Former director allegedly spent $236K+ from Capitol Hill after-school program on shopping trips, kid’s college tuition, Disneyland

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Kids’ Club provides after school care and a summer camp for more than 100 families at Capitol Hill’s Stevens Elementary (Image: CHS)

Screen Shot 2013-10-09 at 7.08.50 AMMultiple 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.

An example of a transaction Kids' Club says Reed made using the organization's funds

An example of a transaction Kids’ Club says Reed made using the organization’s funds

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:

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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.

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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.

Screen Shot 2013-10-09 at 7.12.10 AMIncluded 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:

March 2008
More than $3,000 on a personal trip to Ft. Lauderdale, FL. that included food and lodging.

May 2008
$1,700 on eating out and a spa day in the University Village.

July/August 2008
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.

September 2008
Kids’ Club check for $21 check to Shorecrest High School.

October 2008
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.

May 2009

More than $1,500 on the Kids’ Club credit car for a cruise to Victoria, BC.

June 2009

Nearly $1,500 on a trip to Hawaii for Reed, her husband, and their son.

July 2009

Nearly $1,300 to unbeatablesales.com.

November 2009

A tuition payment of $3,656 to Washington State University, where Reed’s daughter attended.

December 2009

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.”

January 2010
More than $3,700 at the Apple Store in Seattle.

February 2010
$389 at Sutter Home and Hearth, a fireplace store.

March 2010
$7,255 to Dream City Sportscars, now called Jet City Autos.

April 2010
A tuition payment of $2,381 to Washington State University.

May 2010
$85 to the Inglemoore Animal Hospital.

June 2010
$100 to Aloha Nails Spa in Mount Vernon.

Reed paid herself $1,300 in two checks, tilted “summer programming bonus.”

July 2010
$2,000 for anther trip to Hawaii for Reed, her husband, and her son.

$600 for a trip to Yellowstone.

August 2010
Reed wrote a check to herself for $6,000.

October 2010
$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.

December 2010
$190 to the Mt. Baker Ski Area.

January 2011
$580 to Sound Experience, a company that specializes in sail boat tours of the Puget Sound.

February 2011
Nearly $3,100 on the Kid’s Club credit card for yet another trip to Hawaii — hotels, food, and airfare.

April 2011
$5,000 to Fish and Ski Marine, a boat dealership.

May 2011
$1,600 to Seattle Light.

July 2011
$74 to the Paradise Pet Lodge.

September 2011
$181 to Rom Mai Thai.

$200 for flowers.

November 2011
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 –

23 thoughts on “Former director allegedly spent $236K+ from Capitol Hill after-school program on shopping trips, kid’s college tuition, Disneyland

  1. I hope you’ll share this article with the online news sources for Lake Forest Park. It would be nice for her immediate community to be aware of the damage she’s done. Shorecrest’s Booster Club and the City of Lake Forest Park should know where the money came from.

    $3800 sounds like property taxes in LFP. Perhaps the City would consider refunding the money to Kid’s Club and charging Reed interest and late fees or perhaps just put a lien on her house.

  2. Wow. My family’s children were at Kids Club from 2001-2007, and again since 2012. I am so very grateful that the leadership in place during those times has been positive. The director Amy, the assistant director, and all of the staff is warm, welcoming, and best of all, the children seem to love them. I hope the current Stevens and Kids Club families can make sure to throw their support behind Amy and her staff.

  3. Volunteer organizations are well-advised to have a CPA if not on the Board then at least annually review all the accounts. Internal controls are routine, but often ignored in more informal organizations. Hope the Prosecutor files felony embezzlement and theft charges.

  4. I know I said this when the Friends of Volunteer Park issue came to light, but please tell me that Kids’ Club has changed their internal controls so that the person who writes/has access to checks is not the same person who signs checks. This is the single most basic tenet of nonprofit accounting.

    • Most likely she didn’t tell her family where the “extra” money came from, and fabricated some story. First class seats could have possibly created too many questions even for them. I’m sure the intent was not to get caught.

  5. The board members at the time of her theft should also be on the lawsuit. They should have caught this and failed in their fiduciary duties. This is the entire point of having a board of directors. Whatever monies they cannot recover from her should come from the directors. Hopefully they were smart enough to have a Directors & Officers policy to insure them from this kind of gross negligence. And I totally agree with Fitz and Genevive. As for the thief, I hope she eventually rots in prison for a long time.

  6. I want to know first of all why she is not in jail or at least has to put up a large bond. Is she not a flight risk?

    Secondly, where was the board of Kids’ Club since 2008 when all these shenanigans were going on. I guess they never or rarely audit their expenses, eh?

  7. I was there when Cathy was hired. She bragged and bragged about an inheritance she received that was going to help pay for vacations for herself and family along with a new-used Mercedes she was driving. I’d be happy to talk to anyone associated with this.

  8. For years Cathy would tell staff that money was tight and they had to do with no bonus or make do when supplies ran out. She needs to go to prison. How does some one steal from children for years and be okay with that.

  9. Pingback: Blotter | First Hill robberies, 22nd/Union iPhone grab, car part ripoffs | CHS Capitol Hill Seattle

  10. This makes me so sad. My kids haven’t been to Kid’s Club, but have participated in various other afterschool programs and I have worked in the children’s activities world for ten years. It absolutely kills me that this woman would take parents’ money and use it on herself. I have worked for greedy business owners in the past, but never have I seen such horrible misconduct.
    As parents, sometimes we have to cut other things out of our family budgets to pay for our kids to do the activities they enjoy and for this woman to just embezzle that money is just wrong.
    Have fun in prison!

  11. Well my child goes to Kids Club and I am absolutely appalled. I have no issue at all with the care, the services or the childrens well being, I love the place. But realizing that some of the 20k+ I have paid them over the last 5 years likely went to pay for college funding, holidays etc make me sick to the teeth.

    I’ve been checking my email every couple, of hours of late as I am curious as to when Stevens will actually bother to send a letter to the families and explain some of this, if they can. Have heard nothing yet.

  12. I am shocked at what I just read. I worked with Cathy years ago at two different schools. This is a terrible thing she has done and I am very sad for all the families who had put money and trust into the program she ran.

    I feel sad for her children and what her actions may do to them. I have known this family for many years.

  13. My kids have been going to Kids Club for years, and were there the whole time Cathy was. I always wondered why she left so suddenly. Now I know. Absolutely shocking and disgusting. On top of our tuition fees that she stole, we actually gave that thief holiday gifts every year. I hope Kids Club is successful in getting their money back (and that legal fees don’t eat up most of that).

  14. Any updates on this? Doesn’t look like she’s been arrested yet, or any progress on getting the allegedly embezzled funds returned.

  15. She worked at Kenmore Air on Lake Union, Seattle last summer. It appears she does not work there anymore. I would see her from time to time there; had a bad feeling about her and knew I couldn’t trust her. I hope she never gets a job anywhere ever and goes to prison. This lady needs to be locked up.