EAST CHICAGO — Police commander Nate London is under pressure by state auditors to return $1,287 to the police department’s confidential fund, according to a newly released audit.
The money went missing under his watch, according to a July 26 State Board of Accounts audit. The special investigation notes the results also were forwarded to the Lake County prosecutor's office and the Indiana Attorney General.
Historically, the East Chicago Police Department's gang and narcotics unit uses the funds in question to purchase illegal drugs in undercover drug cases and to compensate confidential informants for assisting detectives during investigations, audit records show.
London was designated to oversee the fund by former police Chief Frank Smith on Sept. 1, 2016 — a role he filled until May 9, 2019, the audit states. As custodian of the account, the commander was responsible for maintaining records as to the receipt, disposition and balance of the funds, state auditors concluded.
The fund was periodically replenished from the police federal forfeiture fund — held by the city controller — at the direction of the fund's custodian, the audit states.
London allegedly told state auditors the funds were kept in an unlocked cabinet in his office. Per department policy, the funds were to be kept in a locked safe, according to the audit.
A count indicated a cash shortage of $1,287 as of May 9, the audit states.
State Board of Accounts officials allege the East Chicago Police Department did not have adequate controls over the accounting of the confidential fund due to a lack of management oversight.
“Management failed to inform its personnel of the policy governing confidential funds. In addition, management did not ensure that quarterly internal audits were being performed; therefore, noncompliance went undetected,” the audit states.
Deputy Chief Jose Rivera said Tuesday the SBOA found London was "negligent" due to poor record keeping, nonexistent records, inadequate bookkeeping practices, malfeasance, misfeasance and nonfeasance.
London was first hired in June 1998 as a probationary patrolman. He has worked in the gang and narcotics division since 2007, first as a narcotics investigator until being appointed to commander in July 2018, Rivera said. Former Police Chief Frank Smith demoted London back to master patrolman in May after the audit discovered money was unaccounted for in the fund.
As of Tuesday, London remained employed with the department.
Rivera said he is conducting an internal investigation into the alleged mishandling of funds. Once that is complete, a punishment will be determined, he said.
"I will be looking into several (policies)...that were possibly violated and I will report my findings to the Chief of Police Hector Rosario to determine punishment. The East Chicago Police Merit Board will be notified once our investigation is complete," Rivera said.
Payouts not documented
The State Board of Accounts has asked London to reimburse the department those dollars, as well as cover the $2,225 of costs incurred by state auditors to conduct the investigation.
"Audit costs incurred because of theft and shortage may be the personal obligation of the responsible official or employee," the audit states.
The audit covers the period Sept. 1, 2016, to May 9, 2019. During that time, 12 payouts from the fund were not supported with written documentation, and 24 confidential information receipts lacked a required witness signature, the audit states.
Department policy holds that the controller cannot replenish the account above $4,000, though there were purchase orders and checks issued by the office in the amount of $5,000 each, the audit alleges.
Police Chief Hector Rosario replaced Smith as head of the department in June.
The audit states SBOA held an exit conference June 12 with Rosario, City Controller Valeriano Gomez, Common Council President Lenny Franciski and Councilman Robert Garcia.
East Chicago government holds an insurance policy that protects them from employee theft, with a limit of $50,000 per occurrence, the audit states.
Lake County Prosecutor Bernard Carter could not be reached for comment Tuesday.