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Two former HR staff members for the city of Asheville, N.C., have pleaded guilty to felony charges of making fraudulent claims for reimbursements from their flexible spending accounts (FSAs).
Robin Nix, who served as assistant director of the city’s HR department before her arrest, pleaded guilty to multiple charges of felony fraud on Aug. 31, 2010. Nix received a suspended sentence and was ordered to pay a $2,000 fine and $8,524 in restitution to the city. Nix told the court that she did not know that filing the reimbursement claims was illegal.
“I was not aware at the time that I was breaking the law,” Nix said during her plea hearing.
Laura Masters, a former compensation analyst for the city’s HR department, pleaded guilty on Oct. 4, 2010, to charges of forgery and obtaining property by false pretenses. In a plea deal arranged with prosecutors, Masters used what is known as an “Alford plea,” which allows defendants to plead guilty but not admit openly to committing the crime.
“I did not admit guilt,” Masters told reporters as she left the courtroom.
Attorneys for Masters and Nix claimed that the two former HR managers never intended to break the law. Prosecutors presented evidence that in 2008 and 2009 Masters received $19,052 in reimbursements from a flexible health spending account for products and services that she never purchased.
Judge Mark Klass with the Buncombe County (N.C.) Superior Court gave Masters a six-month suspended sentence with 24 months of supervised probation. The judge then ordered her to perform 72 hours of community service.
The cases of two other former members of the city’s HR staff are still pending in the county court. Lisa Roth, the city’s HR department’s former director, is facing charges of felony obstruction of justice and Liz Oldre, a former benefits specialist, has been indicted on several charges of felony fraud.
Roth is charged with making false statements to investigators when she was questioned about the alleged fraud. Investigators said that Roth did not appear to be involved in filing any of the fraudulent claims and apparently did not benefit from any of the reimbursements.
The fraud and obstruction of justice charges were filed in March 2010 after the Asheville City Police investigated allegations that several members of the city’s HR staff of 12 were abusing the city’s FSA program. The city’s FSA plan was self-administered by the HR department. The city immediately fired all four of the HR staffers and outsourced the FSA plan when the accusations of misconduct and fraud came to light.
While the rules and procedures for receiving reimbursements from FSAs can be confusing, cases of fraud involving FSAs are very rare.
“I’d say this situation is definitely an aberration,” said Patty Cain, a partner in the Chicago law office of Neal Gerber & Eisenberg LLP. “Most spending account plans are outsourced and administered by a third party, which can prevent problems like this from arising. But whenever money is involved, people will try and find ways to get around the system.”
Bill Leonard is a senior writer for SHRM.
Fraud Charges Place N.C. City in an HR Crisis, HR News, June 16, 2010.
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