State Auditor Story Archives - West Virginia Public Broadcasting

State Recovers Nearly $1 Million From Check Fraud Scheme

State officials report that more than $1 million was stolen from the Department of Health and Human Resources in a check fraud scheme. Roughly 85% of the stolen funds have been recovered so far.

State officials recovered more than $966,000 from a fraud scheme involving paper checks and a state agency, according to state Auditor JB McCuskey during a Friday press conference.

After the Department of Health and Human Resources (DHHR) sent more than $1 million in checks to a Texas vendor, it was soon intercepted as part of a fraud scheme.

Fraudsters now under investigation used a chemical agent to remove the vendor’s name from the DHHR’s checks and redirect the funds to their own accounts.

Details on the incident — like the individuals responsible, and a timeline on when the fraud and investigation occurred — remain scarce, because McCuskey said the investigation remains ongoing.

So far, approximately 85 percent of the stolen funds have been recovered by McCuskey’s office, alongside investigators with the state treasurer’s office, the U.S. attorney’s office, the governor’s office, the West Virginia State Police and Truist Bank.

Agencies involved in the investigation described the recovery of stolen funds as a success story, but one that points to deeper concerns.

“Unfortunately, in the world we live in, there are a lot of fraudsters. They are very creative,” said Truist Regional President Patrick O’Malley. “It continues to be the number one risk in the banking industry.”

McCuskey said that particular risk to the state comes from the use of paper checks to transfer large amounts of money. These can be more easily redirected by outside parties, he said.

Since taking office in 2017, McCuskey said he has made a concerted effort to reduce the number of paper checks sent by state agencies. On Friday, he urged current state officials to consider opting for electronic forms of payment instead.

“If you haven’t signed up for electronic funds transfer, please do so,” he said. “You’re actually doing yourself a favor. But more than that, you’re doing the taxpayers of West Virginia a favor because it makes our jobs in finding fraud much, much easier.”

United States Attorney for the Southern District of West Virginia Will Thompson said that instances of check fraud have been growing nationwide.

“It’s happening with obviously the state of West Virginia, but it’s also happening in private industry and private individuals,” he said. “I want to make people aware of it.”

Thompson said his office will continue to pursue a criminal investigation into the perpetrators of the fraud. He has not yet provided a timeline for the investigation or said what charges will be filed.

Morrisey Partners With State Auditor To Ensure Proper Local Spending Of Opioid Funds

West Virginia Attorney General Patrick Morrisey announced a partnership with the state Auditor’s Office to supplement efforts to ensure opioid settlement money will be used for its intended purposes as outlined in the West Virginia First Foundation Memorandum of Understanding.

To make sure opioid settlement money is being used for its intended purpose, local governments will have additional resources from the West Virginia State Auditor’s office.

The MOU created a plan of action to address the opioid crisis and details the allocation method for any settlement funds or judgments received as a result of the various lawsuits against opioid manufacturers, distributors and other parties in the pharmaceutical supply chain.

The West Virginia First Foundation will handle 72.5 percent of the state’s settlement funds, while 24.5 percent will go to local governments. The remaining three percent will be held by the state in escrow to cover any outstanding attorney’s fees.

Morrisey and Auditor J.B. McCuskey are sending letters to cities and counties to provide information and guidance as they begin to receive and plan to spend their share of the opioid settlement money.

“This is another layer in the checks and balances to make sure the money from settlements are used in the best possible way, to attack the opioid scourge head-on,” Morrisey said. “I am pleased to partner with the State Auditor’s Office to bring its proven track record of transparency, accountability, and service to local governments to amplify the collaborative effort between the Attorney General’s Office and local governments around the state.”

Appalachia Health News is a project of West Virginia Public Broadcasting with support from Charleston Area Medical Center and Marshall Health.

Justice Says He Just Learned About $861,000 Loan Default Judgment

Justice could have forfeited 20 percent of his wages on each paycheck to settle the debt.

Gov. Jim Justice said he didn’t know that a bank loan to one of his coal companies he personally guaranteed had gone into default.

Justice said in his weekly briefing Wednesday that he just learned about the $861,000 default judgment that would require the state auditor to garnish his wages.

“I found out about this when you found out about this,” he said. “You know that I give away 100 percent of my salary to communities and schools. Have done that from day one.”

Justice accused Citizens Bank of West Virginia of “grandstanding” but said the matter would be resolved.

The bank filed a document last week in Randolph County Circuit Court in Elkins seeking to recover $847,000 from Justice, plus interest and fees.

The bank had loaned Bluestone Resources, a coal company his family owns, the money for an equipment purchase.

Justice could have forfeited 20 percent of his wages on each paycheck to settle the debt.

Justice May Have State Wages Garnished To Repay $847,000 Bank Loan

The notice orders the state Auditor to garnish 20 percent of Justice’s state wages after deduction of state and federal taxes, or the amount of his wages that exceed 50 times the federal hourly minimum wage.

Update: March 29. 2023 9:30 a.m.

Statement from state Auditor J.B. McCuskey’s office: “When we receive a wage garnishment order issued by a court, it is processed as directed by applicable statutes, rules and regulations. This is done without regard to whom the order is directed, whether a state official or employee, including the governor.”

