Multiple trips to Disneyland and Hawaii, a new car, a pet retreat, and thousands of dollars in college tuition payments — all paid for by the director of a children’s after school program in Capitol Hill, allegedly using the Kids’ Club bank account.
According to the lawsuit and police report, recently obtained by CHS after a public records request, for three years ending in 2011, Cathy Reed stole more than $236,000 from her former employer, Kids’ Club at 18th Ave’s Stevens Elementary. According to the allegations, Reed used the Club’s money like it was her own personal bank account. The roster of alleged transactions runs more than 15 pages of the 24-page suit against her.
Kids’ Club runs before school and after school programs, as well as a summer camp, from the Steven’s Elementary School campus at 18th and Galer.
This is the first time the allegations against Reed have been revealed to the public.
Month by month the Kids’ Club civil suit, filed in April in King County, documents Reed’s alleged spending spree as she used the nonprofit’s checks and credit cards to buy everything from the lavish to the mundane. In some transactions, the complaint alleges she spent thousands of dollars of the nonprofit’s money on vacations and tuition fees at Washington State University, where her daughter attended. Other times, it was a few dollars for coffee and a purchase at the Wallingford toy store, Archie McPhee’s.
The allegations of Reed’s amazingly brazen embezzlement included giving herself unauthorized raises and bonuses totaling $62,500 and spending nearly $175,000 in unauthorized personal purchases. The director’s role was authorized for a salary of $42,000 a year when she took the job in 2007. The board authorized a raise to more than $45,000 in 2008. The next year, according to the lawsuit, Reed took matters into her own hands by increasing her salary to more than $50,000. The organization’s lawyers say, by that time, she had already begun abusing the Kids’ Club credit card and bank accounts starting with a March transaction:
In the beginning, the Kids’ Club and its board were apparently oblivious to the alleged embezzlement. While the suit says Reed allegedly began stealing thousands of dollars from Kids’ Club as early as 2008, only six months after she was hired, no one in the organization appears to have said anything until 2011. Current board president Kari Kaill told CHS she couldn’t comment on the previous board’s actions.
Kaill said she joined the volunteer board in September 2011, shortly before Reed was fired in December.
CHS attempted to contact Reed several times without success. At the Reed’s home in Lake Forest Park, a man who identified himself as her husband told CHS she was not home Tuesday evening and declined to comment further on the case. Calls to a number listed for the Reed household have gone unanswered.
According to court documents, Reed does not appear to have representation in the civil case. An attorney representing Reed withdrew from the case shortly after the suit was filed. The trial is scheduled to begin in July 2014.
Included in the lawsuit is a detailed account of what Kids’ Club lawyers say were Reed’s attempts to cover up her alleged misuse of funds. In September 2011, Reed allegedly submitted a proposed budget that failed to break down individual salaries of administrators and staff. According to the complaint, Reed ignored requests by the program’s treasurer for more information on employee salaries and expenses. The suit goes on to say that Reed transferred Kids’ Club funds into different accounts and shredded business documents before the board president and treasurer were finally able to discover her alleged activities in December 2011.
Kids’ Club filed the civil suit against Reed this May, a year and a half after she was fired. Seth Berntsen, who is representing Kids’ Club in the civil case, told CHS it took months to document Reed’s years of alleged embezzlement. Still, he said he had no clues as to why Reed would steal from the children’s program.
“I have no idea why she did this,” Berntsen said. “It’s unfortunate these things happen.”
According to Kaill, the program is funded though enrollment fees and does not receive direct funding from Seattle Schools.
The case isn’t the only major embezzlement investigation underway at a Capitol Hill nonprofit. CHS reported on the allegations against a former treasurer at the group Friends of the Volunteer Park Conservatory this summer.
Current Kids’ Club director Amy Hale, who has been in the position for just over a year, said the program is up and running smoothly.
“My focus is making the future of this place as strong possible,” she said. “We have a great community and things are moving forward. Business is viable.”
Kaill would not elaborate on how the alleged embezzlement changed the program’s budget and declined to comment on the program’s current operating expenses. She said Reed’s actions did not force the program to enroll fewer kids than usual. There are currently 126 families with kids in the program.
In May, Kaill reported Reed’s alleged embezzlement to Seattle Police. The case is being handled by SPD’s fraud unit, according to the police report.
“We aren’t seeking attention with this,” Berntsen said, who is only representing Kids’ Club in the civil case. “[Kid's Club] just wants their money back.”
According to court documents, Reed allegedly stole at least $236,000 from the nonprofit program and the run-down of her purchases is bold, to say the least. Here is a sampling of how the lawsuit says the money was spent:
More than $3,000 on a personal trip to Ft. Lauderdale, FL. that included food and lodging.
$1,700 on eating out and a spa day in the University Village.
More than $5,500 on the Kids’ Club credit card for a personal trip to Disneyland, as well as meals at Boom Noodle and Blue C Sushi.
Kids’ Club check for $21 check to Shorecrest High School.
More than $1,000 for hotel stays in Pullman, where Reed’s daughter attends the Washington State University.
$407 on various Craigslist purchases and restaurant bills, including at Deluxe Bar and Grille.
$26 in late charges at Snapdoodle Toys.
More than $1,500 on the Kids’ Club credit car for a cruise to Victoria, BC.
Nearly $1,500 on a trip to Hawaii for Reed, her husband, and their son.
Nearly $1,300 to unbeatablesales.com.
A tuition payment of $3,656 to Washington State University, where Reed’s daughter attended.
More than $2,000 to a tour guide company that specializes in tours of India.
$7,250 in a Kids’ Club check Reed made out to herself titled “Xmas Bonus.”
More than $3,700 at the Apple Store in Seattle.
$389 at Sutter Home and Hearth, a fireplace store.
$7,255 to Dream City Sportscars, now called Jet City Autos.
A tuition payment of $2,381 to Washington State University.
$85 to the Inglemoore Animal Hospital.
$100 to Aloha Nails Spa in Mount Vernon.
Reed paid herself $1,300 in two checks, tilted “summer programming bonus.”
$2,000 for anther trip to Hawaii for Reed, her husband, and her son.
$600 for a trip to Yellowstone.
Reed wrote a check to herself for $6,000.
$1,307 to the Shorecrest High School booster club.
$452 to Table Top Shop, a store specializing in “fine linens and home decor.”
$1,199 to workout equipment retailer, internetfitness.com.
$190 to the Mt. Baker Ski Area.
$580 to Sound Experience, a company that specializes in sail boat tours of the Puget Sound.
Nearly $3,100 on the Kid’s Club credit card for yet another trip to Hawaii — hotels, food, and airfare.
$5,000 to Fish and Ski Marine, a boat dealership.
$1,600 to Seattle Light.
$74 to the Paradise Pet Lodge.
$181 to Rom Mai Thai.
$200 for flowers.
Reed wrote a $3,800 Kids’ Club check made out to the City of Lake Forest Park, where she lives.
UPDATE 10/10/13 9:06 PM: Here’s TV’s take on the situation –