Auditors say drainage official misused $413,000

The Washington State Auditor’s Office also stated there’s an additional $66,000 in “questionable” payments over the last eight years.

The Washington State Auditor’s Office concluded Drainage District 5 needs to find a way to recollect not only the allegedly misappropriated $413,000, but an additional $66,000 in “questionable” payments and $24,000 in investigation costs. A copy of the report is below. Image courtesy Washington State Auditor’s Office

The Washington State Auditor’s Office concluded Drainage District 5 needs to find a way to recollect not only the allegedly misappropriated $413,000, but an additional $66,000 in “questionable” payments and $24,000 in investigation costs. A copy of the report is below. Image courtesy Washington State Auditor’s Office

A Washington State Auditor’s Office investigation into Drainage District 5 appears to confirm commissioner Allan Thomas took hundreds of thousands of dollars from taxpayers for his and his wife’s personal use over the last eight years.

The report, published May 22, 2019, outlines the investigation, which began when the Enumclaw City Attorney called the Auditor’s hotline about the potential misappropriation of public money back in November 2017.

“We reviewed the investigation files, performed additional procedures, and concluded a payment misappropriation totaling $413,323 occurred at the District between May 2012 and December 2017,” the report reads. “We also found $66,035 in questionable transactions between May 2012 and January 2019.”

A State Auditor’s Office spokesperson said at least 83 percent of the money this district had to spend was misappropriated.

“To get into six figures is a significant amount of money for anyone to spend, but this isn’t just a large amount of money — it’s most of the money that this government had to spend,” said Adam Wilson, the State Auditor’s deputy communications manager. “That’s really unusual.”

Drainage District 5, a special purpose taxing district that now represents about 600 people, was created in 1895 in order to maintain drainage ditches in Enumclaw’s northeastern corner to prevent flooding. Thomas was elected in 1988, but it appears no election has been held since, partly due to some obscure state laws surrounding how elections for special purpose tax districts.

The city of Enumclaw became interested in Drainage District 5 when it was researching storm water utility taxes in late 2017. When a public records request revealed Drainage District 5 was using a company to perform ditch maintenance that was listed as no longer in business as of the summer of 2013, and the supposed business address was the home of Allan’s mother-in-law, the city attorney filed a police report.

The report was finished in January 2019 and was sent to the King County Prosecuting Attorney’s office. No charges have been filed as of yet because prosecutors were waiting for the State Auditor to complete its investigation — now that this investigation is complete, “we will make a filing decision” in the next few weeks, a spokesman said.

According to the police and auditor report, Thomas helped his son Alex open A. Conservation Services in November 2010 in order to perform ditch maintenance. However, Alex told investigators he only performed two jobs in 2012, and according to the Department of Revenue, the business was shuttered June 2013.

Despite this, A. Conservation Services received a total of about $413,000 from Drainage District 5 between 2012 and 2019.

“A review of [A. Conservation Services’] bank account activity showed that every time an invoice payment from the District was deposited into the business account, [Thomas] and his wife (JoAnn) withdrew personal payments from that account adding up to almost the same amounts of the invoice payment, either the same day or within days after the funds were deposited,” the auditor report reads.

Many of the withdrawals were “personal in nature,” the report continued, listing that more than $142,000 was used to pay vendors who provided Thomas’ farm (Thomas Farms) with food for his livestock; another $115,000 was used to cover other farm business and costs; more than $71,000 was withdrawn from the account JoAnn’s name; another $3,000 was given to JoAnn in the form of checks; that $48,000 was transferred from A. Conservation Services’ bank account to the Thomas’ personal joint bank account; $24,000 was used to pay for the Thomas’ property taxes; and $12,000 was paid to Thomas himself in the form of checks.

An additional $66,000 in other payments is being considered “questionable” by the auditor, since “invoice descriptions of completed services lacked enough detail to understand the service area and how the amount billed was calculated,” the report reads.

For example, about $11,000 was paid between 2013 and 2019 to a local sand and gravel company, but the auditor couldn’t determine if the supplies were for ditch maintenance or for Thomas Farms.

