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UCAN: Misspelled Accounts Add Up
The old misspelled-name trick was one of the scams used by UCAN to skim money from the nonprofit.
‘We helped a lot of people. It is disappointing to see where the organization is now.” Thus speaks Jordana (Jodi) Beebe, onetime head of the fraud squad at Utility Consumers’ Action Network (UCAN), the once-revered watchdog organization now under a United States attorney criminal investigation, facing a state-mandated audit, and almost penniless. Just a few years ago, UCAN was on TV twice a week, had 17 part-time and full-time employees, and bragged of a cofounder, Michael Shames, who was a San Diego icon.
Charles Langley blew the whistle.
The watchdog’s collapse was all about greed, hubris, and a board that refused to take off blinders, even after whistle-blowers presented extremely strong evidence of financial shenanigans. Many questions remain, but one in particular has not been resolved credibly: why did hundreds of thousands of dollars move off the UCAN books to accounts with a misspelled word? Call it the “Comsumers” conundrum, although some fraud experts hardly think it’s a riddle, since misspelled financial accounts are age-old devices for hiding money.
Michael Shames skimmed over $400K.
UCAN’s original mission was to battle San Diego Gas & Electric’s sky-high profits, but the organization diversified into telecom, gas prices, consumer fraud, and privacy rights, among many things. It filed class action suits against various companies for consumer fraud and won big settlements. Frequently, its law firm was the former Milberg Weiss Bershad Hynes & Lerach, the bane of Corporate America, whose San Diego head, William Lerach, went to prison for concealing illegal payments to plaintiffs.
Mike Aguirre represents the whistle-blowers.
“Was there a tit for tat?” with anybody at UCAN, asks one skeptic who is near the top of the watchdog’s hierarchy. That’s just one question surfacing now. The person posing that query is not one of the two whistle-blowers, Charles Langley and David Peffer, who filed a suit this year against Shames and the organization’s board members, stating that Shames did not do required audits; collected unauthorized bonus income; moved money off the books into misspelled accounts; represented himself as an attorney while he was an inactive bar member; directed the movement of $1 million of corporate money through UCAN to former San Diegan Peter Navarro for the making of an anti-China movie; and lost $100,000 of the watchdog’s money speculating in a hedge fund that Navarro was deeply involved in.
Jordana Beebe laments UCAN's downfall.
Despite many warnings, the UCAN board failed to do anything about these activities, declared the suit. Indeed, the board’s response is redolent of an orchestrated cover-up. Following complex legal skirmishes, some air has been cleared. Shames rejoined the bar. On October 2, the board demanded that Shames return $474,000 of the secret 10 percent bonuses he was skimming from intervenor fees that the watchdog organization got from the California Public Utilities Commission. After holding on to $400,000 of the $1 million ticketed for Navarro, UCAN, under threat of a lawsuit, finally passed it to him.
Paul Dostart: forensic accountant hired by the board.
There were early signs of the debacle. In 2004, Shames proposed a new organization, Internet Consumers’ Action Network, Inc. (ICAN), a nonprofit that would work with a private organization to be owned by Shames. “Michael is considering launching a new form of UCAN and ditching us,” said a key employee in an email. A person high in the organization wondered if Shames intended to merge his organization with San Francisco’s watchdog, the Utility Reform Network (TURN), to free himself up to pursue fat profits through ICAN’s connection to his private company. “Michael is notorious for doing what he wants with UCAN’s money,” said a top official in an email.
“Shames was hardly ever in the office,” says a former employee. “When he did show up, it was unannounced.” For years, a demoralized staff wondered what he was plotting.
On March 4, 2011, the board was informed of the alleged financial misconduct, including the “Comsumers” accounts. Thirteen days later, Shames warned employees that if they didn’t stop complaining to the board, he would dissolve UCAN, and the board would go along. The board hired attorney Paul Dostart, a forensic accountant, who reported on June 8, 2011, that he could not locate the misspelled account balances on the UCAN books.
But on August 24, 2011, Dostart claimed to whistle-blower Peffer that the misspelled accounts had been tied back to UCAN’s financial records and the “account name misspellings were inadvertent oversights.”
Peffer replied disdainfully that six such misspelled accounts had now been traced to five separate financial institutions. While Dostart had claimed that the accounts involved only nominal amounts, there was one for more than $262,000.
Whistle-blower Langley says it strains credulity to believe that these accounts could have been traced in less than three months. Moreover, UCAN management still has not recovered records of misspelled accounts that landed in financial institutions prior to 2008 and recently sent out letters to retrieve them. Mike Aguirre, attorney for the whistle-blowers, was told by a UCAN accountant that there was only a spot check of the misspelled accounts — not a full audit. The board “decided to go into dissolution rather than do an audit,” says Aguirre.
On September 22, 2011, Dostart wrote to Belinda Johns of the Attorney General’s Registry of Charitable Trusts. Dostart said that the board had decided on liquidation — hopefully in a deal that would permit TURN to take over UCAN assets without acquiring possible large liabilities.
It looked then as if Shames had won: UCAN would be dissolved, the whistle-blowers fired, their allegations buried, and the board let off the hook. But TURN apparently smelled a rat, and so did the United States attorney’s office. In February of this year, UCAN filed for dissolution and claimed it would cooperate with the United States attorney’s investigation. But the dissolution attempt failed, and the probe is now intensifying.
Dostart won’t comment. Richard Kipperman, court-appointed receiver who declared that he had found no wrongdoing, says the court never ordered him to do a forensic audit. The United States attorney may have to locate those “Comsumers” accounts. ■
Here's something you might be interested in.
