COVINGTON, Ky. - The City of Covington is suing former Finance Director Robert Due for $600,000 - the amount officials say he embezzled the past seven years - while also seeking recovery from his family, the city's auditing firms, the company that provided its theft-prevention software and others.
The 47-page complaint filed Friday alleges that Due deposited the money into his personal accounts and the accounts of his wife, Janet Patterson, their children and his late aunt, Virginia Molique, who died in 2012.
The suit also targets Due's retirement accounts and makes claims against banks that failed to detect his scheme.
The city was granted a temporary restraining order freezing Due’s assets Friday afternoon by Kenton County Circuit Judge Gregory M. Bartlett, said Frank Warnock, Covington city solicitor. The order restrains both Due and his wife from accessing accounts without permission from the court.
Besides Due and family members, the suit names:
> Joseph Decosimo & Company
> Von Lehman & Company
> US Bancorp Investments
> Fifth Third Bank
> KVS Information Systems
> Charles H. Bilz Insurance Agency
> Kentucky Retirement Systems and Kentucky County Employees Retirement Systems
> Two unidentified financial institutions
The suit claims that Due’s family members (including his aunt before she died), Decosimo and Von Lehman (auditors hired by the city) and the banks “knew or should have known that the various accounts, funds, and other assets acquired by Defendant Due … were funded and/or purchased through illegally embezzled and converted funds.”
The suit also claims that:
> Decosimo & Company, which conducted Covington's audit in 2012, and Von Lehman & Company, which conducted city audits in 2010 and 2011, failed to detect Due's scheme. It also claims Decosimo, based in Cincinnati, wasn't even registered to operate in Kentucky.
> KVS Information Systems provided Covington with “software designed to prevent” Due’s theft, but it was negligent in allowing Due to manipulate the system by accessing it from multiple workstations and using the logins of other employees.
> Charles H. Bilz Insurance Agency was hired to provide the city with sufficient employee theft insurance, but it didn't provide enough to cover Due's theft.
> The city matched funds for Due’s contributions to the state retirement systems and alleges that Due diverted misappropriated funds to his accounts.
> Fifth Third Bank holds accounts where Due deposited the diverted city funds.
> Unidentified financial institutions 1 and 2 hold one of more accounts that contain diverted funds.
The suit gives the city's account of how Due allegedly stole the money.
It says Due used KVS’ accounting software to produce checks payable to himself, Patterson, the Molique Estate and others, then he would “alter the electronic record of the subject instrument within Defendant KVS Systems’ computer program to an otherwise valid vendor.”
Due would then sign the checks with this own signature and “use an electronic or physical stamp to affix the signature of Plaintiff Covington’s City Manager."
After that, Due would enter false information into the accounting software under the login of other employees without their authorization.
According to the suit, the city believes all the wrongfully issued checks were deposited to checking or savings accounts maintained by Due, Patterson or decedent Molique at Fifth Third Bank.
The city also believes Fifth Third Bank never refused or declined to process these checks, and that US Bank always accepted them in turn from Fifth Third.
According to the suit, Due admitted stealing at least $600,000 from the city since 2006. The suit says he made that admission to police and city officials on Aug. 23.
The amount cited in the lawsuit does not include any additional discovered missing funds, court costs or attorney’s fees, Warnock said.
The lawsuit came just a day after Due tried to kill himself after commissioners unanimously voted to fire the 63-year-old during Tuesday’s meeting.
Due, who was Covington’s finance director since 1999, appeared in court on Monday and pleaded not guilty to the theft, unlawful access to a computer, criminal possession of a forged instrument and official misconduct charges pending against him.
If convicted, he could face 20 years behind bars, according to Rob Sanders, Kenton County Commonwealth’s Attorney.
In the meantime, Jerome Heist, finance department's accounting and operations manager, has been appointed as interim finance director.
Neither Due nor his attorney were immediately available for comment.
Due is scheduled to appear in court for a preliminary hearing on the criminal charges at 1:30 p.m. Tuesday.