By Jose Navarro, MBA | The Navarro Report
Between July 2001 and March 2017, a supervisor in the Glendale City Attorney’s Office created 30 fraudulent settlement packets, fabricated city council meeting minutes that never happened, directed the Finance Department to issue checks based on those fabricated documents, and took possession of those checks to distribute to family members and acquaintances. She did this 30 times over 16 years. The city eventually recovered approximately $609,764. She agreed to plead guilty to a federal charge of theft from an organization receiving federal funds.
The dollar amount is not what makes this case significant. In a city budget of Glendale’s size, $609,764 is recoverable. What makes this case significant is the timeline and the mechanism.
Sixteen years is not a slip or a one-time failure of oversight. It is a systematic absence of the controls that should have caught this scheme in its first year, if not its first instance. The employee had, according to the federal plea agreement, unlimited authority to sign documents directing the Finance Department to issue checks. She was also responsible for picking up those checks and delivering them to claimants’ attorneys. She was, in other words, both the authorizing party and the delivery mechanism for the same transaction — a combination that virtually any internal control framework would identify as a segregation of duties failure.
Segregation of duties is one of the most basic concepts in government finance. It means that no single employee should have complete control over a financial transaction from authorization through disbursement. The reason is exactly what this case illustrates: when one person controls the whole chain, the only thing preventing fraud is that person’s decision not to commit it. That is not a control. It is wishful thinking with a job title attached.
The City Attorney’s office handled settlement packets — documents that authorized payments to resolve civil claims against the city. Each packet was supposed to contain approval from both the City Attorney’s office and the City Council. The fraudulent packets Alexander created included what appeared to be those approvals. The Finance Department issued checks based on the documents in front of it. Nobody compared the settlement records to actual city council meeting minutes. Nobody verified that claimants’ attorneys received the checks. For 16 years.
It is worth being precise about what this means for Glendale’s governance: this is not a case of a sophisticated fraud that defeated strong controls. It is a case of an elementary fraud that succeeded because elementary controls were absent. The fake council meeting minutes are not the product of a clever scheme. They are the product of a system in which nobody was checking whether the documents being used to authorize payments corresponded to meetings that actually occurred.
When the scheme was eventually discovered — through means the public record does not fully detail — Glendale cooperated with federal investigators and the employee was charged. The city has since implemented additional controls. Those reforms matter, but they do not answer the more uncomfortable question: what was the city’s control environment doing for the 16 years before discovery?
Residents of Glendale should know whether an independent review was conducted, what specific control failures were identified, and whether those failures have been comprehensively addressed. A guilty plea closes a criminal case. It does not close the audit.
Jose E. Navarro, MBA, is a financial controller and founder of The Navarro Report, a public finance and government accountability publication based in San Diego, California.
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