Between 2018 and 2019, about $55,000 was paid to a different business for drainage services, but the auditor again could not determine the scope of work performed or how costs were calculated, could not find the business being registered with the Secretary of State, Department of Revenue, or the Department of Labor, and the owner of the business declined to be interviewed, despite an earlier agreement to do so.

Thomas told audit investigators that “any time money was transferred out of the business bank account to their personal bank account or when [JoAnn] withdrew cash, it was to pay for [Alex’s] bills or to give him cash,” the report reads, with Thomas adding that the checks made payable to Thomas Farms “were for rental equipment used by his son’s business for District service work.”

Investigators also interviewed Kenneth Olson, another Drainage District 5 commissioner. He said he had no involvement with the district’s finances and left it to the Thomas’.

In a third interview, Alex said he never touched the money in his business’ bank account, that his step-mother JoAnn handled the account’s checkbook and created the business invoices, and “he [had] no idea where any of the money that was deposited came from or how it was being used.”

The Washington State Auditor concluded that there were little to no safeguards in Drainage District 5’s processes to protect public money, and recommended the district recover the misappropriated $413,000, the questionable $66,000, and the $24,000 it cost for auditors to investigate.

Both Thomas and Olson resigned from their positions in mid-May, before the auditor’s report was released.

WILL TAXPAYERS SEE RESTITUTION?

With Thomas having allegedly misappropriated $413,000 over eight years, that roughly pans out to him having taken more than $680 from each of the 600 Drainage District 5 residents’ taxes.

Adding in the questionable $66,000 would make that amount larger, and if this conspiracy dates back to before 2012 — which King County Councilman Reagan Dunn suspects — individual households could have been defrauded hundreds of dollars more.

But whether these people will receive any reparations is still unknown, Dunn continued, and there are many steps before elected officials can begin to ponder that question.

First, according to Dunn, state law may have a statute of limitations that limits tax refunds to three years, meaning even if households get money back from Drainage District 5, it will likely be significantly less than what they were taxed.

Second, there are multiple ways the restitution process can begin, but the starting gun hasn’t gone off for any of them.

“Normally, [Drainage District 5] would file a civil suit on their own accord against Mr. Thomas to begin the process,” Dunn said, adding that the district would first need to have commissioners in place before going this route.

Dunn said the state Attorney General could also initiate civil action, and the case has been referred to Bob Ferguson’s office.

“The other way to do it is… ask the judge, and the judge would agree, to order Mr. Thomas to repay the money. That might include a lien on his farm and land,” he continued. The King County Prosecuting Attorney, the FBI, and the U.S. Attorney’s Office for western Washington could all begin this criminal prosecution process.

Finally, Thomas could voluntarily repay the money.

“All of those are possibilities, and I don’t know who is likely to strike first,” Dunn said. “But there’s no question that in time, Mr. Thomas will be held accountable for any monies that have been misappropriated.”

But repayment would first go back to Drainage District 5, not to its residents, and the new commissioners would have to decide what to do with that money.

“You wouldn’t take new monies coming into the district that’s specifically designated for ditch clearing and repair and just give it back to the taxpayers. That wouldn’t be how it would work,” Dunn said. “Instead, we’d wait until some some portion of restitution was paid in before it [is] paid out.”

Dunn said he would personally encourage new Drainage District 5 commissioners to give its taxpayers a full three-years of reparations, “but they may decide not to do it because they want to take that money and fix the ditches that haven’t been repaired for a long time.”

Dunn’s office sent out a May 13 letter to Drainage District 5 residents announcing that the district’s commissioners seats are vacant and new commissioners are being sought.

So far, Dunn is planning on appointing David Ballestrasse and Mark VanWieringen to two of the commissioner seats by May 31. However, a third seat would remain vacant.

Those interested in the third commissioner position can contact Lisa LaBranche at Lisa.LaBrache@kingcounty.gov or 206-477-0993.

Whoever is appointed to a commissioner seat will still have to run for re-election. which is supposed to happen every even-year — the next election is scheduled for Feb. 4, 2020.

“Any voter of a special district may become a candidate, including the appointed commissioner, for such a position by filing written notice of this intention with the King County Elections office at least thirty, but not more than sixty, days before a special district general election,” Dunn’s letter reads.

Washington State Auditor's Office report on King County Drainage District 5 by Ray Still on Scribd

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