Original Story

Gov. Jim Justice defaulted on a loan and may forfeit a portion of his state wages to pay it back.

Citizens Bank of West Virginia filed a document last week in the Circuit Court of Randolph County in Elkins that says Justice owes the bank $861,000, including more than $13,000 in unpaid interest and a $27 application fee.

Justice earns a $150,000 annual salary as governor. The wages will be withheld for a year unless the outstanding balance and interest is settled sooner, the document states.

Interest on the balance will accrue at 4 percent annually until the balance is paid.

The judgment was awarded on Oct. 18, and the interest penalty is as of March 14.

The judgment also names Bluestone Resources, a coal company Justice’s family owns.

The West Virginia Record reported last week that Citizens Bank loaned Bluestone more than $2.5 million in 2018 to purchase machinery and that Justice personally guaranteed the obligations. Citizens Bank accuses Justice and Bluestone of breach of contract.

Editor’s note: This story was updated to include the statement from the state auditor’s office.

Senate Finance Investigates Governor’s Donation To Marshall For New Baseball Stadium

The Senate Finance Committee wants to know how $10 million in CARES money ended up being donated by Gov. Jim Justice’s administration to Marshall University for its new baseball stadium.

The money was donated to the university from the governor’s Gifts, Grants and Donations Fund, and was transferred into that account days before the federal deadline to spend CARES funds.

Senate Finance Chair Sen. Eric Tarr, R-Putnam, questioned why a total of $28 million of CARES money was transferred to the gifts account in the first place, given the qualifying expense for the money was listed as the Division of Corrections and Rehabilitation.

“I understand that we still have National Guard in our corrections facilities and we have 1,000 FTEs [full-time employees] unfilled in our corrections facilities and we have a request for a $200 million deferred maintenance to go to corrections,” Tarr said.

“We’re under that state of emergency right now, and when you transfer the last $28 million, which doesn’t come close to covering any of those corrections expenses, the governor decides to put it into a discretionary account and then start putting AstroTurf on baseball fields. I want to ask you what part of that is appropriate,” Tarr said to Berkeley Bentley, general counsel to Justice.

Bentley told the committee that as special federal revenue, the money could only be transferred into a special revenue account.

“When the state reimburses itself, there is no direction under federal law or state law that directs where that money goes. It could not go into the governor’s civil contingent fund, rather it had to go to a special revenue account, and the most likely candidate was the gifts and grants fund,” Bentley replied.

“And ultimately a baseball field,” Tarr said.

Earlier this week, the Senate Finance Committee heard directly from the Division of Corrections and Rehabilitation about their $200 million deferred maintenance costs, including at least $27 million worth of locks that need to be replaced across the system.

Bentley told the committee that the transfer was made to officially spend the CARES money by the Sept. 30 deadline, and avoid returning the money to the federal government. Once the qualifying expense was paid, he said the state can use those funds for any legal purpose.

“We spent $1.25 billion. We did that, and we transferred it out. It’s no longer CARES, but the money is still available for any lawful purpose,” Bentley said. “The money was transferred over to pay the invoices we hadn’t received yet, not timely, what have you, but it’s also available for any other purpose that is legal under state law, no longer subject to the CARES Act requirements.”

Tarr also called on State Auditor JB McCuskey to discuss the process around the fund transfer. Under questioning from Tarr, McCuskey categorized the requested transfer of funds as “unusual.”

“We were working with cities and counties a lot to try to make sure that they were able to obligate their funds legally to ensure that the money that was given to us was spent on things that were legal,” McCuskey said. “Our office processes thousands of transfer requests a week probably … but this was a large number. And I was unfamiliar with the fund, but prior to that request, and you know, pretty obviously the name of it, it pops out pretty quickly.”

When asked why his office approved such a large and unusual transfer request, McCuskey said the governor’s office provided detailed opinions on the legitimacy of the transfer from global accounting firm BDO and the law firm Bailey Glasser.

“We can’t supplant our legal opinion of what their appropriations are if there’s a rational basis for them, and it was close,” McCuskey said. “We decided at the end of the day, it was better to make sure that effectuated what the governor’s office wanted, but to keep a record and an accounting of what happened and why.”

The meeting ended with the Senate Finance Committee agreeing to request more information on the COVID-19 money transfer from the Office of the Inspector General, as well as the Department of the Treasury.

WVSU President's Expenses Include NFL Tickets, Alcohol

The State Auditor’s Office recently flagged as suspicious charges on a state travel card that included Chicago Bears football tickets, alcohol and other purchases that typically aren’t allowed.

The Charleston Gazette says these purchases were allowed because the travel card belonged to West Virginia State University President Brian Hemphill.

Colleges are among agencies that are exempt from state travel and purchasing policies.

West Virginia State Board of Governors chairman Tom Susman says he doesn’t believe Hemphill did anything wrong. He says the board gave Hemphill the travel card so he could cultivate donors.

To his knowledge, Hemphill says no policy was violated. But he will make any appropriate changes to the system.