Online Publication, Copyright © 2008, Gaylord Herald Times
P.O. Box 598, 2058 S. Otsego Ave., Gaylord, MI 49734 · (989) 732-1111 · 877-819-6170 Toll Free
P.O. Box 598, 2058 S. Otsego Ave., Gaylord, MI 49734 · (989) 732-1111 · 877-819-6170 Toll Free
Schuster charged: Former DDA director faces embezzlement/forgery counts
Former DDA Director Sherrie Schuster sits in court Monday, her attorney, David Delaney (standing), appearing as she is arraigned on charges of embezzlement and forgery, charges authorized by Otsego County Prosecutor Kyle Legel (at right). HT - Michael Jones
By Michael Jones, HT Staff Writer
Tuesday, June 3, 2008 5:09 PM EDT LIVINGSTON TWP. — Sherrie Schuster appeared to sit impassively Monday as 87th District Court Judge Patricia A. Morse read the charges of embezzlement and forgery leveled against her as former Gaylord Downtown Development Authority (DDA) director. Officials allege she may have taken as much as $280,000 from Gaylord and state DDA coffers, with her motive nothing but greed.
Schuster’s attorney, David Delaney, and Otsego County prosecutor Kyle Legel indicated Monday a plea agreement may be in the works at a status conference, possibly scheduled for as early as this week in 46th Circuit Court, where she was bound over following her arraignment.
Schuster is free on a $20,000 personal recognizance bond while awaiting a status conference in circuit court, possibly later this week.
A seven-month investigation detectives from the Petoskey Michigan State Police (MSP) post completed last week into alleged financial improprieties at the DDA culminated Monday in the authorization of arrest warrants for two counts each of embezzlement and forgery against 46-year-old Schuster.
After Schuster turned herself in to authorities at the Otsego Count Jail Monday about 2 p.m. for processing — her photo mug and fingerprints taken — the former director, accompanied by Delaney, was arraigned in District Court on one count of embezzlement $100,000 or more, a 20-year felony, for alleged embezzlement of funds from the Gaylord DDA.
She was further charged with a second count of embezzlement, $50,000 or more but less than $100,000, a 15-year felony, for alleged embezzlement of funds from the Michigan Downtown Association (MDA). Schuster had served as treasurer of that state organization until resigning Oct. 23, 2007, the same date she resigned her Gaylord DDA post.
Additionally, Schuster is charged with two counts of forgery — each 14-year felonies. According to the warrant, Schuster allegedly “did falsely make, alter, forge or counterfeit a promissory note” in the amount of $10,000 on Aug. 17, 2007. A second check allegedly was forged in the amount of $1,500 on Oct. 19, 2007. Both reportedly were drawn on Independent Bank. The warrant indicated the $10,000 check had been made out to the state association and the check for $1,500 to the USAA, a financial services institution for military families.
Det. Sgt. Gwen White-Erikson, who conducted the investigation and submitted her lengthy report to Legel last Thursday, said the narrative report alone consists of several hundred pages. In addition to the report of her findings, the detective said she also has several binders filled with additional evidence, including the forensic audit completed by accountants with Plante & Moran and other financial records of the DDA and MDA.
Legel reported that according to the MSP investigation, the bulk of the embezzlement of funds allegedly was accomplished through Schuster’s writing checks to the state organization from the Gaylord DDA account. “Those checks were never entered into the MDA account and as treasurer she may have doctored the financial reports she submitted,” said Legel.
The in-depth investigation began in October following a meeting between the city and DDA where city officials requested a “more concerted effort” by the DDA to pay off a growing debt owed to the city for services and bonds. At that time City Manager Joe Duff reported city records indicated the DDA owed the city $327,933 as of Sept. 30, 2007.
“At this point in time we’re very pleased that the long investigation has come to an end and charges have been formally made,” Duff said Monday after hearing Schuster had been charged with embezzlement. “Our DDA is moving forward, and we’ve been since we realized the indiscretions did occur. We’re looking forward to a restitution package on this.”
