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Treasurer's office retiree accused of embezzling $750,000

Posted April 01, 2008 11:00 pm

Doug Finke

A longtime former employee of the state treasurer's office was indicted Tuesday on federal charges that she embezzled $750,000 in state funds.

Debra Kay Kirby, 53, of Taylorville faces wire fraud and money laundering charges from an alleged scheme that began in 2005 but wasn't discovered until late last year. Kirby retired from the treasurer's office in May 2006.

If convicted, she could face up to 30 years in prison.

Authorities are seeking the return of $263,408, the amount Kirby allegedly used for personal expenses. She could also lose her state pension, which Giannoulias' office estimated at $50,000 a year between pension payments and benefits.

"If these allegations are true, Miss Kirby committed outright theft, pure and simple," Treasurer Alexi Giannoulias said at a Chicago news conference. "She essentially robbed the state's bank in broad daylight.

"I'm shocked. I'm dismayed. I'm troubled. I'm alarmed. Every verb you can imagine," said Giannoulias, who didn't take office until 2007, after Kirby retired.

Kirby could not be located for comment. She has no Taylorville phone listing, and several current and former Taylorville residents who were contacted Tuesday knew nothing of her. Federal authorities said no attorney has filed to defend her against the charges. Kirby will be issued a summons to appear in court at a future date.

Giannoulias said the case appears to be an isolated incident.

"So far, all we've seen is this set of transactions," he said. "There's no evidence anybody else in the office was involved."

Kirby worked 33 years in the treasurer's office, beginning in 1973. In October 2005, she was a supervisor in the clearing unit that is part of the Banking Division, earning a salary of $67,000.

While there, Kirby allegedly ordered a wire transfer of $750,000 to an account she created. Giannoulias' office said Kirby told staff that the amount was mistakenly transferred to the treasurer's office by the Department of Revenue and that Revenue wanted the money returned. However, Revenue made no such request.

Instead, Kirby allegedly had the money sent to an account under the name "Debo Craft."

Paul Miller, general counsel for Giannoulias, said the transfer by itself would not have raised eyebrows.

"We have $16 billion in our portfolio," Miller said. "We make transfers like this all of the time. She had enough seniority and responsibility, by instructing someone, that was sufficient."

Still, he said, there should have been backup documentation to justify the transfer, but there wasn't. Giannoulias said his office has taken steps to ensure that wire transfers must be authorized by more than one person, and that documentation must be obtained.

Around the same time, Pekin Hospital sent $263,408 to the state to cover quarterly payroll taxes. However, it was for federal taxes and should have been sent to the Internal Revenue Service.

"It's not uncommon to pay to the wrong place," Miller said.

The hospital notified the state of the error, and work was started to correct it.

However, the money was never returned to the hospital or forwarded to the IRS.

"Miss Kirby creates fraudulent paperwork and makes it look like the money was moved back to the hospital when it was just a paper transaction," Miller said. "It's still sitting in her bank account."

Pekin Hospital representatives could not be reached for comment Tuesday.

In March 2006, Kirby sent $486,591 to the state, drawn on the Debo Craft account, according to authorities. That check, plus the Pekin Hospital money, totaled $750,000.

"She wrote a personal check and slipped it right back in," Miller said. "On paper, it looks like all of the money is there."

After Kirby retired in May 2006, nothing further was known about the alleged scheme until November, when the IRS wanted to know what happened to the money it was supposed to get from the payroll taxes, Miller said.

The hospital contacted Giannoulias' office, which launched an investigation. It was then that officials noticed unusual aspects about the transactions, such as the original transfer being made between two different banks. Usually, money is transferred between accounts at the same bank, Miller said.

It still took months to piece together the documentation of the complex set of transactions. Giannoulias' office turned its investigative material over to federal authorities March 12.

Giannoulias' office is working with Pekin Hospital to cover the funds it still owes to the IRS.

"We are responsible for it," Miller said. "The indictment is seeking monetary restitution. We are not confident that there is any money there."

Doug Finke can be reached at (217) 788-1527.

How it allegedly happened

October 2005 - Debra Kirby orders a wire transfer of $750,000 to an account she opens called "Debo Craft." She says it is money the Department of Revenue wants returned to it from the treasurer's office.

Fall 2005 - Pekin Hospital mistakenly sends $263,408 in payroll taxes to the state, rather than the Internal Revenue Service. Kirby prepares paperwork indicating the money was returned, when it wasn't. The hospital is told the money was sent to the IRS.

March 2006 - Kirby writes a check to the state from the Debo Craft account for $486,591.

May 2006 - Kirby retires from the treasurer's office after 33 years.

January 2007 - Democrat Alexi Giannoulias becomes state treasurer, replacing Republican Judy Baar Topinka.

November 2007 - The IRS contacts Pekin Hospital about the payroll taxes it was never paid. The hospital contacts Giannoulias' office, which launches an investigation.

March 12, 2008 - Giannoluias' office turns its findings over to federal authorities.

April 1, 2008 - Kirby is indicted on wire fraud and money laundering charges.

Source: U.S. attorney's and state treasurer's offices

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