to herself fraudulent W -2s that underreported her income from the Borough for calendar years 2000, 2001, 2002, and 2003 as detailed in Findings 95 -97. The inaccurate 1099s and W -2s issued to Respondent and Lonny Walters resulted in underreporting as to income received from the Borough on federal tax returns as detailed in Findings 94 and 98 -99. For the time period of July 1998 through June 2003, income received by Respondent and Lonny Walters from the Borough was underreported to the IRS in the total amount of $112,689.75. The following facts pertain to Borough Council's discovery that Respondent Walters, 03 -040 Page 42 misappropriated Borough funds and destroyed Borough records. In May -June 2003, Borough Council became aware of unauthorized rent payments to Respondent and discrepancies between financial information provided by Respondent and certain Borough audits. In June 2003 Respondent admitted to stealing approximately $40,000.00 from the Borough over the preceding three years. Respondent relinquished some Borough records, which did not contain any financial records. Communications between the Borough solicitor and Respondent's attorney indicated, inter alia, that: (1) Respondent always destroyed the Borough records after the conclusion of the annual audit; (2) Respondent was willing to pay the sum of $40,135.00 to the Borough as a result of theft by Respondent over the preceding three years; and (3) Respondent had no supporting documentation to verify the $40,135.00 sum but "just knew" the amount she stole. The parties have stipulated that Respondent destroyed Borough records and documents in an effort to conceal her use of her public position to generate unauthorized payments to herself and to her husband. The following are additional facts pertaining to this matter. From July 1998 through June 2003, of the $152,194.05 in Borough checks payable to Respondent or Lonny Walters, $128,640.00 was fraudulently issued and /or misappropriated by Respondent (Findings 88 -89). That amount - $128,640.00 - was greater than 50% of the total annual revenues generated by the Borough during those years. (Finding 116). Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth the following proposed disposition: "3. The Investigative Division will recommend the following in relation to the above allegations: a. That Cynthia Walters violated Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a), when she utilized borough funds for the private use of herself through the issuance of borough checks made payable to her spouse for work and /or services not performed. b. That Cynthia Walters violated Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a), when she authorized payments to herself in the form of increased compensation as borough secretary /treasurer, without the approval of borough council. c. That Cynthia Walters violated Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) when she authorized payments to herself from the borough for the use of her home as a borough office. d. That Cynthia Walters violated Section 1104(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1104(a) when she failed to file Statements of Financial Walters, 03 -040 Page 43 Interests for calendar years 1999 through 2003. 4. Cynthia Walters agrees to make payments to Jefferson Borough in the amount of $120,000 including an initial payment of $40,000 and monthly payments of $952.38 for eighty -three (83) months and a final payment of $952.46 in settlement of this matter. Said initial amount to be payable to Jefferson Borough and forwarded to the Pennsylvania State Ethics Commission within sixty (60) days of the issuance of the final adjudication in this matter. The amount of $120,000 to be paid to Jefferson Borough is based on an agreement between Investigative Division and the Respondent not to pursue the (10) checks totaling $8,995 (Finding 33) where the second signature could not be determined to be the Respondent's. 5. That monthly payments will be suspended if Cynthia Walters is criminally prosecuted and incarcerated. Payments will resume following Cynthia Walters release from incarceration. 6. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter; and make no specific recommendations to any law enforcement or other authority to take action in this matter. However, this matter will be referred to the appropriate law enforcement authorities for review by such agencies for whatever action they may deem appropriate. Nothing delineated herein shall be intended to prohibit the Commission from initiating appropriate enforcement actions in the event of Respondent's failure to comply with this agreement or the Commission's order or cooperating with any other authority who may so choose to review this matter further." Consent Agreement, at 2. In considering the Consent Agreement, it is clear that the elements for all three recommended violations of Section 1103(a) have been established. With respect to the first recommended violation, from July 1998 through June 2003, Respondent fabricated and submitted false invoices for payment by the Borough in the name of Lonny Walters. Respondent used her position as Borough Secretary/Treasurer to prepare and issue 156 Borough checks payable to Lonny Walters totaling $122,240.00 when no work was actually performed for the Borough. Respondent signed at least 139 of these checks as Borough Secretary /Treasurer and forged signatures of various Council representatives on the checks so that the checks could be negotiated. The checks were either cashed or deposited into personal accounts over which Respondent had signature authority, and the funds were thereafter used for Respondent's personal purposes. Respondent realized a private pecuniary gain of $122,240.00 as a result of these actions. With each element of a Section 