Boards' familiarity of 'bullybezzlers' allowed fraud

Paul Laneuville and Carl Walters are true examples of a phenomenon I call the "bullybezzler." Both were executive directors of non-profit organizations that emphasized their missions more than financial stewardship. Both reported to boards of directors. Both deliberately staffed their offices with marginal employees and bullied them. Both easily raided the victim business accounts via electronic transfers, credit cards and checks under the noses of the boards of directors despite the presence of auditors and outside accountants. Both cost their organizations hundreds of thousands of dollars. And the employees they bullied eventually brought them both down. (I encountered these cases as the senior paralegal at the Hennepin County Attorney's Office in Minneapolis, Minnesota. I've changed the names of the fraudsters and organizations.)

Paul Laneuville and the Dawning Day Academy

The Dawning Day Academy hired Paul Laneuville as its financial director and promoted him shortly afterward to executive director based on his claims of earning an MBA and other qualifications (which it later discovered to be false).

The academy was a charter school dedicated to providing culturally specific K-12 education for an embattled, impoverished ethnic community. It received significant federal and state funding. Immediately after Laneuville gained control of the school's finances, he began to electronically transfer academy funds and write checks to his own personal and shell-company business accounts. He'd forge any necessary additional signatures. Laneuville concealed his thefts by making several ACH transfers to which he appended a memo line with false payee names so they appeared to be related to legitimate academy expenses.

Laneuville assiduously courted the academy's board of directors. He and the board's members were all from the same ethnic community as the academy's students; he shamelessly exploited this connection and implied an altruism toward his community that he didn't have.

The board members — none of whom had a background in school administration or financial management — trusted him and gave him financial director authority despite the academy's founder's warning that this was illegal. They swallowed his financial reports, assertions and recommendations wholesale, including his firing of the academy's outside auditors when they challenged the lack of documentation for the academy's expenditures. (He fired two separate auditing firms late in his scheme.) The board members approved the changes of these auditors when the auditors challenged the lack of documentation for the academy's expenditures.