Hanford debt collector first to sound alarm in massive fraud case
BAKERSFIELD, Calif. (KBAK/KBFX) —
As large as it was, the $19 million fraud case involving checking accounts tied to local school accounts could've been much bigger if not for the sharp eye of a Hanford debt collector, officials said Monday.
"I think it would've been captured without Vicky Callahan," said Joseph Grubbs, who speaks for both the Kern Community College District and the Kern Superintendent of Schools. "However, I don't know how much longer it would've taken and how many more millions of dollars that would've meant."
Callahan works for Kings Credit Services.
"She's looking at how accounts are paid, and she happens to see that she has two separate people that are paying their own accounts, and I don't know what they were, PG&E, a cellphone account or whatever, it was paid out of the same account, our account number," Grubbs said.
Callahan's first call to the district was Feb. 3. Emails obtained by Eyewitness News through public record law show a conversation among district officials about her call which say in part, "Kings Credit Services is willing to share information and possibly recordings of conversations."
"I would say Vicky Callahan is the hero of this story, absolutely," Grubbs said.
Callahan's messages also mention the possibility of a district employee involved in the illegal activity, but Grubbs was quick to downplay the probability.
"The name she provided us with, we can say that person is not and has never been an employee of the Kern Community College District," he said, adding that to date no one has been disciplined by the college district in connection with the case.
Also spotted in the district emails was evidence of a check being altered, something Grubbs said is a totally unrelated fraud, likely attributable to a burglary.
But authorities believe the same system vulnerability that allowed the bad check through could also be responsible for the broader fraud problem.
The schools use what's referred to as a "positive pay" system for their banking. The school accountants send Wells Fargo a list of all the approved debits from their accounts. If there's a transaction that is in conflict with the list, it's flagged as an "exception" in the school's online banking portal. But the school's default setting for exceptions was to pay them.
The schools have maintained since the beginning of the investigation that they did not have access to this account information. They have said that the county's treasurer and auditor-controller were responsible for reconciling their accounts, something the county denies.
Wells Fargo has since advised the schools to change their default setting to return questionable checks, something Grubbs said has been done.
The county's treasurer reported Monday that 84 percent of the missing money has been recovered, leaving just under $2.8 million outstanding.