KY economic development agency accuses former employees of misspending $400,000

A civil lawsuit filed by the economic development authority in Somerset alleges two of its former employees used the foundation’s credit card for personal spending of more than $400,000.

The Somerset-Pulaski Economic Development Authority, which was previously called the Somerset-Pulaski County Development Foundation, is cooperating with a criminal investigation by Kentucky State Police of the alleged misspending by the foundation’s former assistant director, Mark Bastin, and former office manager, Lisa Gadberry, said president and chief executive officer Chris Girdler.

Board members want to make sure the misappropriated funds are recovered and that Bastin and Gadberry are held accountable, Girdler said.

“At SPEDA, we take oversight of taxpayer funding seriously,” Girdler said. “We have worked hand-in-hand with law enforcement for the past 13 months. The more that was uncovered, the more we understood that this negligence and abuse not only required a criminal investigation but civil action as well.”

The civil suit, which was filed by board attorney Jeremy Bartley in Pulaski Circuit Court, alleges Bastin used the foundation’s money for Cincinnati Reds tickets valued at $861.94 and $164.50, a personal trip to Myrtle Beach in 2018, visits to Hooters restaurant in Richmond and expenditures at Somerset Mental Health. It states Gadberry used the foundation’s credit card to pay or a vacation rental in Florida, a Bark Box subscription, a veterinary hospital bill, bowling in Texas and expenditures at Cumberland Orthodontics.

The complaint states the defendants began making personal charges on the foundation’s credit cards on July 10, 2012. Bastin, Gadberry and former director Martin Shearer worked for the foundation for more than a decade.

The complaint alleges Bastin and Gadberry paid their credit card balances with the foundation’s bank account and the two former employees did not tell the foundation’s board members.

According to the complaint, Bastin and Gadberry admitted to investigators they collected and destroyed records of these transactions. The funds have not been returned, the suit states.

Shearer is also named in the civil complaint, which alleges lack of oversight and negligence of duties.

Carrie Wiese, the attorney for Gadberry, said in a statement that her client adamantly denies any wrongdoing. Gadberry “has sadly become collateral damage in a power struggle between Somerset Mayor Alan Keck’s SPEDA organization and County Judge-Executive Steve Kelley’s Pulaski County Industrial Foundation.”

Attorney Bill Thompson, who represents Shearer, said he had not seen the civil complaint but denies the allegations against his client.

Attempts to immediately reach Bastin for comment were not successful.

According to the authority’s statement, Girdler discovered the fraudulent activity and lack of oversight as it was transitioning from the Somerset-Pulaski County Development Foundation to SPEDA last year.

Girdler alerted Kentucky State Police in May 2019 and requested a criminal investigation after finding evidence of misappropriation of funds while auditing the foundation. As the foundation was dissolved, Girdler said there was little to no cooperation from the foundation’s employees. The suit states Girdler requested that the employees return their credit cards, but only Shearer complied. The three employees were let go as the foundation was dissolved.

Once Girdler received full access to the foundation’s financial records, he began seeing red flags on every page, he said in an interview Wednesday morning.

“As part of this process and after relieving the former employees of their services, a tremendous amount of work has gone into diligently going through old files, searching out relevant information, and trying to make sense of what we are finding,” Girdler wrote in the letter to KSP. “That said, in this discovery process, we have become very alarmed and troubled at what we have been uncovering and unraveling.”

Girdler declined to comment on the status of the police investigation, but said SPEDA is cooperating with investigators and auditors.

Pulaski County has been falling behind in economic development and the wrongdoing is salt on that wound, he said.

“This has been so disappointing to see,” Girdler said. “It’s maddening and disheartening.”

Girdler said SPEDA will file an insurance claim in an attempt to recover the lost money.

This story was originally published July 22, 2020 at 1:41 PM.