UCAN: Misspelled Accounts Add Up
UCAN: Misspelled Accounts Add Up
The old misspelled-name trick was one of the scams used by UCAN to skim money from the nonprofit.
‘We helped a lot of people. It is disappointing to see where the organization is now.” Thus speaks Jordana (Jodi) Beebe, onetime head of the fraud squad at Utility Consumers’ Action Network (UCAN), the once-revered watchdog organization now under a United States attorney criminal investigation, facing a state-mandated audit, and almost penniless. Just a few years ago, UCAN was on TV twice a week, had 17 part-time and full-time employees, and bragged of a cofounder, Michael Shames, who was a San Diego icon.
Charles Langley blew the whistle.
The watchdog’s collapse was all about greed, hubris, and a board that refused to take off blinders, even after whistle-blowers presented extremely strong evidence of financial shenanigans. Many questions remain, but one in particular has not been resolved credibly: why did hundreds of thousands of dollars move off the UCAN books to accounts with a misspelled word? Call it the “Comsumers” conundrum, although some fraud experts hardly think it’s a riddle, since misspelled financial accounts are age-old devices for hiding money.
Michael Shames skimmed over $400K.
UCAN’s original mission was to battle San Diego Gas & Electric’s sky-high profits, but the organization diversified into telecom, gas prices, consumer fraud, and privacy rights, among many things. It filed class action suits against various companies for consumer fraud and won big settlements. Frequently, its law firm was the former Milberg Weiss Bershad Hynes & Lerach, the bane of Corporate America, whose San Diego head, William Lerach, went to prison for concealing illegal payments to plaintiffs.
Mike Aguirre represents the whistle-blowers.
“Was there a tit for tat?” with anybody at UCAN, asks one skeptic who is near the top of the watchdog’s hierarchy. That’s just one question surfacing now. The person posing that query is not one of the two whistle-blowers, Charles Langley and David Peffer, who filed a suit this year against Shames and the organization’s board members, stating that Shames did not do required audits; collected unauthorized bonus income; moved money off the books into misspelled accounts; represented himself as an attorney while he was an inactive bar member; directed the movement of $1 million of corporate money through UCAN to former San Diegan Peter Navarro for the making of an anti-China movie; and lost $100,000 of the watchdog’s money speculating in a hedge fund that Navarro was deeply involved in.
Jordana Beebe laments UCAN's downfall.
Despite many warnings, the UCAN board failed to do anything about these activities, declared the suit. Indeed, the board’s response is redolent of an orchestrated cover-up. Following complex legal skirmishes, some air has been cleared. Shames rejoined the bar. On October 2, the board demanded that Shames return $474,000 of the secret 10 percent bonuses he was skimming from intervenor fees that the watchdog organization got from the California Public Utilities Commission. After holding on to $400,000 of the $1 million ticketed for Navarro, UCAN, under threat of a lawsuit, finally passed it to him.
Paul Dostart: forensic accountant hired by the board.
There were early signs of the debacle. In 2004, Shames proposed a new organization, Internet Consumers’ Action Network, Inc. (ICAN), a nonprofit that would work with a private organization to be owned by Shames. “Michael is considering launching a new form of UCAN and ditching us,” said a key employee in an email. A person high in the organization wondered if Shames intended to merge his organization with San Francisco’s watchdog, the Utility Reform Network (TURN), to free himself up to pursue fat profits through ICAN’s connection to his private company. “Michael is notorious for doing what he wants with UCAN’s money,” said a top official in an email.
“Shames was hardly ever in the office,” says a former employee. “When he did show up, it was unannounced.” For years, a demoralized staff wondered what he was plotting.
On March 4, 2011, the board was informed of the alleged financial misconduct, including the “Comsumers” accounts. Thirteen days later, Shames warned employees that if they didn’t stop complaining to the board, he would dissolve UCAN, and the board would go along. The board hired attorney Paul Dostart, a forensic accountant, who reported on June 8, 2011, that he could not locate the misspelled account balances on the UCAN books.
But on August 24, 2011, Dostart claimed to whistle-blower Peffer that the misspelled accounts had been tied back to UCAN’s financial records and the “account name misspellings were inadvertent oversights.”
Peffer replied disdainfully that six such misspelled accounts had now been traced to five separate financial institutions. While Dostart had claimed that the accounts involved only nominal amounts, there was one for more than $262,000.
Whistle-blower Langley says it strains credulity to believe that these accounts could have been traced in less than three months. Moreover, UCAN management still has not recovered records of misspelled accounts that landed in financial institutions prior to 2008 and recently sent out letters to retrieve them. Mike Aguirre, attorney for the whistle-blowers, was told by a UCAN accountant that there was only a spot check of the misspelled accounts — not a full audit. The board “decided to go into dissolution rather than do an audit,” says Aguirre.
On September 22, 2011, Dostart wrote to Belinda Johns of the Attorney General’s Registry of Charitable Trusts. Dostart said that the board had decided on liquidation — hopefully in a deal that would permit TURN to take over UCAN assets without acquiring possible large liabilities.
It looked then as if Shames had won: UCAN would be dissolved, the whistle-blowers fired, their allegations buried, and the board let off the hook. But TURN apparently smelled a rat, and so did the United States attorney’s office. In February of this year, UCAN filed for dissolution and claimed it would cooperate with the United States attorney’s investigation. But the dissolution attempt failed, and the probe is now intensifying.
Dostart won’t comment. Richard Kipperman, court-appointed receiver who declared that he had found no wrongdoing, says the court never ordered him to do a forensic audit. The United States attorney may have to locate those “Comsumers” accounts. ■
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