Duff has been serving as interim DDA executive director since Schuster’s resignation Oct. 23.
“It’s been a long process,” Gaylord mayor Gladys Solokis said of the lengthy investigation. “I’m glad it’s the beginning of the end.”
Prior to her resignation Schuster had served as DDA director since 1993 when the position was created by the city.
Schuster waived her right to a preliminary exam and was bound over to 46th Circuit Court. Prior to that action, Schuster’s attorney indicated to Judge Morse his client was prepared to make a plea to the charges.
Rather than listen to or accept a plea, Morse chose to bound Schuster over to Circuit Court to allow time to review the report submitted by Det. White-Erickson.
— Chris Engle contributed to this story.
The 4 charges:
• Count 1: Embezzlement- $100,000 or more ... being an agent, servant, or employee of Gaylord Downtown Development Authority, did convert to her own use, without the consent of her principal, United States currency, money, or personal property of her principal, having a value of $100,000 or more, that came into the defendant’s possession or under the defendant’s charge or control by virtue of her relationship with the principal; contrary to MCL 750.174(7).
Felony: 20 years and/or $50,000, or 3 times the amount embezzled, whichever is greater.
• Count 2: Embezzlement-$50,000 or more but less than $100,000 ... being an agent, servant, or employee of the Michigan Downtown Association, did convert to her own use, without the consent of her princiap, United State currency, money, or personal property of her principal, having a value of more than $50,000 but less than $100,000, that came into the defendant’s possession or under the defendant’s charge or control by virtue of her relationship with the principal; contrary to MCL 750. 174(6).
Felony: 15 years and/or $25,000 or 3 times the amount embezzled, whichever is grater.
• Count 3: Forgery ... did falsely make, alter, forge or counterfeit a promissory note or an order, acquittance or discharge for money or other property, with intent to injure or defraud, to wit: check #1997, date: 8-17-2007, amount: $10,000, from independent Bank, payee: MDFA, contrary to MCL 750.248.
Felony: 14 years.
• Count 4: Forgery ... did falsely make, alter, forge or counterfeit a promissory note or an order, acquittance or discharge for money or other property, with intent to injure or defraud, to wit: check #1468, date: 10-19-07, amount: $1,500, from Independent Bank, payee: USAA; contrary to MCL 750.248.
Felony: 14 years.
How embezzlement charges are authorized
GAYLORD — Otsego County prosecutor Kyle Legel said the alleged embezzlement of funds by Sherrie Schuster from the Gaylord Downtown Development Authority (DDA) and Michigan Downtown Association (MDA) occurred over a six-year period, from 2001 to 2007, and involved around $280,000 in missing funds.
Schuster was charged Monday with two counts of embezzlement: embezzlement $100,000 or more, a 20-year felony; and embezzlement $50,000 to $100,000, a 15-year felony. In addition to the embezzlement charges, Schuster was charged with two counts of forgery, each a 14-year felony.
In embezzlement cases, Legel explained, investigators and prosecutors typically “look at the entity” when deciding what charges, if any, will be recommended for prosecution. “We consider it to be one act rather than breaking it down into a number of smaller charges for each individual crime.”
By looking at the entire series of alleged embezzlements over the six-year period, investigators reportedly determined in Schuster’s case more than $100,000 allegedly was embezzled from the Gaylord DDA, he said. From that they were able to recommend the maximum 20-year felony for embezzlement.
The 15-year felony Schuster faces for alleged embezzlement from the MDA; determined to be between $50,000 and $100,000.
Last year state legislators passed a law increasing the penalties for embezzlement. Under the old law, the most serious embezzlement offense involved amounts in excess of $20,000 and carried a maximum penalty of 10 years in prison. The new legislation doubles the penalty for more serious embezzlements.
