Traverse City Record-Eagle

Garfield Township

June 18, 2009

Ex-treasurer allegedly hid payments

By BRIAN McGILLIVARY and ART BUKOWSKI

TRAVERSE CITY -- Authorities issued a criminal charge against former Garfield Township Treasurer Judy McManus for allegedly hiding improper payments to a collection agency.

The Grand Traverse Prosecutor's office charged McManus with making a false statement related to finances as a public officer, a 90-day misdemeanor. She's scheduled to be arraigned on the charge today.

The charge stems from McManus' unauthorized decision to hire a collection agency in 2005 to pursue delinquent personal property taxes for the township, Prosecutor Al Schneider said.

McManus resigned after 19 years in office in December 2007 following a lengthy dispute with other township officials over medical leave, job attendance and other issues. She hired the collection agency to address a backlog of about $400,000 in uncollected personal property taxes from local businesses, despite a township attorney's determination that such a move would be illegal.

McManus hired a collection agency which kept 25 percent of all property taxes it collected.

She didn't notify the township board of the collection work and didn't account for more than $21,000 in fees charged by the collection agency, Schneider said.

"She went ahead and did something that the township board did not authorize and concealed it by not recording it in the townships' books, hence the charge," he said.

Attorney Larry LaSusa, representing McManus, said the township's tax accounting software would not allow McManus to make certain entries so she recorded them elsewhere.

"The township board knew about this throughout," LaSusa said. "This is nothing more than a misunderstanding of how the records were kept."

Dennis Habedank, who followed McManus in the job, sought a Michigan State Police investigation in August 2008 after his staff discovered several discrepancies while attempting to collect the back taxes.

Habedank said there were hundreds, maybe thousands of pages of questionable computer entries in which the township received tax payments that later were altered to reflect a smaller amount received.

According to police records, over a six-year period there were "3,645 transactions that have been modified, changed, voided, or otherwise manipulated from the original transaction records."

Though some funds were never fully tracked according to police reports, Schneider said investigators found no evidence of embezzlement by McManus.

Two audit firms that reviewed township records, one in 2006 and another this year, concluded McManus may have altered records to cover the tax money the collection agency withheld as its fee. The township eventually had to reimburse the county and other taxing entities for the discrepancy.

A forensic audit to look specifically for embezzlement was never performed. Schneider said a forensic audit is the responsibility of the township and state Department of Treasury, which is responsible for oversight of township financial affairs.

Neither the prior board nor a group of newly elected township officials in 2008 pursued a forensic audit requested by Habedank. Township officials said a forensic audit would cost at least $60,000.

Current township Treasurer Jeanne Blood said they did have auditors track a sampling of altered transactions and money always ended up in the township accounts. The auditors also sent out letters to businesses with outstanding property taxes to see if there were any discrepancies in the amounts paid to the township.

"The township never lost any money that we could show," Blood said. "What the auditors said was (McManus) didn't follow accounting standards."

Habedank, who was defeated in the August primary, said Wednesday the township should have gone forward with a full forensic audit.

"Not only would it have done justice to the township, it would have done justice to Judy (McManus) if everything was OK," Habedank said.

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