Wealthy exec jailed for charity theft

Posted on 15 Oct 2018

By Chris Borthwick, Thinker-in-Residence, Our Community

As part of the Institute of Community Directors’ commitment to good governance, this ongoing series of articles dubbed “Case Watch” highlight court disputes that offer lessons for other not-for-profits.

In June 2019, top executive Michael Clark from the Adelaide-based charity SYC was sentenced to several years in jail for stealing hundreds of thousands of dollars from his employer.

SYC provides employment, training and housing support services to young people in four states. The details of the case underline the need for not-for-profits to have in place solid financial controls.

What follows is an abridged version of the judge's sentencing remarks.

In sentencing Clark, Judge Muscat said:

… In 2011 you gained employment as an executive with the Service to Youth Council as the General Manager of Corporate Communications, before being promoted in 2015 to the position of Director of Corporate Strategy. As one of the directors, you received a salary package of almost $282,000 per annum. You had authority to authorise payments for SYC of up to $50,000.

Between January 2016 and November 2018, you stole a total of $356,528.50 from SYC by forging invoices payable to a business called Vocative for IT services. Vocative was a legitimate business which was run by your brother-in-law. Using his business name and ABN, you generated false invoices for work supposedly undertaken by Vocative. After authorising payment of a fake invoice, you walked it down to the accounts section for payment. Payment of the invoice was then made by the accounts section by EFT to the account listed on the false invoice, which was in fact the joint ANZ Bank account you held with your wife.

Whilst your fraudulent behaviour was not very sophisticated, because of your position within SYC you were virtually immune from scrutiny or challenge and that is how you were able to get away with what you did for so long…

Instead of reining in your spending or trying to reduce your debt, you chose to steal from SYC in order to maintain the lifestyle [to] which you and your wife had, by then, become accustomed, and which, it seems to me, you were not prepared or willing to forego …

During the period of the offending, you purchased a more expensive home, enjoyed a number of overseas holidays, travelling either business or first class and sent your children to elite private schools. Towards the end, you had even engaged the services of a live-in au pair who travelled with you and the family on a holiday to Bali …

Sadly, somewhere along your journey in life, you lost your moral compass …

This is plainly serious offending. It was deliberate and sustained criminal conduct involving the abuse of your position within SYC. It only stopped because you were caught. In the circumstances, the degree of your moral culpability or blameworthiness is high.

During the sentencing hearing you heard of the enormous impact your offending has had, not only upon the CEO of SYC, who was a close, personal friend of yours, but upon the entire SYC staff and organisation. Through your actions you have deceived and betrayed many people and destroyed your reputation and professional career in doing so …

[Y]ou have now been declared bankrupt … The reality, therefore, is that while you may be willing to make good what you stole from SYC … you are not going to be in a position to repay the rest of the money you stole…

You will be convicted of each offence and imprisoned for seven years.

The sentence is reduced by 40% because of the early timing of your guilty pleas, meaning that the sentence is four years, two months and 12 days imprisonment … [with] a non-parole period of two years …

WATCH NOW: 7News Adelaide's report of the case

What you need to know

What was the community group?
SYC, formerly known as Service to Youth Council, a not-for-profit organisation centred on employment, training and youth services.

Who took the money?
Michael Clark, its director of corporate strategy.

How much did he take?
More than $350,000.

When did it happen?
Clark was arrested in 2018 and convicted in 2019.

How long did it go on?
Several years.

How did he work it?
Clark created fake IT invoices which were then paid into his bank account.

How did he get away with it?
The amount that Clark stole ($356,000) might sound a lot, and his salary ($282,000) might sound a lot too.

But SYC is a $71 million business, 99% government funded, and Clark's take was just 0.4% of the pot. It might not be easy to pick in a budget that size.

The judge said, "Whilst your fraudulent behaviour was not very sophisticated, because of your position within SYC, you were virtually immune from scrutiny or challenge and that is how you were able to get away with what you did for so long."

Did they get the money back?
Clark paid a small amount back, and insurance covered the rest.

What was the sentence?
Four years and two months, with a non-parole period of two years. That's the equivalent of a month for every $7,000 he stole - a month for every $14,500, if he gets the maximum remission.

What did the organisation do afterward?
SYC sought two independent reviews of its systems and practices.

What changed?
Nothing. After the sentencing, SYC CEO Paul Edginton told the ABC, "Both [independent reviews] found SYC could not have prevented the fraud occurring, and had systems in place that detected the wrongdoing, and followed through with a prompt, strong and appropriate response immediately upon detection."

What should I do to prevent it happening to me?
Put procedures in place such that when an employee brings in a large invoice, their supervisor is required to sign off on it. And ensure that budgets are set for expenditure within each department (such as IT), so that deviations are more likely to show up.

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