1103(a) violation having been established, we hold that Respondent violated Section 1103(a) of the Ethics Act when she utilized Borough funds for the private use of herself through the issuance of Borough checks made payable to her spouse for work and /or services not performed. We shall now consider the second recommended violation, which pertains to Respondent's actions to provide herself increased compensation as the Borough Secretary /Treasurer without Council's approval. Per the Stipulated Findings, from January 2000 through May 2003, Respondent Walters, 03 -040 Page 44 used the authority of her public position to obtain a private pecuniary gain of $3,000.00 as a result of altering thirty payroll checks from the Borough that were payable to Respondent as Borough Secretary /Treasurer. Respondent actively deceived Borough Council by reading her accurate monthly salary at Council meetings during the reading of the monthly bills for approval and presenting her accurately completed paychecks to Council president or vice - president for a second signature, but then altering the amount of the checks after they had been signed. For some of these checks, Respondent also made various notations in the explanation section, prior to or following alteration, in order to give the appearance that the checks were legitimate. But for being Borough Secretary /Treasurer, Respondent would not have been in a position to take these actions. Respondent's alteration of thirty of her paychecks resulted in her receiving $3,000.00 of unauthorized salary payments. The paychecks that included misappropriated wages were either cashed or deposited into accounts over which Respondent had signature authority. With each element of a Section 1103(a) violation having been established, we hold that Respondent violated Section 1103(a) of the Ethics Act when she authorized payments to herself in the form of increased compensation as Borough Secretary /Treasurer, without the approval of Borough Council. The third recommended violation pertains to the allegation that without Council's approval, Respondent authorized payments to herself from the Borough account for the use of her home as the Borough office. Per the Stipulated Findings, from January 2002 through May 2003, Respondent misappropriated Borough funds and realized a private pecuniary gain in the amount of $3,000.00 as a result of using her public position as Borough Secretary /Treasurer to issue unauthorized rent checks from the Borough payable to herself for use of her home as the Borough office. The element of use of authority of office is established by Respondent's issuance of six Borough checks (checks nos. 3408, 3458, 3516, 3577, 3600, and 3659) for unauthorized rent payments to herself; affixing her own signature as Borough Secretary /Treasurer on all six checks; and affixing forged signatures of Council President on all six checks. The element of a prohibited private pecuniary benefit is established by Respondent's receipt /use of the unauthorized funds for her personal gain. Given that Borough Council never approved any type of payment to Respondent for use of her home as the Borough office, we hold that Respondent violated Section 1103(a) of the Ethics Act when she authorized payments to herself from the Borough for the use of her home as a Borough office. We note as to the above violations of Section 1103(a) of the Ethics Act that Respondent engaged in various machinations to conceal her wrongdoing, including underreporting Borough payments to her husband and herself on tax forms, altering/ fabricating Borough minutes, and destroying Borough records. The final recommended violation pertains to the allegation that Respondent failed to file Statements of Financial Interests for calendar years 1999 through 2003. In her position as Borough Secretary /Treasurer, Respondent was required to file Statements of Financial Interests with the Borough by May 1 annually. Respondent was aware of that requirement. On August 7, 2003, a Statement of Financial Interests Compliance Review was conducted for the Borough. There were no Statements of Financial Interests for Respondent on file with the Borough for calendar years 1999, 2000, 2001, 2002, or 2003. Based upon the Stipulated Findings, we hold that Respondent violated Section 1104(a) of the Ethics Act when she failed to file Statements of Financial Interests for calendar years 1999 through 2003. We shall now consider the parties' recommendations as to restitution. (See, 65 Walters, 03 -040 Page 45 Pa.C.S. § 1107(13)). In settlement of this matter, Respondent has agreed to make payments to the Borough in the amount of $120,000 including an initial payment of $40,000; monthly payments of $952.38 for eighty -three (83) months; and a final payment of $952.46. The parties have agreed that the initial payment of $40,000 is to be payable to Jefferson Borough and forwarded to this Commission within sixty (60) days of the issuance of the final adjudication in this matter. The parties have further agreed that monthly payments will be suspended if Respondent is criminally prosecuted and incarcerated, but that in such event, payments will resume following her release from incarceration. In considering the above recommendations, the $120,000 of restitution proposed by the Consent Agreement is less than the total private pecuniary benefit that Respondent Walters received from her violations of the Ethics Act during the time period under review, but that amount has been agreed to by both parties in the context of a settlement. The Consent Agreement notes that the amount is based upon an agreement between the Investigative Division and the Respondent not to pursue certain checks totaling $8,995 (Finding 33) for which the second signature could not be determined to be the