Thursday, December 19, 2002

Fifth Third account appeared to be Florence's

But city's finance director suspected of using it himself

By Jim Hannah
The Cincinnati Enquirer


FLORENCE - This city had a Capital Improvements Fund it didn't know about at one of the region's leading banks.

But the deposits made to the account by finance director Ronald J. Epling weren't going to pay for the new aquatic center, the new skate park or the new minor league baseball field.

Law enforcement officials familiar with the investigation of the more than $1 million suspected to be missing from Florence city accounts say the CPA and trusted employee of 15 years opened a Fifth Third Bank account using his own Social Security number, but called it the "City of Florence Capital Improvements Fund."

They said Mr. Epling then used the account to help him embezzle more than $1 million of taxpayers' money during his employment.

Mr. Epling, 51, a Delhi Township resident, has entered a not guilty plea to one count of felony theft involving a $125,000 check deposit to Fifth Third. Other charges are pending as local and federal officials cooperate to freeze all accounts to which the $69,000-a-year appointed employee had access.

Mr. Epling is in the Boone County jail on a $1 million cash bond.

City officials said the Kentucky State Police and FBI have ordered Mr. Epling's office in the $7.1 million city government center on Ewing Boulevard sealed with an electronic sensor.

Florence Mayor Diane Whalen described the atmosphere in city hall Wednesday as "surreal." She said she felt "violated" by Mr. Epling.

"I'm dealing with the theft like a person grieves," she said. "My range of emotions have gone from denial to anger."

Representatives at Fifth Third declined to comment about the case.

Feds part of investigation

Federal authorities, Kentucky State Police and Boone County Commonwealth's Attorney Linda Tally Smith are scheduled to meet before the end of the week to discuss if the case will be prosecuted in state or federal courts, The Enquirer has learned.

"I have an excellent working relationship with the U.S. Attorney's Office and we regularly review cases to see who has the best recourses to prosecute," Ms. Smith said. "If the U.S. Attorney's office feels they can best handle the case, I have no problem handing it over to them."

Pat Maley, supervisor of the FBI's regional Northern Kentucky office, confirmed the government has joined the investigation.

"We have an open, pending investigation and we're working the case jointly with the state police and the city of Florence," Mr. Maley said. Mr. Epling's attorney, Burr J. Travis of Florence, said his client is cooperating fully with authorities.

Ms. Smith said Mr. Epling confessed to detectives that he had indeed taken "in excess of a million" dollars from the city. Ms. Smith said the siphoning began less than a year after he first took the job in 1987.

Mr. Epling was the city's first finance director and established the fast-growing city's accounting system.

Prosecutors say Mr. Epling used the money to live the high life. There were offshore bank accounts, opulent homes purchased with cash and assets deposited around the Tristate in different women's names.

Officials with the state auditor's office in Frankfort said crooked accountants usually have to gain their employers' unwavering trust to be successful.

"It is difficult to catch people who know the system and who are trusted within the system," said Harold McKinney, an attorney with the state auditor's office.

"Some people are very artful in hiding their deceptions. That is how they get away with it ... combined with the trust they have developed."

A banking deposit expert said many things could have sparked the investigation of Mr. Epling's activities with the city's accounts.

Bert Ely, principal of Bert Ely & Co., an Alexandria, Va., bank consulting firm, said the irregularities could have been spotted by Fifth Third. He said it's not uncommon for banks to issue a so-called suspicious activity report when a large amount of money is transferred from one account to another.

"Anything that looks out of the ordinary of normal deposit activity - including, say, a $250,000 inheritance, sale of a house or receipt from an insurance claim - could cause a bank to ask for a report,'' Mr. Ely said.

He also said auditors for the city of Florence could have detected some problems, particularly if they were looking for certain deposits in certain city accounts and did not find them. Mr. Ely said auditors could have then traced the checks by tracking them back to the issuer.

The city's yearly audits have been conducted by Rankin, Rankin and Co. of Fort Wright for years, Ms. Whalen said, and nothing was ever found out of order until this month. Ms. Smith said auditors recently uncovered one small document that seemed odd and out of place that "brought down the house of cards." She wouldn't elaborate.

Richard Rankin, a partner in the Fort Wright auditing firm, declined comment about the case, citing an ongoing investigation.

Mr. McKinney said the scandal will not trigger an audit from state officials, who generally do not audit city books unless they receive a tip about wrongdoing or are asked by local officials.

"It is not unusual for the FBI to ask us in a criminal case to help determine how much is missing and how it was taken," Mr. McKinney said, "We stand ready to do that in this case, but that has yet to happen in this case."

He said this probably isn't the largest case of its kind in Kentucky history, noting that some years back cases neared or topped $1 million.

"A million is significant, don't get me wrong," Mr. McKinney said, "A city certainly could use a million dollars to hire a lot of police officers, pave a lot of roads ... do a lot of things their constituents would want."

Enquirer reporters James McNair, Jeff McKinney, Patrick Crowley, Stephenie Steitzer, and Robert Anglen contributed to this report.


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