According to Legel, two new levels of penalties for embezzlement were added, recognizing the seriousness of the crime. State legislators added the 20-year and 15-year felonies for embezzlement, the two counts Schuster faces.
Gaylord Downtown Development Authority embezzlement timeline
• Nov. 16, 2005: Letter sent by Gaylord accounting firm of Keskine, Cook, Miller and Alexander states over $260,000 is owed by DDA to city. “The (Gaylord) Downtown Development Authority and the IDC fund have deficits in violation of Michigan statutes. We understand the DDA will likely erase the deficit during the current year,” read the letter.
• Week of Oct. 15, 2007: DDA chairman Robert McNamara Sr. asks for a recounting of DDA expenditures; city officials discover improprieties in financial records
• Oct. 22, 2007: “Confirmation” of improprieties found, according to City Manager Joe Duff
• Oct. 23, 2007: Sherrie Burns Schuster resigns as DDA executive director per the advice of city officials; improprieties reported to the Otsego County Prosecutor’s Office and the Michigan State Police (MSP); Det. Sgt. Gwen White-Erickson begins reviewing records
• Oct. 24, 2007: MSP announces investigation into “embezzlement from the Gaylord DDA”; DDA debt to city: $327,933
• Nov. 6, 2007: Per the recommendations of the auditors, two existing DDA accounts — the Tax Increment FInancing (TIF) and administrative accounts — are frozen and two new accounts are opened at Fifth Third Bank; city loans DDA $40,000 to act as “seed money” for those two accounts; Duff appointed DDA interim executive director
• Jan. 9, 2008: DDA debt to city: $306,904.44
• Jan. 31, 2008: DDA funds unfrozen, balances are $17,803 in administrative, and $257,583 in TIF account (after reimbursement of $40,000 loan and repayment to the city for $68,947 in overcollected taxes to be distributed to Gaylord Community Schools and Cheboygan-Otsego-Presque Isle Educational Service District).
• Feb. 16, 2008: Duff reports DDA funds are sufficient to keep current with financial obligations to city, including payments on streetscape and pavilion projects, $222,250 and $71,732 respectively, due in April 2008.
• May 29, 2008: MSP Det. Sgt. White-Erickson submits her final report to the Otsego County prosecutor’s office.
• June 2, 2008: Arrest warrants for Schuster are authorized; Schuster turns herself in to authorities and is arrested and arraigned on charges of embezzlement and forgery.
Tuesday, June 3, 2008 5:09 PM EDT LIVINGSTON TWP. — Sherrie Schuster appeared to sit impassively Monday as 87th District Court Judge Patricia A. Morse read the charges of embezzlement and forgery leveled against her as former Gaylord Downtown Development Authority (DDA) director. Officials allege she may have taken as much as $280,000 from Gaylord and state DDA coffers, with her motive nothing but greed.
Schuster’s attorney, David Delaney, and Otsego County prosecutor Kyle Legel indicated Monday a plea agreement may be in the works at a status conference, possibly scheduled for as early as this week in 46th Circuit Court, where she was bound over following her arraignment.
Schuster is free on a $20,000 personal recognizance bond while awaiting a status conference in circuit court, possibly later this week.
A seven-month investigation detectives from the Petoskey Michigan State Police (MSP) post completed last week into alleged financial improprieties at the DDA culminated Monday in the authorization of arrest warrants for two counts each of embezzlement and forgery against 46-year-old Schuster.
After Schuster turned herself in to authorities at the Otsego Count Jail Monday about 2 p.m. for processing — her photo mug and fingerprints taken — the former director, accompanied by Delaney, was arraigned in District Court on one count of embezzlement $100,000 or more, a 20-year felony, for alleged embezzlement of funds from the Gaylord DDA.
She was further charged with a second count of embezzlement, $50,000 or more but less than $100,000, a 15-year felony, for alleged embezzlement of funds from the Michigan Downtown Association (MDA). Schuster had served as treasurer of that state organization until resigning Oct. 23, 2007, the same date she resigned her Gaylord DDA post.
