What Sedgwick County did after discovering $566,088 was missing from the till

What’s the first thing you do when you realize more than half a million dollars is not where it should be?

On the morning of Oct. 25, Sedgwick County staff members discovered that a $566,088.90 electronic payment never reached Wichita construction company Cornejo and Sons.

By the afternoon of Oct. 26, the case was made public and a fraud investigation was underway. Cornejo and Sons was paid by check that day as well.

The Eagle requested copies of e-mails sent or received on Oct. 25 and 26 by three financial staff members as well as chief financial officer Chris Chronis and deputy chief financial officer Rick Durham. The finance department was the part of county government affected by the fraud.

The county released 11 pages of e-mails to The Eagle and withheld nine pages, citing the ongoing investigation by the sheriff’s department and the FBI.

The documents that were released, combined with other records, show some of the actions Sedgwick County took in the hours after discovering it was the victim of fraud.

Tuesday, Oct. 25

9:15 a.m. Public works administrative assistant Julie Williams told accounts payable manager Cynthia Dodson in an e-mail that Cornejo and Sons had not received an expected payment.

“Cornejo called again this morning and said that this payment still hasn’t been made,” Williams wrote in an e-mail.

Cornejo and Sons had been contracted to do preventive maintenance on an 8-mile section of 53rd Street North.

11:27 a.m. Dodson sent an e-mail to six other financial staff members, mainly in the accounting department: “Please do not release any payments to Cornejo & Sons … until further notice.”

12:18 p.m. Dodson asked senior accountant Ammi Hayes in an e-mail to block a vendor on the “accounting side only.”

“Can a vendor be blocked only on the accounting side so that Purchasing can still issue POs (purchase orders) to them?” Dodson asked in the e-mail.

Melissa Smith, an accounts payable analyst, suggested the idea via e-mail shortly after Dodson’s first e-mail.

4:25 p.m. Hayes said in an e-mail that he had trouble blocking the vendor, citing an error message.

4:27 p.m. Dodson said in an e-mail that accounting director Sara Jantz suggested “we just change them to check until everything is resolved.”

4:40 p.m. Cornejo’s assistant finance manager, Sharla Jones, sent the county the company’s banking info via e-mail and asked the county to “keep me posted” on when Cornejo would get the payment.

“Sorry for the mess,” Jones wrote.

5 p.m. Durham reported to the sheriff’s office that Sedgwick County was a victim of “theft by deception,” with a loss of $566,088.90.

Wednesday, Oct. 26

11:36 a.m. Risk manager Mick McBride told Chronis in an e-mail that he had reviewed the county’s insurance policy.

“I don’t know all the details so I cannot speculate on coverage,” McBride wrote.

McBride wrote that the county had told its insurance agent to find out what information “the insurance company will require when a claim is filed.” He said he preferred to file a claim with the insurance company “as soon as possible.”

“I expect that we will be required to provide a complete description of the circumstances … up through the loss discovery,” McBride said.

Chronis told McBride he would see him that afternoon.

A Sedgwick County spokesperson did not provide an update on the county contacting its insurance company or reviewing its insurance policy.

3:02 p.m. Cornejo’s “change of payment” information was sent via e-mail to Jantz, the accounting director. A check for $566,088.90 was issued to Cornejo and Sons sometime on Oct. 26. It was cashed on Oct. 31, according to county documents.

3:04 p.m. The Sedgwick County Manager’s Office and the sheriff’s office issued a joint release announcing the fraud and the investigation. It did not specify how the fraud occurred.

3:17 p.m. County Manager Michael Scholes notified county employees through an e-mail about “an unfortunate incident that recently occurred regarding Sedgwick County.”

Scholes said the county was the victim of fraudulent activity costing about $566,000. He said the county would “provide 100 percent support” to the sheriff’s office in the investigation.

“To maintain the integrity of the investigation, it’s important that we refrain from speculation,” Scholes wrote. “While there is no additional information we can share at this time, we wanted you to know as a Sedgwick County employee to have situational awareness.”

‘A right to know’

Sedgwick County officials have largely refrained from commenting on the fraudulent activity, the investigation and subsequent policy changes.

County public information officer Kate Flavin referred questions about the county’s actions after the fraud discovery to the FBI.

“We wouldn’t have a comment on their actions or policies,” said Bridget Patton, an FBI spokeswoman in Kansas City. “I wouldn’t speak on behalf of Sedgwick County.”

Sedgwick County Commission Chairman Jim Howell said commissioners were told by the manager’s office and law enforcement not to discuss any aspect of the investigation.

“I’m anxious for us to get information out there,” Howell said. “I’m hoping that this gets wrapped up pretty soon. The public has the right to know.”

Scholes said at a Wichita Pachyderm Club meeting on Friday that he wished he could tell the public more about the incident and what the county has done since.

“I don’t want to hinder an investigation that by me showing our cards or telling you something that can potentially affect the behavior of a criminal element out there,” Scholes said. “But I can’t wait for the investigation to get over to be able to talk a little bit more.”

This story was originally published December 9, 2016 at 6:00 AM with the headline "What Sedgwick County did after discovering $566,088 was missing from the till."