INDIANAPOLIS | East Chicago has gone more than three years without a blanket insurance policy to cover potential employee theft, a move denounced by state auditors as a risky cost-cutting measure.
State law requires local government to take out bonds that can be recouped if top fiscal leaders, including controllers and clerk-treasurers, pilfer from the public till. A broader insurance policy covering all municipal employees is strongly recommended, but Mayor George Pabey's administration dropped East Chicago's comprehensive employee theft coverage in 2005 in an attempt to save money.
The State Board of Accounts warned against the gambit more than a year ago, but the city has yet to take out a new policy.
After The Times inquired about a series of more recent audits, including one alleging more than $40,000 in theft, East Chicago Controller Charlie Pacurar pledged Friday to acquire comprehensive crime coverage within a matter of weeks.
"We were trying to stay away from it because it saves a little money," Pacurar said. "But that turned out to be a mistake on our part."
A state audit released last week found that Julia E. Moore, the former secretary to East Chicago Police Chief Angelo Machuca, did not deposit $40,855 in cash bonds criminal defendants paid to get out of jail the past four years. Machuca did not respond to requests for comment Friday.
No charges have been filed against Moore, the police department secretary, but Machuca sent auditors an Aug. 5 letter stating, "Moore is currently under investigation by the Indiana State Police." A State Police detective on Friday said he could not say whether an investigation is under way.
Pacurar said Moore asked to take early retirement while the state was conducting the audit. Records show Moore reimbursed the city for the missing money by forfeiting three severance checks she received between July and September.
But if Moore didn't have the means to repay the debt, taxpayers would have been left holding the bag. Lake County Prosecutor Bernard Carter said insurance bonds are often the last and only resort for recouping theft of public dollars.
"We recommend that any employee who handles cash should be covered by some type of bond or crime insurance policy," said Mike Bozymski, deputy state examiner for the State Board of Accounts. "Obviously if there's a theft of funds or funds come up missing, then you don't have the insurance coverage to replace those funds."
Recent audits of Northwest Indiana cities, including Gary and Hammond, suggest the lack of theft insurance is relegated to East Chicago, though not to the city alone. The School City of East Chicago also has gone without comprehensive theft coverage since at least July 2005.
A June audit of East Chicago's West Side Junior High School uncovered $5,294 in missing student fees -- primarily from gym uniform sales -- and pinned the blame on former extracurricular treasurer Petrita DeLeon, who denies wrongdoing. But with no insurance policy to pursue, the auditors -- in a rare move -- did not ask the state attorney general's office to begin a collection effort.
No criminal charges have been filed against DeLeon. And her attorney, Justin Murphy, of Hammond, said school officials denied DeLeon access to receipt books and other records he said would have vindicated his client.
East Chicago school officials did not respond to multiple requests for comment. And Murphy has filed a claim alleging that the district owes DeLeon, who was fired, nearly a year's salary for accumulated vacation and sick days.
Attorney General Steve Carter, who has championed efforts to prosecute Lake County fraud and corruption -- often centered in East Chicago -- declined comment on the insurance issue through a spokeswoman.
Carter launched a 2004 lawsuit, which remains pending in Hammond federal court, aimed at reimbursing taxpayers for the largest theft in East Chicago history: a $24 million sidewalks-for-votes scheme that preceded the 1999 city primary.