Additionally, Schuster is charged with two counts of forgery — each 14-year felonies. According to the warrant, Schuster allegedly “did falsely make, alter, forge or counterfeit a promissory note” in the amount of $10,000 on Aug. 17, 2007. A second check allegedly was forged in the amount of $1,500 on Oct. 19, 2007. Both reportedly were drawn on Independent Bank. The warrant indicated the $10,000 check had been made out to the state association and the check for $1,500 to the USAA, a financial services institution for military families.
Det. Sgt. Gwen White-Erikson, who conducted the investigation and submitted her lengthy report to Legel last Thursday, said the narrative report alone consists of several hundred pages. In addition to the report of her findings, the detective said she also has several binders filled with additional evidence, including the forensic audit completed by accountants with Plante & Moran and other financial records of the DDA and MDA.
Legel reported that according to the MSP investigation, the bulk of the embezzlement of funds allegedly was accomplished through Schuster’s writing checks to the state organization from the Gaylord DDA account. “Those checks were never entered into the MDA account and as treasurer she may have doctored the financial reports she submitted,” said Legel.
The in-depth investigation began in October following a meeting between the city and DDA where city officials requested a “more concerted effort” by the DDA to pay off a growing debt owed to the city for services and bonds. At that time City Manager Joe Duff reported city records indicated the DDA owed the city $327,933 as of Sept. 30, 2007.
“At this point in time we’re very pleased that the long investigation has come to an end and charges have been formally made,” Duff said Monday after hearing Schuster had been charged with embezzlement. “Our DDA is moving forward, and we’ve been since we realized the indiscretions did occur. We’re looking forward to a restitution package on this.”
Duff has been serving as interim DDA executive director since Schuster’s resignation Oct. 23.
“It’s been a long process,” Gaylord mayor Gladys Solokis said of the lengthy investigation. “I’m glad it’s the beginning of the end.”
Prior to her resignation Schuster had served as DDA director since 1993 when the position was created by the city.
Schuster waived her right to a preliminary exam and was bound over to 46th Circuit Court. Prior to that action, Schuster’s attorney indicated to Judge Morse his client was prepared to make a plea to the charges.
Rather than listen to or accept a plea, Morse chose to bound Schuster over to Circuit Court to allow time to review the report submitted by Det. White-Erickson.
— Chris Engle contributed to this story.
The 4 charges:
• Count 1: Embezzlement- $100,000 or more ... being an agent, servant, or employee of Gaylord Downtown Development Authority, did convert to her own use, without the consent of her principal, United States currency, money, or personal property of her principal, having a value of $100,000 or more, that came into the defendant’s possession or under the defendant’s charge or control by virtue of her relationship with the principal; contrary to MCL 750.174(7).
Felony: 20 years and/or $50,000, or 3 times the amount embezzled, whichever is greater.
• Count 2: Embezzlement-$50,000 or more but less than $100,000 ... being an agent, servant, or employee of the Michigan Downtown Association, did convert to her own use, without the consent of her princiap, United State currency, money, or personal property of her principal, having a value of more than $50,000 but less than $100,000, that came into the defendant’s possession or under the defendant’s charge or control by virtue of her relationship with the principal; contrary to MCL 750. 174(6).
Felony: 15 years and/or $25,000 or 3 times the amount embezzled, whichever is grater.
• Count 3: Forgery ... did falsely make, alter, forge or counterfeit a promissory note or an order, acquittance or discharge for money or other property, with intent to injure or defraud, to wit: check #1997, date: 8-17-2007, amount: $10,000, from independent Bank, payee: MDFA, contrary to MCL 750.248.
Felony: 14 years.
• Count 4: Forgery ... did falsely make, alter, forge or counterfeit a promissory note or an order, acquittance or discharge for money or other property, with intent to injure or defraud, to wit: check #1468, date: 10-19-07, amount: $1,500, from Independent Bank, payee: USAA; contrary to MCL 750.248.
