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Out of the frying pan and into the fire

A convicted fraudster's plan to make some fast money goes terribly wrong



Irene Dixon was driving on I-80 outside of Lincoln, Nebraska, when she saw the flashing lights of a Lancaster County Sheriff car in her rear-view mirror. The officer pulled her over, discovered a duffel bag containing 90 pounds of marijuana with an estimated street value of $400,000 in her vehicle and arrested her. She was later charged with possession of marijuana with intent to deliver. (See, Lots of tears, no bail for Ithaca woman who reportedly had nearly 90 lbs of marijuana, Ithaca Voice, by Jolene Almendarez, May 2.) Her attempt to score a quick buck and turn her life around by muling drugs from the West Coast to Ithaca, New York, had gone hopelessly wrong.

Employee games the system

On March 18, less than four weeks before the traffic stop, Dixon pleaded guilty to one count of grand larceny in the fourth degree for embezzling nearly $45,000 from her Ithaca employer, Classen Home Health Care Associates. Judge John Rowley of the Tompkins County Court sentenced her to five years of probation and restitution totaling $44,438. (See, Ithaca woman who stole 30K from employer sentenced, by Kelsey O'Connor, Ithaca Journal, April 5.)

Dixon had committed two types of fraud. In the first scheme, a classic payroll fraud, she duped her employers into paying her more than she actually worked by padding her timesheet. Part of Dixon's job at Classen was to compare scheduled work to the hours the employees reported, so she'd simply ask to check the numbers for accuracy and then add a few extra hours for that pay period to her time records. This all began in early 2012 just after she and her husband separated.

Phyllis Joyce, a nurse at the agency, discovered the larceny in October 2014. She noticed that two caregivers were claiming the same hours on their time sheets for the same client. She reported her findings to Timothy Reynolds, director of nursing at Classen. Reynolds verified the facts and made his report to Classen Home Health Care owner, Patty Classen. The company initiated a comprehensive review of payroll records, which determined that Dixon had overreported her time by approximately 2,600 hours and had stolen $31,338 of unearned compensation. (See the court document.)

In the second element of Dixon's larceny, she allegedly redirected deposit amounts from Classen's daughter — also an owner and employee. Dixon managed to transfer $100 from each of her daughter's paychecks to her own savings account at an entirely different bank from April 2012 to May 2015. She stole $13,100. (See the disposition and sentencing document.) Dixon often filled in for the payroll processing employees even though she didn't normally work in that department. Worse, she knew the employee's system login and password, so no one could prove that she'd modified these transfers — only that she benefited from them.

Dixon had worked for Classen Home Health Care for more than 10 years. She'd started as a home health aide and worked her way up to a trusted administrative assistant. Patty Classen personally mentored her. "It was very shocking and very upsetting. … You just never, ever know what runs through people's minds," Classen said in the Ithaca Journal article.

When it became clear to Dixon that her fraud was about to be uncovered, she admitted to Classen that she'd padded her hours. Later, in May 2015, Classen's daughter discovered that Dixon had also been stealing from her. By that time Dixon was already being prosecuted for the initial fraud charge.

Key takeaways

On May 2, Dixon appeared before Judge Rowley to answer for her probation violations — leaving New York state without permission and engaging in criminal activity by possessing and transporting drugs. Through her attorney, Karen Shaw, Dixon asked the court to be released on her own recognizance because she has two young children under her care, is employed in the community and has been meeting with her probation officer as required. "This could very well be considered an act of desperation rather than an act of true criminal intent," Shaw said.

Assistant District Attorney Andrew Bonavia said Dixon should be held without bail. Judge Rowley concurred and ordered her to Tompkins County Jail without bail until a June 24 hearing. (See Almendarez, Ithaca Voice, May 2.) As of publication, she continues her local incarceration on the probation violation. Her fate on the Nebraska drug charges has yet to be determined.

Let's review some lessons. First, crime, of course, doesn't pay. And committing another crime in an attempt to resolve the financial consequences from the first will only dig the perpetrator into a deeper hole. In Dixon's case, she narrowly avoided jail time for her initial fraud at Classen, but she's now serving time for the Tompkins County probation violation and could serve even more from the drug charge in Nebraska.

Secondly, even though Classen had suitable internal control procedures set up for its time reporting, Dixon found a way to circumvent those controls. Companies should be ever vigilant in creating fraud deterrence policies, establish proper internal controls and be watchful of the people looking to compromise them.

Finally, employees should never share login and password credentials. This will inevitably create problems. Companies should have written policies that clearly advise employees not to share such sensitive information. All staff members should periodically change login usernames and passwords.

Author's note: On July 9, I arranged to meet and interview Irene Dixon while she was incarcerated at the Tompkins County Public Safety building in Ithaca, New York. Dixon wasn't aware of the purpose of my visit to the jail that day, so she was initially reluctant; however, she later agreed and shared an in-depth and honest dialogue. Dixon addressed the charges she pleaded guilty to, recounted exactly how and why the fraud occurred, and offered the rationale as to why she not only felt entitled to the additional money but why she was willing to transport drugs across the U.S. See the interview below.

