Vernon County Ambulance District lawsuit: How did we get here?

On May 31, 2017, an indictment of former Vernon County Ambulance District employees James McKenzie and Tina Werner was made public. This is how we got here.

McKenzie and Werner have been charged with eight and nine counts, respectively, of wire fraud stemming from a more than two-year period from 2013-15 in which they are alleged to have embezzled more than $260,000 from VCAD.

The following is a compilation of events and coverage by Matt Resnick and Gabe Franklin of the Nevada Daily Mail.

On Oct. 19, 2015, the Internal Revenue Service filed a tax lien against Vernon County Ambulance District for failure to pay a total of $213,158.26 in taxes during periods ending Dec. 31, 2013, March 31, 2014, June 30, 2014, Sept. 30, 2014, Dec. 31, 2014, and March 31, 2015.

The lien noted that the IRS had requested the back due taxes be paid, but they had not been paid.

VCAD responded publicly citing a clerical error and a server failure for the problem.

At a special board meeting on Oct. 23, 2015, VCAD director James McKenzie’s and bookkeeper Tina Werner’s employment was terminated, and D.S.W.A. Certified Public Accounts hired to review the district’s financial footing.

D.S.W.A. Certified Public Accounts has performed VCAD’s annual audit for approximately the last ten years but had not been contacted to perform the 2013-14 or 2014-15 audits.

At a Nov. 3, 2015, special meeting, the district announced they owed approximately $44,000 in taxes to the state of Missouri and discussed a loan in order to repay the tax lien.

VCAD also approved a contract with Specialized Billing and Collections Systems of Texas to process patient billing, a task previously done by Werner.

Board president Mark Humphrey said a recent nation-wide change to the coding of billing, also promoted this move. According to Humphrey, roughly 12,000 new codes went into effect Oct. 1, 2015.

On Nov. 18, VCAD’s board of directors approved an application for a short-term tax-anticipation loan of $150,000 in order to take care of immediate operating needs.

By Nov. 21, 2015, VCAD learned they owed the IRS more than the $213,000 initially anticipated. The additional taxes stemmed from the second and third quarters of 2015. The board also learned of several outstanding debts: $15,000 to Stryker EMS for an ambulance cot, $14,000 to On Deck for an outstanding loan the board had not approved, and $6,500 to a credit card which was possibly in the name of a former employee.

On December 23, 2015, board member Nancy Jeffries resigned after moving outside of her sub-district.

At the January 2016 meeting, Dan Dilly, a resident of Deerfield, questioned the board regarding VCAD’s annual audit.

“I’m here as a taxpayer,” Dilly said. “I’m not here to point fingers.”

Dilly was concerned that VCAD had hired the same auditor used in the past, D.S.W.A. Certified Public Accounts.

“To me, that’s not an independent [review],” Dilly said. “If [DSWA] has had connections to the board and to the ambulance district — that’s not independent.”

Board chairperson Mark Humphrey told Dilly that DSWA’s work for VCAD is limited to audits.

Dilly suggested the Missouri State Auditor should audit the district’s finances, and that if evidence of fraud or other crimes were found, it would be turned over to law enforcement.

Humphrey explained the district’s last audit was for the 2012-13 fiscal year. Audits for 2013-14 and 2014-15 were now underway.

Wolfe arrived at the meeting following the conclusion of Dilly’s discussion with the board. He told the board he had recently turned over of the audits to the Missouri State Highway Patrol.

By the February 2016 board meeting, VCAD has secured a $450,000 loan from Heritage State Bank and paid $345,001.63 to the IRS and $52,915.14 to the Missouri Department of Revenue, and other outstanding debts were paid in full.

Coeta Smith was appointed to replace Nancy Jeffries on the board of directors.

The $150,000 tax anticipation loan from Heritage State Bank had been paid in full.

In March 2016, the board hired J. Cory Gayman CPA to handle the district’s accounts payable and payroll.

In April 2016, abated penalties and interest totaling $62,853 were returned to VCAD by the IRS as a result of an appeal by the district. The entire amount was applied to the principal of VCAD’s loan with Heritage State Bank.

B.G. Wolfe from DSWA CPA told the board that on the advice of his legal counsel, he could not release the audit results do to a pending criminal investigation.

