Three former University employees charged with embezzlement

Updated 10:00 AM March 20, 2006

Three former University employees charged with embezzlement

By Kevin Brown

Three former Michigan Public Media employees face felony charges of embezzlement, stemming from an internal University audit sparked by a former director's concerns with irregularities involving on-air messages on behalf of businesses and organizations.

Arraigned March 16 in Ann Arbor District Court before Magistrate Thomas Truesdell were former Michigan Public Media deputy director Michael Coleman, 40, of Ypsilanti; former development director Justin Ebright, 35, of Whitmore Lake; and former account executive Jeremy Nordquist, 28, of Saline.

All three were charged with embezzlement, which carries a penalty of 5 years in jail and/or a $10,000 fine or three times the amount embezzled, whichever is greater. Ebright and Nordquist each face an additional charge of conspiracy to embezzlement, which carries a penalty of 5 years in jail and/or a $20,000 fine or three times the amount embezzled.

Preliminary exams were scheduled for each defendant in Ann Arbor District Court. Coleman faces a March 29 exam while Ebright and Nordquist face exams April 12.

"The University of Michigan and its public broadcasting stations share a deep commitment to education and the public good," President Mary Sue Coleman said. "We are especially proud of Michigan Radio's contributions to informed public dialogue in our state.

"The recently discovered problems with financial controls are unacceptable and do not reflect our core values," Coleman added. "I am reassured by the fact that University leadership acted immediately upon discovering this information, and that a thorough audit has been conducted to identify and correct all the problems. We will take every possible step to ensure this will not happen again."

Executive Vice President and Chief Financial Officer Timothy Slottow said former Michigan Public Media director Donovan Reynolds discovered in November irregularities with respect to on-air recognition given in exchange for cash contributions to the station, recognition that may be given in exchange for goods or services that benefit the radio station.

The University's Department of Public Safety launched an investigation and a thorough audit was initiated. "These investigations revealed a number of problems," Slottow said:

• The internal audit showed there was insufficient documentation regarding on-air acknowledgements, and that many were aired with no supporting paperwork documenting what contribution, if any, the station received. "With respect to in-kind trade, in many cases there was no documentation of the business rationale for the trade," Slottow said. "In addition, it appears that some of the in-kind trade was not used to benefit the station."

• Bonus payments may have been made to underwriting personnel without adequate authorization and/or support of the achievement. "The audit report notes that in some instances, bonuses appeared to be excessive and were not based on actual underwriting activity," Slottow continued.

• Problems with University Purchasing Card expenses also were documented, including some instances where expenses may have been improperly reimbursed or double-billed.

"Because a criminal investigation and legal process are underway, there are some details we cannot share out of concern that we might interfere with the investigation," Slottow said. While the review is ongoing, investigators say the irregularities happened mainly in 2004-05, and involved financial losses in excess of $50,000—mainly related to in-kind trade.

Slottow said that annual revenue for Michigan Public Media was $9.4 million in fiscal year 2005, and that the estimated losses were one half of 1 percent of that amount. Still, he said the University views the irregularities as a very serious matter.

"The audit has shown us where our internal financial controls were not adequate, and we are taking immediate steps to strengthen our controls, "Slottow said, adding that the University has hired outside consultants to review all existing policies and procedures, and to develop new policies and procedures consistent with the University's Standard Practice Guide . These revisions will address topics including conflict of interest and gifts, acceptable in-kind trade practices, bonus qualifications and required approvals and consistent airtime pricing.

The University has hired radio and TV management veteran Steve Schram as interim director while a national search is initiated to hire a permanent director. "He will focus his efforts on a review of business operations, policies and procedures," Slottow said. Retired University controller Fred White has been hired as an interim controller for Michigan Public Media.

"In the coming weeks and months we will make any additional policy revisions that are needed, put new processes in place and educate the staff," Slottow said. "We will expect and monitor full compliance."

Three former University employees charged with embezzlement

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