A hearing has been scheduled to address an accountant’s motion to dismiss a malpractice suit alleging an insurer had to cover nearly $700,000 embezzled over a 10-year period by former Moro Township Supervisor Donald R. Flack.
The hearing on the defendant’s motion to dismiss has
been reset for Dec. 18 at 9 a.m. on request of the plaintiff.
Officials of Illinois Risk Management Association (TOIRMA) filed a suit against
Thomas B. Fahnestock and Fahnestock Financial Services on May 14.
who had served as Supervisor between 2001 and 2013, pleaded guilty at federal
court in East St. Louis in September 2013 to wire fraud and structuring
transactions to evade reporting requirements. He was sentenced in July 2014 to
five years probation on each count to run concurrently and ordered to pay
restitution of $698,894.13 - of which $661,565 was to go to TOIRMA and $37,329.13 to Moro
Township. He also had to pay a $200 assessment.
78, was ordered to begin repaying his debt at a rate of $1,000 per month on Aug.
suit says that Township officials became "immediately" suspicious
that money was not merely missing, but was likely misappropriated or embezzled
by Flack during a trustee meeting on May 14, 2013.
the meeting, which was convened to discuss missing money, Flack "abruptly
stood up, announced he was resigning, and walked out of the meeting."
forensic audit of Township finances to determine the extent of embezzlement and
misappropriation was then ordered.
conducting its inquiry, the accounting firm of Ken E. Loy and Co. determined
that during a period of over 10 years, Supervisor Flack
misappropriated/embezzled $698,894.13 which TOIRMA had to pay to Moro Township
as per its bond claim," the suit says.
further alleges that Fahnestock and his firm failed to properly audit the
funds, finances and expenditures of Moro Township in audits performed in
2005, 2009 and 2013. The alleged malpractice included failing to reconcile the
bank accounts of the Township, failure to analyze the checks, transfers and
other expenditures and the failure to ensure that the Township's financial
records contained documented support, including receipts, invoices or
statements for reimbursements that Flack was receiving "purportedly for
defendants filed a motion to dismiss on June 18.
claim Fahnestock Financial Services did not perform any audits because it is
not licensed to perform audits.
to the federal information charges against Flack, his problems began in 1996
when he was presented with a personal investment opportunity where he
originally bought $2,500 worth of petroleum stocks with his own money and was
promised a "big pay day" with a very large promised return on his
approximately 2006, Donald R. Flack began unlawfully taking money in excess of
his authorized salary from the Moro Township Accounts- Township Fund,
Road/Bridge Fund, and Oil Fund initially believing that he could repay the
money to the township when he received the big return on his investment.
Initially Donald R. Flack used the money for his everyday expenses.
large promised return on the investment never happened and Donald R. Flack
realized that he did not have the funds to repay the original misappropriated
funds. In desperation Donald R. Flack began searching on the Internet of
promised ways to make money fast.
thereafter Donald R. Flack was solicited to participate in 'advance fee'
schemes where he was persuaded to pay money in order to obtain a larger sum of
money that never materialized.
R. Flack participated in these advance fee schemes and took more and more money
from Moro Township in hopes of being able to recoup and repay the previous
participate in the advance fee schemes Donald R. Flack wrote checks to himself
out of one of the Moro Township accounts. The payments to himself were
generally disguised as "office expenses." Donald R. Flack would then
cash these checks and use the cash to make wire transfers of funds via Western
Union agents to various places around the world, generally Nigeria, South
Africa and Nicaragua. Donald R. Flack used a large number of different Western
Union Agents and directed the funds to a large number of various receivers.
Donald R. Flack generally participated in structuring the transmitted funds in
amounts under $3000."
first six months of Flack's sentence were to be served at a halfway house. But
four months into it, he moved to suspend his halfway house sentence due to
health reasons, which was granted by Chief Judge Michael Reagan on Nov. 14,
is represented by Andrew Carruthers of HeplerBroom in Edwardsville.
T. Walker of Granite City represents the defendants.
County Circuit Court case number 15-L-619