Jim Hibbs was sworn in following the election where he had run unopposed. In the same election, James McKenzie received the single write-in vote and had been certified as eligible to hold the seat by the Vernon County Clerk’s office. McKenzie was elected to the seat formerly held by Darrell Hillier who chose not to run for re-election

On May 4, 2016, VCAD announced that McKenzie was willing serving on the board of directors but prior to taking office at the next regular meeting, he withdrew his candidacy citing a potential violation of the Missouri Ethics Conflict of Interest (Section 105.454, RSMo.).

Interim director Leland Splitter told the board that since outsourcing accounts payable to Specialized Billing and Collections Systems of Texas, monthly revenue had increased by an average of more than $10,000.

On May 16, 2016, VCAD filed a civil suit against McKenzie and Werner. The seven-count civil suit alleged the two former employees “intentionally, maliciously, and fraudulently concealed from VCAD their failure to bill approximately $250,000 due from insurance companies Missouri HealthNet, and Medicare for payments for service,” fraudulently applied for a credit card in the district’s name, falsified hours worked, and used money from district bank account for personal means among other similar allegations.

On June 2, as a result of the audits being made public record by the civil suit filed in May, B.G. Wolfe delivered a draft of the 2013-14 audit to the board.

“Within 10 minutes of me getting here I looked at one bank statement and I pulled up one financial statement and it’s like boom, it just hits you,” Wolfe said. “There was ample evidence of manipulating the accounting records. There are expenditures that are not recorded in the books. There are expenditures recorded in the books that were not actually paid.”

Following the events of October 2015, VCAD’s board chose to outsource patient billing, account payable, and payroll.

“I think it’s smart they outsourced, just like the monthly accounting, it’s good to have an extra set of eyes,” Wolfe said, adding that patient billing has become increasingly complex since the passage of the Affordable Care Act.

During discussion of the petition audit, Wolfe said the state auditor’s office would use the work he had already completed.

“I don’t think it is a wise use of money,” Wolfe said.

Dilly said, “I don’t think it [the audit] went far enough. You said you can’t get into their personal accounts?”

Wolfe answered that only a law enforcement official could access McKenzie’s and Werner’s personal accounts.

The draft of the 2014-15 audit results was presented at a June 16 meeting and was similar to the 2013-14.

At the June 28, 2016, meeting, the board voted to hire J. Cory Gayman, CPA, to reconstruct the district’s financial records for the period from July 2014 to March 2016.

At a July 14, 2016, meeting, April Jacobs was appointed to the board by unanimous vote. She filled the seat left open by McKenzie’s withdrawal.

In November 2016, the Vernon County Clerk’s office confirmed enough eligible signatures for a petition audit of VCAD by the Missouri State Auditor’s office.

Organized by Dan Dilly, 964 signatures on the petition were submitted to the Missouri State Auditors office. The petition needed 863 signatures from registered voters living within the ambulance district. The Vernon County Clerk’s office confirmed 874 valid signatures.

The petition audit is scheduled to begin June 19, 2017, and is expected cover the 2015-16 and current fiscal year.

In November 2016, at the suggestion of Wolfe, the board of directors approved the acceptance of bids for the annual audit. The following month, the board selected DSWA over Nick Myers Certified Public Account from Joplin. Myer’s had bid $19,400 to perform the annual audit. DSWA bid $5,460.

In January 2017, VCAD amended the 2016-17 budget to account for an almost $300,000 increase in billing revenue as a result of itemized billing by Specialized Billing and Collections Systems of Texas.

Chairperson Mark Humphrey chose not to seek re-election in April 2017 and was replaced by Jeanne Baldwin. Coeta Smith ran unopposed and retained her seat.

Mike Harris became board chairperson, Smith accepted the vice-chairperson position, and Chris Mason remained the treasurer.

On May 31, 2017, more than a year after VCAD’s financial crisis came to light, the US Attorney’s Office, Western District of Missouri, announced a nine-count indictment of McKenzie and Werner alleging the two former employees embezzled more than $260,000 from the district beginning in January 2013 and ending with the termination of their employment in October 2015.

As of May 31, McKenzie is reported to have turned himself in. After an initial court appearance, he was released on his own recognizance. Werner is still being sought.

Each count McKenzie and Werner are charged with carries a maximum of 20 years in prison and a $250,000 fine. The prosecution is also seeking mandatory repayment of the more than $260,000 taken from VCAD.