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City unable to get full restitution

The city's internal audit office recently recommended in a report that two former Urban County Government employees should pay $43,588 in restitution for illegitimate expenses paid from the Lexington Festival Committee's bank account.

But Becky Estep, a senior aide in former Mayor Teresa Isaac's administration, and Debbie Jones, a former administrative assistant, paid significantly less: a total of $2,411 in restitution.

A grand jury indicted Estep and Jones in March on felony theft charges. Estep pleaded guilty in April to an amended charge, first-degree official misconduct, a Class A misdemeanor, and was sentenced to two years' unsupervised probation. She paid $1,500 in restitution.

Charges against Jones were dropped last month because prosecutors did not think they'd be able to disprove Jones' claim that she was doing what Estep, her boss, told her to do. Jones paid $911 in restitution.

Susan Straub, spokeswoman for Mayor Jim Newberry, said the city does not plan to seek additional restitution.

The report, sent Nov. 5 to the mayor by Bruce Sahli, director of the internal audit department, says that attempts to collect more restitution in court would be cost-prohibitive with little chance for success.

Estep and her attorney, Mark Wohlander, declined to comment.

Jones said in a telephone interview Friday that she never felt like she was doing anything wrong.

"Everything that was purchased was purchased at the request of my supervisor," she said.

Court documents filed in March say Estep used money belonging to the Lexington Festival Committee to buy clothes, popcorn and lunches worth more than $300. Jones was accused of using money from the same source to pay for a trip to Gatlinburg, and gift cards and lunches totaling more than $300.

According to the city's audit, released to the Herald-Leader through an open records request, the commonwealth's attorney's office calculated the actual restitution based on evidence that Estep and Jones benefited from the purchases. Assistant Commonwealth's Attorney Andrea Mattingly said in an interview that the grand jury did not indict Jones and Estep on charges related to the gift cards, which accounted for much of the internal audit office's recommended restitution.

Auditors evaluated festival committee expenses from 2005 and 2006 after allegations arose that Estep, who left her position when Newberry took office in 2007, and Jones, who resigned in April 2007 from her post in the mayor's office amid the city's inquiry, were spending money inappropriately.

The 11-page report says the city did not monitor the bank account for the Lexington Festival Committee, which is responsible for management of events such as the Fourth of July Festival, Fourth of July parade, Bluegrass 10K Run, Arts & Crafts Expo, and Vendors on Vine.

The festival committee had an "off-the-books" account, the report says, and "the lack of oversight provided the opportunity from which the multiple questionable transactions arose."

Straub said these types of accounts have been common in the past, but the city is trying to fully integrate all accounts for city-sponsored events into the city's accounting system for complete oversight and transparency.

The audit was difficult because at least four years of invoices needed to validate festival committee purchases were destroyed, although some invoices were obtained from vendors, the report says. The audit says Jones told auditors that she saw Estep destroy some of the records.

According to the audit, the festival committee bank account balance decreased from $68,689 on Jan. 1, 2005, to $4,545 on Dec. 14, 2006, the day the account was closed. Festival committee administrative expenses also increased annually, from $8,302 in 2002 to $83,226 in 2006.

The 2006 administrative expenses were more than the combined expenses from 2002 through 2005, according to the report.

"There appears to have been a deliberate effort on the part of Becky Estep and Debbie Jones to spend festival committee funds down to a minimal balance," the report says.

In 2006, a check for $3,394 was made to Estep that Jones said was to reimburse Estep for her trip to Germany for the World Equestrian Games, according to the audit. But Estep was reimbursed for this trip by the city, the report says.

The audit says Jones also told auditors that two checks totaling $1,109 were written to Estep for personal clothing.

In November 2006, the audit says, the festival committee paid Jones $586.90 to cover a trip to Gatlinburg. Jones said it was a personal trip, but Estep told Jones that Jones could charge it to the committee if she met with Gatlinburg's city manager, the report says. Jones met with the city manager for about an hour and a half during the two-day trip, discussing ways to improve Fourth of July events.

More than $14,000 was spent on gift cards during the week of Aug. 7, 2006, and slightly more than $6,000 was spent on gift cards during the week of Dec. 4, 2006, the report states. There were 573 gift cards purchased for various amounts, according to the report. Gift cards were purchased at several establishments, including Applebee's, Carino's, Circuit City, Joseph-Beth Booksellers and Walmart.

According to the report, Jones admitted to keeping about $1,200 in gift cards, and she said Estep kept several cards. Jones returned gift cards worth about $467 when she resigned, according to the report.

Sixteen city employees said they received gift cards from Estep or Jones, with values from $20 to $200. The audit says there was no evidence the employees knew the cards were purchased with Lexington Festival Committee money.

Many gift cards were not accounted for, according to the report.

The city plans to establish an internal gift policy to help employees determine what constitutes an appropriate gift in exchange for volunteer or paid work, the report says.

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