Friday, April 1, 2016


The date:  April 01, 2009.

The SCPR was at the Stark County Office Building covering the regular weekly meeting of the Stark County commissioners (Bosley, Ferguson and Meeks) when information broke that Stark County Chief Deputy Treasurer Vince Frustaci had been fired as he was suspected of stealing taxpayer money.

Ultimately, Frustaci was convicted on his guilty plea of having stolen $2.4 million Stark County taxpayer dollars.

Here is an extract from the SCPR's blog of April 1, 2009:
From the results of an interview with Stark County treasurer Gary Zeigler this afternoon together with information gained from a source last evening, The Report believes the following is a sensible picture of how Chief Deputy Frustaci (earning about $50,000 per year) came to be fired by Zeigler.

On Tuesday (March 31st), The Report believes that Zeigler got a phone call from an area bank (Zeigler refused to identify the bank) informing the treasurer (Zeigler did not say so) that all was not right with the treasurer's bank account in terms of the interest factor. A SCPR source (not Zeigler) has told Report that it was interest that has been drained off the county account in question and not capital funds)

With this information, The Report believes Zeigler did some internal checking and confirmed to himself that there was a problem with the office account balance and satisfied himself that Frustaci was the Stark treasury employee who worked the account. Then, The Report believes Zeigler immediately initiated action to bring in the state auditor (Mary Taylor), Stark County Sheriff Tim Swanson and Stark County Prosecutor John Ferrrero to investigate.

By the way, John Fererro walked into the treasurer's office as yours truly and an Alliance Review reporter were talking with Zeigler. Zeigler excused himself and walked off with Ferrero.

As part of the discussion with Zeigler, (because a federal bank account is a subject of the investigation), he did indicate that there is an possible federal aspect to this matter.

The Report's non-Zeigler source says that as this matter was breaking, Frustaci was either contacted or was contacted (while he was on vacation) a treasurer's office employee and learned of Auditor Taylor's crew contacting the office asking for certain records whereupon Frustaci allegedly told the office contact that nothing was to be given to Taylor until he returned to handle the matter.
From the beginning there was a lot of finger pointing as to whom was to blame for conditions to have existed over several years that the thefts are thought to have taken place for Frustaci to have been able to pull off the theft undetected until March, 2009.

A key document was an audit began by the State of Ohio Auditor (SOA) on April 1, 2009 and issued on February 26, 2010.

Here is a summary of the SOA findings outlined in a cover letter signed by then state auditor Mary Taylor (Republican, now lieutenant governor).

The Honorable Gary D. Zeigler
Stark County Treasurer
County Administration Building
110 Central Plaza - Suite 250
Canton, Ohio 44702-1410

We conducted a special audit of the Stark County Treasurer’s Office (SCTO) by performing the procedures enumerated in the attached Supplement to the Special Audit Report for the period January 1,
2005 through April 13, 2009 (the Period), solely to:

• Examine reconciliations of SCTO’s depository activity to the Stark County Auditor’s Office (SCAO) adjusted fund balances at each month end during the Period and at April 13, 2009, to determine whether funds received were deposited into SCTO’s bank and investment accounts.

• Examine available documentation supporting certain SCTO disbursements for the Period to determine whether the disbursements were for SCTO-related purposes.

This engagement was conducted in accordance with the Quality Standards for Inspections established by the President’s Council on Integrity and Efficiency (January 2005). The procedures and associated findings are detailed in the attached Supplement to the Special Audit Report. 

A summary of our procedures and significant results is as follows:

1. We examined month-end reconciliations, bank statements and other relevant documentation and determined whether the SCTO depository and book balance agreed to the total fund balance maintained by the SCAO for the period January 1, 2005 through April 13, 2009.

Significant Results – In examining these documents and using the reconciled bank balances, we determined the SCTO’s depository balance did not agree with its book balance or SCAO’s adjusted fund balance due to shortages identified in the head cashier’s vault; inaccurate posting of interest/investment income and related service charges/investment expenses; and unauthorized manual checks issued and cashed by a SCTO employee.

We recalculated the head cashier’s vault cash balance and determined the vault cash was short $2,734,560 on April 13, 2009. In Issue No. 2, we noted two unauthorized checks totaling $230,000 were issued from SCTO’s bank accounts. Accordingly, we issued a finding for recovery against Vince Frustaci, chief deputy treasurer, for $2,734,560 of public monies collected but unaccounted for and $230,000 of public monies illegally expended.

We made one noncompliance citation for maintaining a vault cash balance in excess of amounts established by SCTO policies.

We made nine management recommendations addressing internal control weaknesses noted in the reconciliation process, vault cash collection process, cash drawer overages/shortages, tracking and recording unclaimed wires, recording interest income earned and fees incurred, and segregating the cash collection and reconciliation processes.

2. We examined bank, investment, and trust account statements, wire transfers, canceled checks and other relevant documentation and determined whether certain SCTO disbursements during the Period were for SCTO-related operations.

Significant Results – We examined available documentation supporting 1,285 canceled checks and wire transfers totaling $1,219,076,533 and 201 deposits into SCTO’s First Merit Bank trust accounts and determined these transactions were for SCTO-related operations with the exception of two checks. We determined former Chief Deputy Treasurer Vince Frustaci improperly issued and cashed two checks written to First Merit Bank totaling $230,000. These funds were not spent for SCTO-related operations.

