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County government loses $50K in alleged TSBA scheme
Jan 09, 2006 12:00 am
January 5, 2005
A blistering audit of the Tennessee School Board Risk Management Trust indicates Wilson County lost nearly $52,000 in taxpayer money in allegedly fraudulent commissions.
A state investigative audit released Thursday of the Tennessee State School Board and Risk Management Trust painted a picture of wholesale mismanagement and fraud, including more than $276,000 in "illegal retirement benefits" paid to TSBA Director Dr. Dan Tollett between 1994-2000.
The audit also found Risk Management Trust program manager John Evans raked in $492,694 in fees from the trust — basically an insurance pool which is open to county governments and other entities — that were never authorized by the organization's board of trustees.
It was through the county's participation in the insurance pool — which has since ended — that it apparently lost $51,268 in taxpayer funds, the audit indicates.
When the trust was switched to a reinsurance carrier that charged lower premiums, Evans and Tollett "rather than passing the savings on to local governments" upped the commissions to 9 percent.
In the audit, Wilson County was singled out along with five other county governments that were overcharged in the alleged scheme.
Finance Director Ron Gilbert had not seen the audit on Thursday when contacted but said the county participated in the pool until July for insuring some workers compensation claims as well as liability insurance on physical property such as buildings and cars.
However, Wilson County Schools Director Dr. Jim Duncan had read the audit, which he called a "pretty scathing indictment" of the TSBA and its insurance arm.
"It certainly doesn't speak very well for some of the individuals involved," Duncan said, adding many in the education establishment had heard recent rumors regarding activity within the organizations.
"I don't believe anyone knew any specifics of the audit, but obviously they do now," he said Thursday.
The document says the TSBA Board of Directors improperly presented Tollett and his wife with "lavish retirement gifts" totaling more than $19,000, including "a travel certificate, luggage, a Rolex watch and pearl necklace."
Additionally, TSBA operating funds were also used "for a reception on Dr. Tollett's behalf costing at least $6,740, which included 18 hotel rooms at the Lowes Vanderbilt Hotel for board and trust members as well as over $500 for alcoholic beverages."
The audit also states Tollett received more than $100,000 in insurance benefits never approved by trustees and "prepared a fraudulent invoice and ordered payments" for over $15,000 for TSBA legal fees.
From 1994-2003 Tollett also "improperly received" a second employer funded pension which totaled $120,000 during a 10-year period, the audit says.
The document goes on to say the Risk Management Trust Board of Trustees "apparently failed to fulfill required duties" and Evans commingled funds to earn $59,000 in interest on member premiums which "were not remitted for use in support of trust purposes."
The audit claims Tollett "assumed multiple roles" in the two organizations "to create a conflict of interest between his fiduciary duties" to the two.
The audit states the Risk Management Trust generated losses estimated at $10.2 million during a four-year period ending June 30. An entire segment of the operation, however, has yet to be audited, the document states.
Senior Staff Writer Brooks Franklin can be reached at 444-3952 ext. 14 or by e-mail at firstname.lastname@example.org.