East Ridge Parks Director Adam Wilson and two other city employees have resigned in a payroll fraud investigation.
East Ridge officials said, "On Jan. 3, the Finance Department received a call from a concerned family member who brought forth allegations of impropriety regarding an employee. It was determined that a female received a check for umpiring some baseball/softball games at Camp Jordan.
However, she never umpired a single game - but her stepfather did, who was a civilian Police Department employee.
"At that point the city manager ordered an internal investigation by the Police Department into the matter. The investigation revealed that the Police Department employee had falsified documents at the suggestion of the Parks Director. At that point the city had the investigation by the Police Department expanded and shifted towards the Parks Director.
"A Fire Department employee was also identified as falsifying a W-9 for purposes of being able to referee baseball/softball games in a manner very similar to the Police Department employee and therefore was included in the investigation.
"Most of the recreational sports at Camp Jordan utilize third-party referee/umpire agents. The agent is a contractor that handles the scheduling and payment to the referees/umpires. To be clear, the payment is made by the third-party agent who is a separate and apart from the city.
" In the case of baseball/softball, the third-party agent quit that duty in April 2021 for unknown reasons. As a result, the Parks Department had to handle the umpire assignment duties in house, which meant the city had to compensate the umpires directly from that point forward.
"The city has a policy prohibiting employees from doing secondary work for the city. It is an IRS best practice that an employee should not receive compensation under a W-2 and a 1099 simultaneously from the same employer. All umpires/referees do their work as independent contractors, so their pay is not taxed and they have to pay their taxes on their own. Each referee/umpire fills out a W-9 IRS form which is used for payment purposes.
"Specifically, two employees submitted fraudulent W-9 IRS documents, worked temporarily under false names, and took payment that was not intended for them. Additionally, the Director of Parks accepted and executed the fraudulent W-9s, and he alone submitted false time sheets to finance causing city funds to be remitted to people who had not done any work, and gave checks to people who were not the intended recipient.
"After the three city employees were implicated with factual evidence, they were interviewed by our Human Resources Manager. The Human Resources Department followed up with interviews of other Parks employees and determined that no one else was involved.
"After the investigation was concluded, all three employees were informed of the findings and were given an opportunity to discuss their decisions with the city manager. All three employees resigned on January 10, 2022.
"The Finance Director immediately informed our auditors of the issue and also reported it to the State Comptroller’s Office. The Finance Director immediately initiated and has completed an internal audit of all the referee/umpire payments from the Parks Department and determined that no other employees were involved. The audit only had to go back to April 2021 when the third-party agent ceased to operate at Camp Jordan and the function became part of the city operations.
"The earnings of both employees were added to their W-2 and thus reported to the IRS. Since all three employees resigned, the investigation was closed. The actions these employees took were felonies but because the amount of fraud by each employee was under $500, no criminal charges have been filed."