Officials with the Fort Worden Public Development Authority warned their former chief financial officer that she could face felony charges if she didn’t return “boxes of FWPDA files and …
Officials with the Fort Worden Public Development Authority warned their former chief financial officer that she could face felony charges if she didn’t return “boxes of FWPDA files and documents” in the months following her ouster from the agency, according to public records released by the authority.
Diane Moody announced her retirement from the Fort Worden PDA last June; a move that members of its board of directors later said came in response to “financial irregularities” within the PDA that were first announced publicly in October.
But while PDA officials have been tight-lipped with any details on the alleged fraud within the development authority, records made public through a recent request by The Leader show, in part, that concerns about employees being overpaid — as well as a questions about nearly $1 million that was spent on the fort’s Makers Square project — were shared with state auditors in the weeks before PDA officials announced the agency was in a financial crisis.
The Washington State Auditor’s Office is still at work examining accusations of financial improprieties within the PDA. The release of the state’s accountability audit was originally expected to be made public in April but has since been pushed back.
The Fort Worden PDA has been front-and-center of public scrutiny since officials announced late last year it was in a financial freefall and may not survive the COVID-19 pandemic. While a dramatic drop-off in revenues was rightly recognized as caused by fewer visitors to the fort during the global pandemic, documents released by the PDA show the agency had a budget deficit in 2019.
PDA officials have said “serious financial irregularities” within the public corporation were found last year after David Timmons was hired to help the organization navigate the impacts of the COVID-19 pandemic.
Timmons announced last October that the PDA’s financial foundation was a “house of cards” and that millions of dollars in bank loans and lines of credit that had been secured for construction projects and other improvements of the fort campus — debt of $5.1 million — was coming due.
Officials had also found millions of dollars from construction projects had been diverted to the costs of daily operations, which PDA Board Co-Chairs Norm Tonina and Todd Hutton have since said was “unauthorized.”
Tonina and Hutton earlier said the PDA’s financial problems were caused in part by former executive director Dave Robison’s “apparent lack of oversight of key staff.”
Robison was relieved of personnel and financial management responsibilities after the potential malfeasance was discovered, and Robison retired from the PDA in November.
Financial misdeeds within the PDA extended beyond the shifting of capital dollars to daily expenses.
Documents released to The Leader in response to public records requests show that Moody, the PDA’s chief financial officer, was under scrutiny for being paid for time she wasn’t at work but on vacation.
In an email to The Leader, Tonina said the vacation allegation “was brought to our attention AFTER the investigation that Todd and I led was completed and Robison submitted his letter of retirement.”
The issue of Moody’s vacation pay was added to the investigation underway at the State Auditor’s Office, Tonina added.
“If the SAO investigation finds fraud, or recommends further investigation, then the PDA will take appropriate follow-up steps,” Tonina noted.
Recently released records show the PDA’s investigation included internal and external investigators, and the agency sought assistance from the Port Townsend Police Department and the Washington State Patrol, as well as the Washington State Attorney’s Office.
PDA officials have offered few public details on the quest to resolve the authority’s “financial irregularities” that were discovered before the agency announced it was millions in debt and living a month-to-month existence.
Subsequent work to refinance the PDA’s substantial debt is ongoing as the authority’s board of directors is preparing to vacate their posts en-masse in the coming month.
PDA officials have long said they contacted the Washington State Auditor’s Office to “self-report” the suspected fraud within the agency last year.
Records released to The Leader show the internal investigation by the board into financial questions dogging the agency happened months before officials publicly announced the PDA was facing an impending financial collapse.
Officials were also trying to get back records that Moody had taken with her after her June departure from the organization.
In an email to Moody, PDA attorney John Watts wrote on Sept. 1: “…You have backed out of a number of recent promises to return several boxes of FWPDA files and documents that you’ve said you have.
“I am asked to notify you that unless arrangements — no later than close of business Wednesday,
September 2nd — with me or [the PDA’s human resources manager] for their return … FWPDA will have to pursue other options to obtain their return.
“For your information, wrongfully exerting control over government records is theft in the second degree, a Class C felony,” Watts added.
“I only refer to criminal statues to get your attention, and of course we do not want to involve the police or prosecutor’s office in this matter,” Watts wrote. “What we seek is your cooperation.”
Moody responded via email four hours later, and said the “back outs” were because her car brakes were getting worked on, and after that, she was helping a neighbor and didn’t see the email request until the evening.
A medical procedure soon followed, Moody added, and that led to a hospital stay.
“I have been on bed rest from my hospital visit until Thursday this week,” she wrote.
“Curious what this is about?” Moody added in the email. “Seems there is another layer at play.”
Moody then offered to deliver the records in six days.
Her email prompted a response from the PDA’s lawyer the next morning: “This is about overdue return of PDA records. To avoid further delay, we would like to have the docs returned by tomorrow, or arrange to pick them up from your house tomorrow.”
Employees suspected someone was stealing from the PDA by August 2020, at least, according to records released to the Leader by the development authority.
PDA staff were warned Aug. 21 to keep quiet about the probe, and Chief Criminal Deputy Prosecutor Chris Ashcraft was emailed a week later about the accusations, according to records released by the PDA.
Port Townsend police were also notified.
Within the PDA, officials continued to look for financial misdeeds.
