AG Schneiderman Recovers $1m Embezzled From Catholic Missionary Group By Former CFO
By Long Island News & PRs Published: March 26 2014
Society For The Propagation Of The Faith And Pontifical Mission Societies Reported The Theft To The A.G., Are Strengthening Financial Controls
New York, NY - March 25, 2014 - Attorney General Eric T. Schneiderman announced today that his office has recovered approximately $1 million that was embezzled from the Society for the Propagation of the Faith, one of four Pontifical Mission Societies of the Roman Catholic Church in the United States, by its former Chief Financial Officer, the late Raymond F. Schroeck. The money is being returned to the Manhattan-based organization by Schroeck’s widow. In a separate agreement with the Attorney General's office, the Pontifical Mission Societies have agreed to take several important measures to strengthen financial controls of the organization to avoid the risk of falling victim to further schemes like the one carried out by Mr. Schroeck. These steps continue a process of strengthening the organizations’ financial controls that began prior to the discovery of Mr. Schroeck’s theft, which was reported to the Attorney General’s office when it was uncovered.
“I’m pleased that we’ve been able to recover the stolen charitable funds and return a large sum to the Societies so they can continue their important mission. Today’s agreement also ensures that these organizations will continue to enhance their controls to operate in a responsible fashion and prevent any future abuses,” Attorney General Schneiderman said. “The late Mr. Schroeck flagrantly abused the trust placed in him, and his estate is paying a price for it. In these circumstances, it’s crucial that victimized organizations come forward and, like the Pontifical Mission Societies, take necessary steps to guard against future misconduct.”
The societies have agreed to a number of measures to strengthen their internal financial controls. These include the reconstitution of their audit and finance committees, and new and enhanced procedures for check handling, wire transfers, mail sorting, credit card use, petty cash and the handling of cash disbursements. The organizations will also install new accounting and management software systems and conduct periodic, proactive reviews of their risk control policies and practices.
Together with the other Pontifical Mission Societies, the Society for the Propagation of the Faith supports the work of Catholic missionaries in the United States and abroad. Mr. Schroeck, who died in September 2012 at the age of 64 and lived with his wife in North Bellmore, Long Island, was hired by the Society as its controller in 1989. In 2009, he was appointed director of finance and administration, effectively assuming the chief financial officer position at the Society.
Attorney General Schneiderman’s investigation found that, beginning in 2003, Mr. Schroeck devised a simple scheme that enabled him to embezzle money from the Society for nearly a decade. His scheme worked, in part, because of an inadequate segregation of internal functions. The funds he stole came from a “pooled income” investment fund, consisting of funds contributed by donors and managed by State Street Bank in Boston, Massachusetts. Upon the death of a donor, State Street Bank would send a check to the Society for the amount contributed by the donor, plus the undistributed investment earnings on that principal.
Mr. Schroeck was the sole officer of the Society empowered to receive and deposit these checks. Rather than deposit them in the organization’s account, Mr. Schroeck used a computer to add his wife Kathleen's name on many of these checks, followed by a “care of” notation. He then would sign his wife's name on the back of the checks and deposit them by ATM into an account of hers that was linked to other accounts that he controlled. The deposits were made at Citibank branches near the Society’s office at 70 West 36th Street and near the couple’s home. In this fashion, Mr. Schroeck managed, over a nine-year period, to divert approximately $1,770,000 of the Society's charitable funds into his accounts, which he then used for a variety of personal and family expenses, including several luxury automobiles, jewelry, vacation trips and home renovations.
The Attorney General's investigation did not find evidence that Kathleen Schroeck knew of or participated in her late husband's illegal scheme. Nevertheless, it found that she benefitted from and was unjustly enriched by the scheme. Under the terms of the Attorney General’s settlement, Mrs. Schroeck, both in her individual capacity and as executor of her late husband's estate, assigned to the Society her and the estate's interests in various investment accounts, retirement accounts, time-share units and insurance proceeds having an aggregate value of $ 1 million.
In addition to the $1 million recovered from Mrs. Schroeck, the Pontifical Societies have recovered approximately $400,000 from other entities, further reducing the losses from Mr. Schroeck’s thefts. His widow has also paid $25,000 to the Attorney General's office to defray the costs of its investigation in this matter.
Father Andrew Small, National Director of the Pontifical Mission Societies and the President of the Society for the Propagation of the Faith, said, “We thank the Office of the Attorney General for its work throughout this matter. Following our uncovering and reporting of the theft, we worked with the Attorney General's office to achieve a recovery of stolen funds that rightly belong to the poor and to strengthen our internal controls and board oversight. This was a model form of collaboration. Today’s announcement allows us to put this sad affair behind us and to focus on our mission of helping poor churches and communities around the world.”
A copy of the settlement agreement with the former CFO’s widow can be found here. A copy of the agreement with the Societies can be found here.
The investigation of this matter was handled by David Nachman, Senior Enforcement Counsel in the Executive Division, and former Charities Bureau Assistant Attorney General Claire Evans. The Charities Bureau is led by Bureau Chief James Sheehan. The Bureau is part of the Social Justice Division, which is headed by Executive Deputy Attorney General for Social Justice Alvin Bragg.