News and Tribune

April 6, 2013

Sellersburg Housing Authority Board discovers ‘bombshell’ of missing funds

Former housing authority director being investigated for fraud

By BRADEN LAMMERS
braden.lammers@newsandtribune.com

SELLERSBURG — The executive director of the Sellersburg Housing Authority has been removed from her position and is being investigated for theft, forgery and official misconduct.

Sellersburg Police Department through an investigation believe Kathy Downes. the former executive director of the housing authority, wrote checks from the authority to a nonexistent landlord from 2008-12 and kept the money. A total of 47 checks were cited in a police report totaling $48,092. The alleged theft was discovered when Downes’ son received a letter from the IRS about unreported income from rental property.

According to the police report her son, who is 23, has never been a landlord and knew nothing of the checks with his name on them. At the time the first checks were written, he would have been 19.

As a result of the letter from the IRS, Sellersburg Police Detective Mark Levesque said the son contacted the state’s Housing and Urban Development office. The state then contacted the Sellersburg Housing Authority’s Board of Directors, which brought the matter to police.



BOARD REACTION

Mary Jo Trester, president of the Sellersburg Housing Authority Board of Directors, said the board members became aware of the allegations in late January.

“Our program, being so small, we thought it was under control,” she said.

The only program the Sellersburg Housing Authority administers is Section 8 housing assistance. The funding for the housing assistance comes from HUD and Trester said the checks are cut to the landlords for those who have applied, and qualified, for assistance. She added that all payments were still being made to the landlords of the tenants receiving the aid through the authority.

“That’s why we didn’t catch her,” said authority Board Member Bradley Walker.

According to the police report and several board members, Downes was writing additional assistance checks to herself, or her son, and keeping the money. Levesque said the board discovered there were a number of checks made payable to Downes, or two other names she used, Kathy Ellenbrand and Kathy Perkins.

“They found these checks are made payable to her,” he said. “These were in addition to her payroll checks.”

Board members also say they found some of their names forged on checks, as the checks require a co-signer.

“She forged our names; she wrote extra checks that we knew nothing about,” Walker said. “She put their name down as receiving money but she was taking the checks.”

“We never saw the checks until the investigation,” Trester added.

She added that HUD had not notified the board of any wrongdoing before January.



HUD STATEMENT

Laura J. Feldman, public affairs official with the U.S. Department of Housing and Urban Development Region V, said in an email that housing authorities with only the housing choice voucher program that are considered “troubled” are required to submit various reports to HUD. She added that audits are not required under the Single Audit Act for agencies which have expenditures of federal funds of less than $500,000 annually.

“Sellersburg Housing Authority does not meet this threshold and therefore does not have independent public accountant audits,” Feldman said in the email. “A review is conducted by the local field office when a housing authority becomes troubled and when the agency appears to have recovered from troubled status.”

Barry McLaughlin, special agent in charge of Region V, which includes Indiana, said the allegations are being looked into, but “at this point I can’t go into any further detail.”

The alleged theft and forgery is the first instance of any wrongdoing related to the Sellersburg Housing Authority in the 25 years that Trester has been a part of the organization, she said.

“You felt betrayed because this was somebody you trusted,” Trester said. “We trusted her.”

Messages left with Downes were not returned as of press time.

Downes had been serving as the executive director, which is a part-time position, for more than five years.

“We’ve always had people we can trust,” Trester said. “It’s a good program ... I just think it’s a shame people take advantage [of it].”

When the board was made aware of the alleged check forgery, there was a general reaction of shock and disappointment.

“It’s kind of a bombshell to everybody,” said Board Member David Crum. “Everybody on the board, we had a lot of people that didn’t pick up on this. We were totally shocked.”

In addition to the six-member board, an accountant for the authority was also checking the housing authority invoices and did not pick up on the additional checks being written.

“I don’t know how she could have done this ... it’s a situation that she got away with too far for too long,” Walker said.

He added that when the alleged forgery was discovered, Downes “just didn’t show up anymore.” The last time he saw Downes was in February, he said.

As a result of Downes removal as executive director the authority — which is located in Sellersburg Town Hall but is not under the control of the town government — the office has closed.



HELPING OUT

A message on the housing authority’s voicemail cites “circumstances beyond our control” and directs callers to the Charlestown Housing Authority.

Henrietta Boley, executive director of the Charlestown Housing Authority, said her organization is helping answer calls while the Sellersburg Housing Authority is addressing its situation.

“I’m hoping maybe one of them will decide to take it on,” Trester said of one of the Charlestown Housing Authority employees.

She said that the Sellersburg Housing Authority board would work with Charlestown and keep the reporting of the two entities separate.

“Our board members are very dedicated and working hard to keep the program going,” Trester said.

In addition to the allegations Downes faces, it may not have been the only requirement she was violating. According to the Sellersburg Clerk-Treasurer’s office, minutes from the housing authority’s meetings have not been handed over to the clerk since 2007, when Ruth Miller was the housing authority’s director.

Levesque said the investigation has been turned over to the Clark County Prosecutor’s Office, but as of Friday, no warrant for Downes arrest has been issued.

Downes faces possible charges of forgery, a class C felony, and theft and official miscount, both class D felonies.