Jack Little (JL): Where are you from and what brought you to Ithaca?
        Irene Dixon (ID): I was born and raised in New York City, the Bronx, and came from a broken home. My father was both a drug dealer and a drug abuser. My mother worked hard and did her very best to support us. I got into trouble as a teenager and was remanded by the court to the Lansing Residential Facility for Girls, outside Ithaca, in 1995. I was 13. I successfully exited the program in 1998, and was in foster care in Dryden for a time where I attended — and ultimately graduated from — Dryden High School. I elected to stay in Ithaca after graduation and started working to support myself.

JL: Tell me about your marriage and family.
        ID: I got married to my former husband in January 2007 and we have two wonderful daughters; the first was born in 2002 and a second in 2008. Our marriage was difficult in a number of ways — I worked too much, my husband drank too much. There were a lot of problems. We separated in 2012 and divorced in 2014.

JL: Tell me about your job at Classen Home Health Care. Did you like your job? Were employees treated well? What was the environment at the company?
        ID: I started working at Classen Home Health Care in 2002 as an entry-level companion aide and three months later I became a certified home health aide. I slowly worked my way up to a key administrative position, essentially running the company for Patty Classen. I loved my job and I was good at it. I credit Patty Classen for giving me the opportunity, training me well and giving me a lot of experience running the business. But home health care is a hard business and Classen has a "hands off" management style. She often left me to deal with all the problem situations with both the clients and the employees in the business.

The employees were not always treated well at Classen and there was constant turnover. This turnover made it difficult for me to cover all the required shifts to support the client's needs. I continually felt stressed and burdened by the workings of the Classen Company. I always seemed to have to make the hard decisions.

JL: What drove you to start padding your work hours?
        ID: I remember it perfectly. It was 2012, and I had just separated from my husband and moved into an apartment with my daughters. The rent was due and I didn't have the money. I padded my hours one week for some extra cash and made up for it the next. It was like a company loan. A few weeks later, I was short again and so I padded the time once again — but this time I didn't make it back up the following week. Eventually, I was just adding extra hours to every paycheck.

JL: What was going through your head?
        ID: I needed the money for rent, to feed my kids, but I was also suffering from depression. I started living beyond my means as a way to deal with my depression. The padding of my hours all started out as a self-approved loan, but later turned out to just be a way to make my world go around. I rationalized it in any number of ways — I was a valuable employee and I handled all of Classen's problems. I guess I ultimately just felt entitled.

JL: Tell me how you did it. You managed to get around some controls that were in place that should have prevented you from altering time records. Can you describe what happened?
        ID: There was an approval process that should have prevented [the fraud] from happening. I just asked to review the payroll records to be sure they were correct, then added shifts and hours while I was reviewing them. Nobody circled back to check anything after I was done. I was in a positon of trust in the company, and for a long time, nobody checked what I was doing.

It was all a burden on me though; it just added and added to the stress. Ultimately, I went to Patty Classen and admitted what I had done. At first, she didn't believe what I was telling her, but she eventually looked at the records and was able to see exactly what I did. I do believe the other staff had started to catch on and were reviewing company information the day I spoke with Patty.

I admit I padded my hours and took the money. I am sorry for what I did and for the impact it had on my family and friends. I wrote a letter to Judge Rowley as well, apologizing.

JL: How about talking with Patty Classen?
        ID: No, I haven't been able to do that yet. There are a lot of issues for me to deal with on that. I need to, I admit.

JL: Is there anything in the news media or court records that just isn't correct? Someplace where your voice wasn't heard? Something you want to come out that hasn't?
        ID: There are two things. First, I adamantly state that I had nothing to do with the redirection of payroll deductions from Christy Peters' [Patty Classen's daughter] paychecks. This is some kind of administrative error. I didn't know my coworker's login and passwords either, so I couldn't have made those changes.

Second, I don't think the news accounts adequately described the background information relating to the charges and didn't consider my family situation. I think I was villainized by the media.

JL: So tell me about the drug charge in Nebraska. How does all this tie together? What were you thinking? What was your motivation to do it?
        ID: Well, it wasn't a very good decision on my part, obviously. It was a one-time thing and would have allowed me to make restitution on the Classen charges. Beyond that, on the advice of my attorney, I can't say any more about the Nebraska charges. I do know that when I'm out of here and back to work that I just have to make my restitution to the Classens over the long haul, not all at one time.

JL: Irene, what have you learned from all of this? The charges on your record? Your time in jail?
        ID: I know I really fouled up my life. I had a good job, a good paycheck, and that is going to be hard to replace. I was lucky to have been sentenced to only restitution and probation on the larceny charge, but I didn't appreciate that at the time. Now that I've been to jail, this is somewhere I never want to be again. I certainly have learned from this experience.

John E. "Jack" Little, CFE, CPA, is director of the Masters of Accounting Program at Johnson Graduate School of Management and a professor of the Practice, Accounting, at the Dyson School of Applied Economics and Management at Cornell University in Ithaca, New York. He's also a local practitioner. His email address is: jack.little@cornell.edu.






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