Thursday, October 8, 2015

Fire Chief Guilty of Fraud

By Greg Wright
Certified Fraud Examiner
Certified Financial Planner™

Mark Watson Mug Shot
Almost from the start
Only eight months and one day after his appointment as Speedway Fire Chief, Mark Watson started depositing checks payable to the Speedway Fire Department into his personal bank account.  The account, “Mark Watson dba Speedway F.D.”, was established on Feb. 7, 2011, without the knowledge of the Town of Speedway.

Checks made payable to the Town were mailed in envelopes addressed to the town of Speedway Fire Department. According to town officials, Watson opened all mail addressed to the fire department. 

Over the next four years, until its discovery, Watson deposited $42,982.39 in checks intended for the Town of Speedway including payments for fire protection by the Indianapolis Motor Speedway. 

Funds from this account were not used to benefit the Town or its fire department.  Instead, Watson used the funds for personal purposes including the purchase of a Toyota pick-up truck, credit card payments, and cash withdrawals. 

Just a year after establishing the bank account
In 2012, Watson started using the Town of Speedway credit cards and to issue fraudulent invoices for items of personal use.  These unauthorized purchases included a firearm and holster, a television, two sets of tires, a snow blower, clothing, and lawn and garden items.  The value of these items were relatively minor compared to the diversion of checks payable to the town; but, eventually led to his downfall.  Sometimes it is the little things that lead to a fraudster’s downfall.

Fictitious vendor
Just last year, on August 13, 2014, Watson established a bogus company, “FireProf,” and opened a U.S. post office box in the name of “Mark Watson, FireProf.”    A few weeks later, he presented a purchase order to be paid to FireProf in the amount of $4,491.67 for SCBA repairs.  The voucher was submitted for payment, approved by the Speedway Town Council and a check was mailed to Watson’s post office box.  After Watson’s schemes had unraveled, the uncashed check was recovered. 

Cash Skimming
Firefighter testing fees totaling $3,160 were collected in 2013 by three Town Pension Board members and given to Watson for deposit.  Bank records indicated that these funds found their way into Watson’s personal account. 

In 2013 and 2014, firefighter clothing costing $2,872 was purchased with town funds by Watson.   He sold the clothing to firefighters and kept the cash.  Court records indicated that proceeds from the sale were not remitted to the Town of Speedway and ended up in Watson’s personal bank account.

Mark D. Watson 
Fire Chief Watson
Mr. Watson joined the Speedway Fire Department in 1991 and served in several ranking positions including interim fire chief.  On June 6, 2010, he was appointed Fire Chief. 

New Clerk-Treasurer
On Nov. 1st, 2013, Monty W. Combs, a Certified Fraud Examiner, became the Speedway Clerk-Treasurer.  He was new to Speedway government.  Combs told me that, while he had not socially interacted with Watson, he found him to be a likable individual.    However, it was the little inconsistencies that appeared to have unmasked Watson’s frauds.

Combs was reviewing a Sam’s Club invoice submitted by Watson for truck tires for Fire vehicle 204.  Combs was new to the job; but, he did not believe that there was a fire dept vehicle with the identification of “204.”  The vehicle described on the Sam’s Club invoice was a Silver 2011 GMC Yukon.  Mark Watson’s personal vehicle was a Silver 2011 GMC Yukon.  This caused Combs to dig further.

Monty Combs, CFE
Combs then questioned Watson about some purchase orders. One of those was a $4,491.67 P. O. dated Sept. 22, 2014, issued to FireProf for scuba gear repair. Combs noted that its address was a Post Office box – a red flag to many auditors. 

Combs told me that he spoke with a vendor requesting several years of purchase records attributed to a credit card issued to Watson.  He found several questionable purchases and called in the Indiana State Board of Accounts (SBOA) requesting an audit review.  Mark D. Watson resigned as Chief on Oct. 27, 2014. 

The SBOA audit began on Nov. 3, 2014.  A “Special Investigation Report of the Fire Department of the Town of Speedway” was filed on July 10, 2015.  The audit period was January 1, 2011, to December 31, 2014. 

Following a further investigation by the Indiana State Police, a Probable Cause Affidavit was filed in Marion County on Sept. 3, 2015, charging Mark Watson with Theft and Official Misconduct. 

Watson pleaded guilty and, as part of the plea agreement, he paid full restitution to the Town of Speedway and repaid the cost of the audit conducted by the State Board of Accounts.  Watson received a sentence of two years on probation. 

Almost one-third of the Speedway firefighters attended former Chief Watson’s sentencing hearing.  He had not been a popular fire chief, and they complained about his management style.  According to Speedway employees, they felt betrayed by Watson.  A copy of his mug shot was posted in the Speedway fire house located at 1410 N Lynhurst Dr. with the word “Thief” written below.

Watson apologized; but, did not offer an explanation for the theft.  Monty Combs, Speedway Clerk-Treasurer, who liked Watson personally, posted a sign in his office – “Trust is not an internal control.”  Combs is up for re-election this November.  The Certified Fraud Examiner is running unopposed. 

According to my research, half of the embezzlers that have gone undetected for long terms are governmental employees.  Too often small governmental units rely on trust and have inadequate internal controls including separation of duties.  Absent the talent and fraud examination training of someone like Mr. Combs, this fraud might have continued undiscovered for many years.