We made one noncompliance citation for SCTO to maintain records supporting daily and month end reconciliations including the amounts reflected on those documents and disbursements of SCTO funds in accordance with the Commissioner’s records retention schedule.

We made one management recommendation for SCTO to develop and implement an operations manual documenting procedures for collecting, depositing, and recording payments received;
processing wire transfers, and completing daily and monthly reconciliations.

3. On June 14, 2010, we held an exit conference with the following individuals representing the SCTO:

Honorable Gary D. Zeigler, Treasurer
Lem Green, Deputy Treasurer
Honorable John D. Ferrero, Prosecuting Attorney

The attendees were advised they had an opportunity to respond to this special audit report. No response was received.

/s/ Mary Taylor

For his part Gary Zeigler steadfastly rejected the SOA finding in terms of accepting that he had done anything wrong in the management of the Stark treasury.  And he refused to resign from office despite many calls that he do so.

On July 28, 2010 a lawsuit was filed in the Stark County Court of Common Pleas whereby the Stark County treasurer, the State of Ohio and the Stark County commissioners sought recovery as provided for by Ohio statutory law (ORC 321.37) for recovery against Frustaci, Zeigler (who was not accused of or alleged to have any part whatsoever in the theft), and bonding and insurance companies providing bonds/insurances as required by Ohio law.

On August 23, 2010 the Stark County Board of commissioners as a follow on to the civil lawsuit having be filed under ORC 321.37 instituted proceedings to and did on the 23rd remove Gary Zeigler as Stark County treasurer.

On September 7, 2010 Zeigler filed a quo warranto with the Ohio Supreme Court contesting his removal by the commissioners.

On June 23, 2011 the Supreme Court found:

Because R.C. 321.38 does not require a complaint and hearing before authorizing a board of county commissioners to remove a county treasurer, it is incompatible with Section 38, Article II of the Ohio Constitution, and thus is unconstitutional on its face

and thereby restored Zeigler (a Democrat) to office.

Eventually (October 19, 2011), the Stark County commissioners reached a settlement with Zeigler whereby he agreed to retire/resign on that date whereupon the commissioners appointed Republican Alex Zumbar as treasurer.

(SCPR Note:  Zumbar won election as treasurer in November, 2010 as the nominee of the Stark County Republican Party.  However, the June 23rd Supreme Court decision negated the election results)

On October 31st, in the face of the commissioners having appointed Zumbar on October 19th and other Stark County communitywide pressure, the Stark County Democratic Party Central Committee appointed Zumbar to fill out Zeigler's term.

Indeed, April 1, 2009 was a sad day for Stark Countians.  There were a number of political reverberations on account of revelations which flowed from that date.

But the most trying was that it was clear to many public officials that Stark Countians had lost a great deal of the trust they had in county government.

The commissioners did the best they could to recover taxpayer monies and here is an accounting that The Report obtained from Stark County Auditor Alan Harold
  • (SCPR Note:  Harold, a Republican, likely won office in November, 2010 as a consequence of the troubles in the treasury because the incumbent Democrat [Kim Perez] was apparently perceived by the public to not having done enough to bring his misgivings about the practices and procedures in treasury to the authorities attention)
a printout of the final financial cost to Stark County taxpayers, to wit:

At the end of the day, Stark Countians were out $1,546,441.01.

But the greater damage was the loss of trust that Stark Countians had for their government.

The Stark County commissioners did not try to get Stark Countians to renew an existing sales tax levy or put on a replacement sales tax in the November, 2010/May, 2011 election because they thought that the trust factor was so low that a tax issue had virtually no chance of passing.

However, through the hard work of newly elected commissioners (November, 2010) Thomas Bernabei (Democrat, a highly respected former law director, councilman and service director for Canton) and Janet Creighton (Republican; a well thought of former Stark County recorder and auditor and mayor of Canton), county government has made a rapid recovery on the trust front.

While things are way far brighter on April 1, 2014 than the were on April 1, 2009, work remains.

The commissioners yesterday had some unhappy county officials in their board meeting room for a work session expressing their distress at not having their requested appropriations for the 2014 budget year approved.

If the commissioners grant the requested additional money, it could mean that the recently adopted budget (a mere two weeks ago) will have to be reworked with other Stark County departments of government receiving less than they thought (two weeks ago).

Any such development undoubtedly will create some rancor among the departments of government and therein make the commissioners' job of maintaining a "solvent" through 2019 objective problematic.

The 0.5% sales tax increase approved by Stark Countians in the November, 2011 election is due to expire in 2019.

Getting the county department of governments to self-discipline on fiscal matters has proved to be very difficult indeed for the commissioners to accomplish.

It is far from certain as of today that Stark County can make it until 2019 without experiencing another round of draconian cuts that occurred in 2010 through 2011 as a consequence of Stark's meager 0.25% sales tax expiring.

Sadness lingers on this "unhappy anniversary date" of April 01, 2016 of past treasury department travails.

Fortunate for Stark County that the leadership of Thomas Bernabei and Janet Creighton has brought the county out of the depths of despair.

The lesson from what local attorney and civic activist Craig T. Conley has name "Zeiglergate" is that elected officials need to be persistently vigilant in detecting structures of governance (i.e. administrative procedures and physical facilities) that present opportunities for those with an inclination to violate the public trust to do so.

No comments: