Ball State University and Colleges and Universities and Investment Losses and Investing and Banking & Finance and Securities fraud and Education & Workforce Development

Ball State fraud involved failed internal controls

June 25, 2014

Internal controls at Ball State University that should have alerted school officials about a pair of fraudulent investments costing the school $13.1 million failed, its treasurer says.

Treasurer Randy Howard told The Star Press he doesn't know whether that failure involved deception by anyone at the university, lack of due diligence or both. He told The Associated Press on Wednesday that the U.S. attorney's office is investigating and that he plans to meet soon with the Delaware County prosecutor.

Seth Beoku Betts was sentenced to four years in prison for wire fraud earlier this month in U.S. District Court in New York City. Authorities say he persuaded a Ball State investments director to invest millions in the mortgage market, but instead spent the money on luxury cars, a house in Florida and other personal indulgences.

Last year, George Montolio was sentenced to three years in prison after pleading guilty to one count of wire fraud. Betts has been ordered to pay $8.16 million in restitution and Montolio has been ordered to pay $3.8 million. The remaining $1.2 million remains unaccounted for.

Howard said among the red flags that were missed:

— An interest rate of 5.04727 percent on a purported $3 million U.S. Treasury investment. An interest rate with more than three digits after the decimal point is atypical, unless the investment was bought on the secondary market.

— A maturity date of Aug. 27, 2036, on a supposed Fannie Mae investment. University policy limits investments to terms of five years.

— A digit missing on a supposed Fannie Mae investment. Ball State attorney Jim Williams compared it to a missing digit in a Social Security number.

— Different code numbers being given to the same U.S. Treasury investment, which would be like a person using two Social Security numbers to identify himself.

"It should all match up," Howard said.

The supporting documents are supposed to verify the investment that was purchased, the payment schedule, the transfer of funds by wire, a confirmation that the security was purchased and other information. Those documents don't even exist for some of the fraudulent transactions.

"That's suspicious," Howard said. "There's nothing. Why? I'm surprised people signed off on that without the documentation."

Because of retirements and other turnover, most of the nine people who worked in the controller's office at the time of the investment fraud scheme no longer work there, school officials said.

ADVERTISEMENT

Recent Articles by Associated Press

Comments powered by Disqus