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Embezzlement hits Kentucky scholarship fund

Embezzlement hits Kentucky scholarship fund

A Federal indictment alleges that in a period of over five years Charles and Diana Muir embezzled $1.4 million from the Woodcock Foundation, an Episcopal Church-related charity and scholarship fund founded in 1872 and based in Louisville..

The Foundation awarded scholarships to needy college students for the past 50 years.

With assets that once totaled about $1.5 million, the Episcopal-church affiliated charity gave away nearly $500,000 over the past five years alone to 60 to 70 students a year.

But now the foundation — named after the third bishop of the Diocese of Kentucky, the Right Rev. Charles Edward Woodcock — has only $8 to its name, and students who were awarded scholarships last year never got their money.

The reason, according to a federal indictment unsealed Thursday in U.S. District Court: The foundation’s longtime chairman, Charles Muir, and his wife, Diana Muir, embezzled $1.4 million over five years, wiping it out.

The indictment alleges that Charles Muir, 59, transferred the foundation’s money into his wife’s business account, disguising the payments as loans, and that they withdrew $262,000 from ATMs at Indiana casinos and took the rest out her for business bank account.

The government says at least some of the money was spent on gambling.


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Weiwen Ng

Article is here:

If you read the comments in this other article, there appear to have been very weak controls. the Board only met to control disbursements. Normally there should have been a CFO, but it appears to have been a husband and wife show.

If you look at their IRS Form 990s, you’ll see that 2009 through 2011 are available. They reported big expenses, characterized as theft and unauthorized disbursement in both 2010 and 2011. This raises the question of why this was spread over 2 years. In April-ish 2011, when they filed their 2010 Form 990, what was the Board aware of?

In their 2009 Form 990, everything looks normal-ish. They reported a big stock market loss, though, and the market in general was rebounding in 2009. So, odd. And they had a large loan of $400,000 on their report, compared to annual disbursements of about $40,000. This should have raised concern to an educated non-accountant who had actually bothered to read the Form 990 or the organization’s report to the BoD. You might say, these guys have no website, probably a relatively small operation, maybe they didn’t make detailed reports to the board.

Well, trust but verify is the single wisest thing that President Reagan said. You do need to produce accurate reports for your board, certified by a third party (your auditor, at the very least your investment manager, your bank, etc). You don’t need an accountant on the board, but you do need someone who’s has at least basic familiar with nonprofit or corporate accounting. You need people who are comfortable with numbers. Someone should arguably have caught this in 2009 if this were a properly run organization which allowed their board to verify how they were operating. My student ministry had a very well run board. OK, it was quite a few insiders who attended the ministry or who attended various churches in the area. This happens in many nonprofits. But we had an accountant on staff, people were able to ask financial questions, etc.

The other thing I would have asked as a layperson is that the organization is paying the chairman $40,000 and is making grants in the area of $40,000 a year. In 2009 they had about $1.4 million in assets. $80,000 in ongoing expenses translates to a withdrawal rate of about 6 percent. They advise individuals in retirement to withdraw about 4 percent of their savings a year, with the expectation that their savings will be more or less depleted when they die. So, if this organization is meant to be run in perpetuity, 6 percent seems high. Maybe they intend for the endowment to be exhausted at some time, and maybe they are able to get continuing external contributions. But still, I would ask about that withdrawal rate. And I would ask why we are paying the chair as much as we are disbursing.

Bill Dilworth

How horrible. Wasn’t anybody besides the Muirs keeping an eye on this fund?

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