Felony: 14 years.
How embezzlement charges are authorized
GAYLORD — Otsego County prosecutor Kyle Legel said the alleged embezzlement of funds by Sherrie Schuster from the Gaylord Downtown Development Authority (DDA) and Michigan Downtown Association (MDA) occurred over a six-year period, from 2001 to 2007, and involved around $280,000 in missing funds.
Schuster was charged Monday with two counts of embezzlement: embezzlement $100,000 or more, a 20-year felony; and embezzlement $50,000 to $100,000, a 15-year felony. In addition to the embezzlement charges, Schuster was charged with two counts of forgery, each a 14-year felony.
In embezzlement cases, Legel explained, investigators and prosecutors typically “look at the entity” when deciding what charges, if any, will be recommended for prosecution. “We consider it to be one act rather than breaking it down into a number of smaller charges for each individual crime.”
By looking at the entire series of alleged embezzlements over the six-year period, investigators reportedly determined in Schuster’s case more than $100,000 allegedly was embezzled from the Gaylord DDA, he said. From that they were able to recommend the maximum 20-year felony for embezzlement.
The 15-year felony Schuster faces for alleged embezzlement from the MDA; determined to be between $50,000 and $100,000.
Last year state legislators passed a law increasing the penalties for embezzlement. Under the old law, the most serious embezzlement offense involved amounts in excess of $20,000 and carried a maximum penalty of 10 years in prison. The new legislation doubles the penalty for more serious embezzlements.
According to Legel, two new levels of penalties for embezzlement were added, recognizing the seriousness of the crime. State legislators added the 20-year and 15-year felonies for embezzlement, the two counts Schuster faces.
Gaylord Downtown Development Authority embezzlement timeline
• Nov. 16, 2005: Letter sent by Gaylord accounting firm of Keskine, Cook, Miller and Alexander states over $260,000 is owed by DDA to city. “The (Gaylord) Downtown Development Authority and the IDC fund have deficits in violation of Michigan statutes. We understand the DDA will likely erase the deficit during the current year,” read the letter.
• Week of Oct. 15, 2007: DDA chairman Robert McNamara Sr. asks for a recounting of DDA expenditures; city officials discover improprieties in financial records
• Oct. 22, 2007: “Confirmation” of improprieties found, according to City Manager Joe Duff
• Oct. 23, 2007: Sherrie Burns Schuster resigns as DDA executive director per the advice of city officials; improprieties reported to the Otsego County Prosecutor’s Office and the Michigan State Police (MSP); Det. Sgt. Gwen White-Erickson begins reviewing records
• Oct. 24, 2007: MSP announces investigation into “embezzlement from the Gaylord DDA”; DDA debt to city: $327,933
• Nov. 6, 2007: Per the recommendations of the auditors, two existing DDA accounts — the Tax Increment FInancing (TIF) and administrative accounts — are frozen and two new accounts are opened at Fifth Third Bank; city loans DDA $40,000 to act as “seed money” for those two accounts; Duff appointed DDA interim executive director
• Jan. 9, 2008: DDA debt to city: $306,904.44
• Jan. 31, 2008: DDA funds unfrozen, balances are $17,803 in administrative, and $257,583 in TIF account (after reimbursement of $40,000 loan and repayment to the city for $68,947 in overcollected taxes to be distributed to Gaylord Community Schools and Cheboygan-Otsego-Presque Isle Educational Service District).
• Feb. 16, 2008: Duff reports DDA funds are sufficient to keep current with financial obligations to city, including payments on streetscape and pavilion projects, $222,250 and $71,732 respectively, due in April 2008.
• May 29, 2008: MSP Det. Sgt. White-Erickson submits her final report to the Otsego County prosecutor’s office.
• June 2, 2008: Arrest warrants for Schuster are authorized; Schuster turns herself in to authorities and is arrested and arraigned on charges of embezzlement and forgery.
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