An extensive review was conducted of PDA credit card accounts that were in the names of Moody and Robison.
An audit was also conducted of Moody’s and Robison’s paid time off.
“Diane is a chronic offender,” the PDA’s human resources manager said in a September email to Timmons, who had since become interim executive director of the PDA. “We have record in TSheets of time she put in for time off, only to go back in and cancel those days off in order to credit her PTO [paid time off] ledger. I do have coordinating email confirmations for most if not all.”
Timmons, in an email forwarding the time-off audit to an audit manager in the State Auditor’s Office, added: “As I suspected here is another way they were converting leave time that is now being cashed out.”
Watts, the attorney for the PDA, notified Moody in a Dec. 16 letter that the agency was withholding any final payment to her.
“The State Auditor’s Office, in reviewing the FWPDA’s books, has called out some areas where there may be inappropriate activity, including reporting of paid leave,” Watts said in the letter to Moody.
“Until that review is completed (which may take several more months), the FWPDA will be withholding your final payment for leave payout,” Watts added.
In a response to PDA officials, Moody said she did not believe her paid leave balances were incorrect.
“The Quickbooks system calculated it and the finance team adjusted due to PTO hours calculated by QB,” she wrote. “I was capped out a long time ago because I didn’t take vacation as I should have.”
In an email to The Leader, Robison said he could not answer questions about the use of capital funds on daily expenses “due to the ongoing investigation by the Washington State Auditor’s Office.”
Robison said Moody “initially worked well with board members and the general manager in preparing the annual operating budget as well as being the lead staff for ongoing board review of the monthly financial reports. Beginning in spring of 2019, board concerns were raised about accurate and timely financial reporting. In January 2020, the board and I found out that the year ended in a deficit, which was not forecasted in earlier financial reports,” Robison wrote.
He said his opinion of Moody had since changed.
“I was devastated that she was not transparent with me and the board finance team,” Robison told The Leader.
Robison also said he accepted responsibility for the PDA’s problems over the past year.
“As executive director, I was responsible for the overall organization. I trusted my senior staff, perhaps too much, to manage their staff and carry out their department responsibilities,” he said in his email to The Leader.
Another email forwarded to the state auditor was an email of a stock sale that Moody had been involved with that had raised questions at the Fort Worden Foundation.
The foundation’s chief advancement officer noted he had found a stock holding “that Diane [Moody] never disclosed or put on the balance sheet. It was held at our brokerage account and not subject to oversight.”
“Normal practice is to always sell such a position immediately at market,” the foundation officer added. “It was disclosed at the end of 2019 and sold at that time. However, I don’t see where those funds went ... I’m concerned.”
In a following email, the officer added that the foundation had paid $66,749 for “contract services,” but it was unclear how that money was spent.
The email also noted that there were no details in financial information provided to the foundation by Moody that would show how $903,000 was spent on the Makers Square project, “but no detail as to how or where, and a balance of $96,159.78 unaccounted for.”
Those emails were also sent to the State Auditor’s Office.
Timmons noted to the audit manager he had advised the foundation, “FYI I suggested they investigate ASAP.”
In response to a public records request from The Leader for documents raising issues of fraud that were presented to state audit officials last year — a disclosure mandated by Washington state law — the Fort Worden PDA released a handful of emails to the newspaper as well as a log of documents that would be kept secret.
Most of the new details on the alleged theft within the agency, however, come from a six-page document prepared by the PDA that lists records that were withheld from public view.
Nearly all of the records kept secret, according to the PDA, were due to “legal research, opinions, or mental impressions related to investigation and anticipated legal proceedings regarding suspected fraud by a former FWPDA employee.”
Watts, the PDA’s attorney, cited that reason 21 times in the development authority’s rationale for withholding information on fraud-related records shared with the State Auditor’s Office.
Even so, descriptions of the documents give a limited insight into the timeline of the PDA’s investigation into internal claims of fraud and when the agency alerted other officials about potential financial misdeeds within the publicly chartered corporation.
An engagement letter with a forensic investigator was prepared by Sept. 1, and the next day, the PDA’s attorney asked the county prosecutor’s office for help in the investigation.
As PDA officials set out the scope of the investigation, they also reached out to employees to ask for their assistance in the probe but to maintain confidentiality.
By Sept. 4, according to PDA records, the agency’s attorney had picked out people within the development authority who could help out in the investigation.
Timmons, the PDA’s interim director, contacted the Washington State Auditor’s Office about hiring an investigator on Sept. 15 — two weeks after the investigator was hired.
The next day, the forensic accountant handed over her report — an 11-page report with nine pages of attachments.
In the days that followed, according to records released by the PDA, the agency’s board chairs traded notes on next steps with the investigation with the PDA’s attorney while he reminded staff to keep quiet about the review.
Records indicate the forensic accountant’s investigation report was sent to the State Auditor’s Office
Sept. 24, roughly a week after it landed in the hands of the PDA’s attorney.
Watts, the attorney for the Fort Worden PDA, contacted Port Townsend police the next day about an investigation.
Records show that four days later, Timmons notified the State Auditor’s Office of Watts’ outreach effort to local police.
Documents released by the PDA also show that the Washington State Attorney General’s Office was in contact with the authority in October.
Topics included getting the State Patrol’s help in the investigation, and a possible criminal referral to the Attorney General’s Office.