Five years and a $125,000 civil lawsuit settlement later, a former director of a Capitol Hill after school program has been sentenced to 17 months in prison and ordered to pay another $82,000 in restitution for embezzling thousands of dollars from the program she increasingly used as her personal bank account, according to court documents.
Earlier this month, Cathy Reed pleaded guilty to multiple counts of theft from Kids’ Club, a non-profit after school program at 18th Ave E’s Stevens Elementary. From 2009-2011 Reed used Kids’ Club money to buy a new car, fund personal vacations, and even pay property taxes on her house. CHS first broke news of the allegations against Reed last October. At that time, Reed did not respond to multiple requests for comment, nor was she home when we knocked on the door of her Lake Forest Park home.
In court documents, the King County prosecutor said Reed’s actions were a clear case of a person who chose to live beyond her means.
“There is no evidence … of a gambling addiction, or of a drug problem, or of a compulsive shopping habit,” said deputy prosecuting attorney Amanda Froh. “Instead, those records tell the story of someone who was living her life, day by day, in a manner beyond what her income could sustain.”
In April, Reed agreed to pay Kids’ Club $125,000 to settle the program’s 2013 civil suit against her. The lawsuit claimed Reed had embezzled at least $236,000 to fund multiple trips to Disneyland and Hawaii, cruises, a pet retreat, and thousands of dollars in college tuition payments for her daughter. Prosecutors in the criminal case also concluded Reed had used the stolen money for those items, but some of those charges were dropped in a plea agreement.
Following the civil suit, a Seattle Police investigation found Reed stole at least $180,000 from Kids’ Club in the form of personal spending, and unauthorized salary increases and bonuses. At one point, Reed had nearly doubled her salary without permission to more than $80,000, according to court documents and the SPD investigation.
According to court documents, Kids’ Club board members were unaware of Reed’s activities until 2011 when Reed submitted a budget that did not break down employees salaries. Reed then refused to answer questions from the program’s new treasurer and became “increasingly defensive” when asked about the program’s financial matters. According to the SPD detective assigned to the case, Reed sometimes forged signatures on checks to cover her tracks.
When board members eventually gained access to the Kids’ Club bank statements they discovered Reed had transferred the program’s money to a personal checking account. She was fired soon after.
According to prosecutors, Reed had completely depleted the program’s reserve funds while she directed the program. However, In October 2013, CHS spoke with current Kids’ Club director Amy Hale, who said the program was 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.”
Regaining its footing, Kids’ Club continues to serve students and parents for the 2014/2015 school year.
A sampling of Reed’s purchases using Kids’ Club funds.
Thanks for the update on this!
I hope the individual board members will be required to pay back the rest of her embezzled money or that they had good D&O insurance that covered it. This is happening way too much with so many non-profits in Seattle. The Boards of Directors need to start being held personally accountable for their total negligence.
I agree with this sentiment. But who wants to volunteer to serve on their kids’ after-school program’s board if they’re risking personal liability? (Not me.)
I would if it would prevent my hard earned money from being embezzled by an criminal. It’s not really that much of a time commitment to make sure that very basic accounting practices are in place to prevent theft like this from being possible. And a good Director’s and Officer’s policy would have been cheaper than the embezzlement. At minimum yearly audits would have caught this much much sooner.
I’m glad that there is some jail time for this. Too often embezzling just results in a slap to the wrist.
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