Respondent's. As for referrals of this matter to law enforcement authorities, the Investigative Division has recommended that this Commission make no specific recommendations to any law enforcement or other authority to take action in this matter. However, the parties have agreed that this matter will be referred to the appropriate law enforcement authorities for review by such agencies for whatever action they may deem appropriate. Given the egregious nature of Respondent's conduct, it is appropriate that this matter be referred to law enforcement authorities for review as agreed by the parties. We determine that the Consent Agreement submitted by the parties sets forth the proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, Respondent Walters is directed to pay restitution to Jefferson Borough in the amount of $120,000 including an initial payment of $40,000; monthly payments of $952.38 for eighty -three (83) months; and a final payment of $952.46, with the initial payment to be payable to Jefferson Borough and forwarded to this Commission by no later than the sixtieth (60) day after the mailing date of this Order. The aforesaid monthly payments shall be suspended if Respondent Walters is criminally prosecuted and incarcerated, but shall resume following her release from incarceration. We shall refer this matter to the United States Attorney for the Western District of Pennsylvania, the Pennsylvania Attorney General, and the District Attorney of Greene County for review for whatever action they may deem appropriate. If she has not already done so, Respondent is directed to file with the Borough Statements of Financial Interests for calendar years 1999, 2000, 2001, 2002 and 2003, providing full financial disclosure as required by the Ethics Act, and to forward copies verifying such filings to this Commission by no later than the thirtieth (30 day after the mailing date of this Order. Compliance by Respondent as to the ordered payment of restitution to Jefferson Borough and filing of Statements of Financial Interests for calendar years 1999, 2000, 2001, 2002 and 2003 will result in the closing of this case by this Commission. Noncompliance will result in the institution of an order enforcement action. IV. CONCLUSIONS OF LAW: Walters, 03 -040 Page 46 1 As the Secretary /Treasurer of Jefferson Borough ( "Borough ") from July 1, 1987, through June 26, 2003, Cynthia Walters ( "Walters ") has at all times relevant to this matter been a public official /public employee subject to the provisions of the Ethics Act. 2. Walters violated Section 1103(a) of the Ethics Act when she utilized Borough funds for the private use of herself through the issuance of Borough checks made payable to her spouse for work and /or services not performed. 3. Walters violated Section 1103(a) of the Ethics Act when she authorized payments to herself in the form of increased compensation as Borough Secretary /Treasurer, without the approval of Borough Council. 4. Walters violated Section 1103(a) of the Ethics Act when she authorized payments to herself from the Borough for the use of her home as a Borough office. 5. Walters violated Section 1104(a) of the Ethics Act when she failed to file Statements of Financial Interests for calendar years 1999 through 2003. 6. Restitution is warranted in this case. In Re: Cynthia Walters ORDER NO. 1361 File Docket: 03 -040 Date Decided: 2/28/05 Date Mailed: 3/14/05 1 Cynthia Walters ( "Walters "), a public official /public employee in her capacity as the Secretary /Treasurer of Jefferson Borough ( "Borough ") from July 1, 1987, through June 26, 2003, violated Section 1103(a) of the Ethics Act when she utilized Borough funds for the private use of herself through the issuance of Borough checks made payable to her spouse for work and /or services not performed. 2. Walters violated Section 1103(a) of the Ethics Act when she authorized payments to herself in the form of increased compensation as Borough Secretary /Treasurer, without the approval of Borough Council. 3. Walters violated Section 1103(a) of the Ethics Act when she authorized payments to herself from the Borough for the use of her home as a Borough office. 4. Walters violated Section 1104(a) of the Ethics Act when she failed to file Statements of Financial Interests for calendar years 1999 through 2003. 5. Per the Consent Agreement of the parties, Walters is directed to pay restitution to Jefferson Borough in the amount of $120,000 including an initial payment of $40,000; monthly payments of $952.38 for eighty -three (83) months; and a final payment of $952.46, with the initial payment to be payable to Jefferson Borough and forwarded to this Commission by no later than the sixtieth (60 day after the mailing date of this Order. The aforesaid monthly payments shall be suspended if Walters is criminally prosecuted and incarcerated, but shall resume following her release from incarceration. 6. If she has not already done so, Walters is directed to file with the Borough Statements of Financial Interests for calendar years 1999, 2000, 2001, 2002 and 2003, providing full financial disclosure as required by the Ethics Act, and to forvard copies verifying such filings to this Commission by no later than the thirtieth (30 day after the mailing date of this Order. 7 This matter shall be referred to the United States Attorney for the Western District of Pennsylvania, the Pennsylvania Attorney General, and the District Attorney of Greene County for review for whatever action they may deem appropriate. 8. Compliance by Respondent with Paragraphs 5 and 6 of this Order will result in the closing of this case by this Commission. a. Non - compliance will result in the institution of an order enforcement action. BY THE COMMISSION, Walters, 03 -040 Page 48 Louis W. Fryman, Chair