The University of Kentucky Police Department confirmed it is investigating the former superintendent of the College of Agriculture's Woodford County Farm in the loss of at least $198,000 over two years.
College officials fired Michael A. Peters, 47, in January after UK auditors, acting on an anonymous tip, confirmed that Peters used the farm's fuel to fill up his personal vehicle.
But a further review by the auditors revealed that Peters allegedly sold $179,000 worth of UK's crops under his own name. In addition, $13,000 worth of equipment disappeared, and the contract for tobacco harvesting cost the university nearly $6,000 more than in previous years under his watch.
Scott Smith, dean of the College of Agriculture, called those revelations, detailed in a May 19 audit, "a bombshell" that has "shocked" the college.
UK officers are still investigating and declined to comment. But UK police have forwarded their initial findings to the commonwealth's attorney in Woodford County to see whether criminal charges should be filed, said UK spokeswoman Kathy Johnson.
Prosecutors in the office of Commonwealth's Attorney Gordie Shaw, who covers Woodford, Bourbon and Scott counties, declined to comment.
The auditors' findings prompted a flurry of changes for UK's eight farms across the state, which are used for agricultural education and research.
"We were inadequately prepared for this. I can't argue with that at all," said Smith, who has been dean since 2001. "But I think we've made an amazing amount of progress with regard to accountability and verification ... in a very short amount of time."
The UK audit of the Woodford County Farm coincided with a separate management review that Smith ordered in August 2008 to find out why the department that oversaw the farms and several other agricultural divisions consistently overspent its $5 million annual budget by more than $500,000.
Smith said he suspected "bad management," not criminal activity.
Managers and farm superintendents said they "spent till they were told to stop," according to the March 6 management review report.
As a result, Smith said, the college eliminated the operations department and created a direct chain of command from the farms to an assistant dean of facilities management.
The former head of the operations department, Bill Peterson, retired effective June 7 by "mutual agreement," Smith said.
Peterson was responsible for overseeing all of the farm superintendents, including Peters at the Woodford County Farm. That 1,484-acre farm grows tobacco and other crops and is home to UK's beef research unit, sheep unit and swine research center.
In a brief interview Tuesday, Peterson said he was "absolutely not" aware of improper activity by Peters.
Peters, who worked for UK for 27 years, including seven as head of that farm, didn't return messages left by the Herald-Leader on Tuesday.
The most costly finding of the audit team was that Peters sold $177,403 worth of corn, soybeans and wheat to Perdue Grain and Oilseed LLC in Winchester under his own name.
Peters was in charge of signing contracts between the farm and purchasers, such as Perdue. Apparently, without anyone else's knowledge, Peters entered into a deal with Perdue to sell UK's crops between Nov. 14, 2006, and Nov. 21, 2008, the audit said.
The chicken giant's corporate media office didn't return a message requesting comment Tuesday.
Peters allegedly sold an additional $1,600 in straw to Maramour Farm in Woodford County in July 2008, again listing himself as the vendor, the report said.
Johnny Byrd, the farm manager, said Tuesday he thought the farm was paying UK when it purchased the straw.
The audit found that the college had no way to accurately monitor the farm's crop revenue or track inventory.
"That was the failure here. We didn't have a good inventory system," Smith said. "It was all in the head of one guy, and that empowered that guy to do what he did."
The new policies require two people with keys to access inventory at the farms, Smith said. In addition, all inventory reports now will go through an internal auditor in the college's business office, Smith said.
The audit also found:
■ Peters allowed employees to borrow tools or to purchase excess equipment that should have been handled by the university's surplus sales. The total in missing tools and equipment is about $13,000, auditors estimated.
■ Conflicts of interest on the farm went unchecked. For instance, a company co-owned by Peterson, the former head of management operations, bought grain from the farm 10 times. And Peters awarded a contract to a former UK employee, who wasn't named in the audit, to head the harvesting of tobacco in 2008 at a higher price than previous years. That cost UK nearly $6,000 more, the audit said.
■ UK did not keep track of what happened to fuel for farm vehicles. Peters acknowledged to auditors that he filled up his personal vehicle from the pump five or six times. However, Peterson reported to auditors on Dec. 18, 2008, that there was no documentation for the use of 2,902 gallons of fuel at the Woodford County Farm.
Smith said the college installed cameras at the pumps and set up electronic monitoring. Smith said he is proud of the way the college has responded to the losses and the criminal investigation.
"One of the reasons this was disturbing is that the college really has a history of being committed to stewardship of these places," he said. "One of the reasons we felt so compelled to respond so aggressively was our commitment to the value of these places."