Grand Forks County officials accused of theft, misspending vulnerable clients' money
Public administrators for Grand Forks County spent vulnerable adults' money improperly, perhaps on their own gourmet cookie business and on a husband's auto repair business, and stole gold coins and cash, according to allegations by county officials and a local attorney in court documents revealed recently through lawsuits against Grand Forks County.
Grand Forks attorney Tim Lamb is representing Faith Krueger and Paul Veum, elderly people earlier judged in need of a public administrator to oversee their financial affairs.
Lamb says the county's public administrator in 2010 and 2011, Barb Zavala, and her assistant, Cathy Westensee, took or misspent assets from Krueger and Veum, and that the county is liable because it was their employer.
But Howard Swanson, a private attorney in Grand Forks representing the county in the litigation, says it isn't clear that any assets of Veum and Krueger are missing and that if there are, the county isn't liable.
Trials in both cases are set to begin within weeks in Grand Forks.
Lamb claims that Veum is missing $35,000 worth of property, including a Chevy pickup truck, and $10,000 from his bank accounts, taken while he was "under the guardianship" of Zavala. Lamb says Veum also owes more than $50,000 to a nursing home because of Zavala's actions.
Lamb alleges Krueger is missing more than $300,000 -- including proceeds from the sale of a house and drained bank accounts, as well as missing gold coins, paintings and antique furniture.
Meanwhile, a criminal investigation of Zavala and Westensee by state crime bureau agents over the allegations apparently continues into its second year, although the state attorney general's office will not comment on it.
Peter Welte, Grand Forks County state's attorney, said he would have been notified if the investigation had been completed or dropped.
However, no charges have been filed.
Federal officials also have been looking into the matter, because most clients of the public administrator receive Social Security payments, according to court documents and people with knowledge of the cases.
In a separate action, county officials are fighting with state insurance officials over whether the state's bonding fund should pay claims made by the county for alleged improper actions by Zavala and Westensee in their duties as public administrators.
At the heart of the complicated case is the unusual nature of "public administrators," set up decades ago under state law as a county office to watch out for vulnerable adults who have no one else to watch out for their financial affairs.
Zavala, who previously served as veterans services officer for the county, was appointed to be public administrator in 2010. Cathy Westensee was tapped to assist her.
Both resigned abruptly in January 2012 just before a special county commission meeting set apparently to fire them because of the allegations.
The criminal investigation began after county Auditor Debbie Nelson wrote a letter to Grand Forks Police Detective Mike Flannery on Sept. 19, 2011. The letter just became public in May through Lamb's discovery requests in the civil lawsuits.
In the letter, Nelson says "It is with deep concern," that she told Flannery -- who since has retired -- about apparent discrepancies in the way Zavala and Westensee were spending and accounting for clients' money.
Nelson found that 18 clients under Zavala's guardianship wrote checks of exactly $249 to Westensee for gourmet cookies from David's Cookies, from Feb. 10, 2010, through June 29, 2011, for a total of $4,499.10.
David's Cookies is a national marketing firm that provides customers with instructions on how to bake the gourmet cookies and sell them.
"I do not know if Cathy Westensee is baking the cookies or if she is buying the cookies from David's Cookies," Nelson told Flannery. "If she is buying the cookies, I wonder why the checks are made out to her and not to David's Cookies. I also wonder why 18 of their guardians (clients) have decided to buy cookies."
Nelson also told Flannery that records showed payments from the county to Rod Fisk and his auto body shop totaling about $2,300 for retrieving, moving, storing and fixing vehicles belonging to clients.
Fisk is married to Westensee, Nelson told Flannery.
The records of clients' assets being sold by the public administrators also don't make clear who was buying the assets, whether fair prices were paid and what happened to the money, Nelson said.
Other figures in the public administrators' reports also didn't seem to add up, Nelson said.
"I am making this report because of the possibility vulnerable adults are being defrauded," Nelson wrote to Flannery.
Zavala has retained Grand Forks attorney Kerry Rosenquist, who said he wouldn't discuss the case in detail before the lawsuits go to trial. He pointed out no criminal charges have been filed.
"She denies any wrongdoing," Rosenquist said of Zavala. "She didn't take anything that belonged to a client. The concerns that Ms. Nelson raised in her letter are no more than concerns. There is nothing nefarious that happened."
Haley Wamstad, an assistant state's attorney for Grand Forks County, filed a claim with the state insurance department's bonding fund Jan. 18, 2012, seeking a payment of $10,000. In the claim document, Wamstad writes that Cal Dupree of the state's Bureau of Criminal Investigation, checked out the cookie receipts and learned that only one of the 17 cookie invoices was valid.
Dupree said Zavala told him on Jan. 12, 2012, that she and Wentensee provided BCI agents with receipts that "were falsified."
Wamstad said further concerns were raised because the public administrators "are dealing with cash frequently, completing client's transactions with ... family members" of Zavala and Wentensee.
But officials of the state insurance fund denied the county's claim, saying county officials had missed a deadline to file such a claim.
Swanson, who in a separate capacity serves as counsel for the city of Grand Forks, says the lawsuits of Krueger and Veum hold no water.
"Quite frankly, in both cases, the plaintiffs are uncertain as to whether there is even property missing, let alone who may have taken it," Swanson told the Herald Friday. "They have made allegations but don't have any evidence that any of their property is even missing, or if it is missing, who took it."
Swanson said public administrators are an unusual historical artifact in North Dakota government: appointed by and answering to state district judges but paid by county governments.
"They did not report to the (county) commission," Swanson said of Zavala and Westensee. "In fact, the commission would not have any knowledge or information when the court would appoint anyone as a public administrator for a client. All reports go to the court -- the court has jurisdiction. ... To prove liability against the county, you have to prove the county had control over those employees."
Lamb argues in his brief that county officials, by filing an insurance claim with the state over alleged improper acts by Zavala and Westensee, acknowledged their "supervisory responsibility" over the women.
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