Vermillion charity audit finds questionable expenses

A forensic auditor who studied the finances of the Homeless Youth Foundation found several "personal like" expenses by former Henderson City Councilwoman Kathleen Vermillion that "could constitute a violation of criminal and/or civil law."

The auditor singled out expenses for airline tickets, spa days and clothing. Financial documents included with the audit also showed the purchase of a car for a homeless client with a "scholarship" fund.

In a memo to foundation board members dated March 23, auditor Dennis Meservy recommended the foundation "consider appropriate legal action to attempt to recover funds" deemed inappropriate expenses by the board, which had commissioned the phone book-sized audit that examines foundation financial information from Dec. 1, 2009, to Dec. 31, 2011.

'GRAY AREAS'

Vermillion blasted the audit as incomplete and biased.

"Those are very, very gray areas that they turned into black," she said.

She and former board members, including Assemblyman Marcus Conklin, D-Las Vegas, former first lady Sandy Miller and lobbyist Mark Fiorentino, could have provided simple explanations for the questionable transactions, Vermillion said.

"They should have interviewed the people who were responsible for those transactions," she said. "But they never did, so how complete is the audit?"

Vermillion pointed to a comment in the auditor's letter in which he acknowledged rushing to finish the audit.

"Unfortunately, I was pushed to complete this report on a timeframe not of my preference," Meservy wrote.

During the past two months, Vermillion has contacted the partnership's board to request a meeting in which she could return equipment and documentation, including bank statements and receipts, but she never heard back, she said.

"They shut the door in my face," she said.

Vermillion established the foundation in 2008 to ensure the future financial security of the Nevada Partnership for Homeless Youth while managing its assets and distributing funds to other nonprofits with similar goals.

A complaint filed earlier this year against Vermillion with the Nevada attorney general's office by Arash Ghafoori, executive director of the partnership, alleges Vermillion used the foundation to take funds from the partnership and pay her salary, make political contributions and pay expenses to the Department of Motor Vehicles, among others.

The complaint prompted a joint investigation by the FBI and the attorney general's office, which is ongoing. The foundation forensic audit was a result of those allegations.

AUDIT FINDINGS

The audit results were forwarded to the Metropolitan Police Department, the Nevada attorney general and the FBI. An audit of the Nevada Partnership for Homeless Youth is under way.

Meservy points out in his summary of the foundation audit that several supporting documents, including receipts, were missing.

Among his findings were the following:

■ Restaurant expenditures not likely for foundation business purposes.

■ Spa, clothing and many other "personal like expenditures not likely expenses for this type of entity."

■ "Many telephone expenses for personal accounts (only one receipt was found under the name Ms. Boutin) were made."

■ "Expenditures paid on November 11, 2011, to Esalen Institute for Yoga and Buddhist Meditation invoices to Steven Kalas and Kathleen Boutin appears to be in the realm of possibly fraudulent."

Boutin was Vermillion's married name.

QUESTIONABLE TRANSACTIONS

One of the questionable transactions Meservy noted was a November trip to a California yoga and meditation retreat for Vermillion and mental health counselor Steven Kalas, who writes a column for the Review-Journal.

The trip was scheduled for late December at the Esalen Institute in Big Sur, Calif., and cost $1,155 per person, receipts show.

Vermillion said she planned the trip to take creative writing classes at the retreat but canceled because the organization couldn't afford it. Kalas had volunteered his time with the homeless partnership by providing state-required evaluations of children before they could be accepted into the charity's shelter, she said.

Kalas could not be reached for comment Tuesday night.

Another expense included a $2,000 transfer from the foundation to the partnership for a car in March 2010. In an email exchange, Vermillion approved the transaction once she received backup information from a client explaining why he needed the money.

Vermillion provided instructions to a partnership staffer that the check should read "scholarship allocation on the notation field."

But Vermillion said the money for the car came from a scholarship fund used to support homeless children to establish their independence. That usually included educational expenses, but it also could include travel and other expenses.

The fund also covered vehicles after a fundraising gala where several people donated $2,500 specifically for vehicles. When those donations ran out, no more vehicles were purchased, she said.

"If he would have picked up the phone, I could have explained that," Vermillion said, referring to the auditor.

DISSOLVING THE FOUNDATION

Partnership officials released a blanket statement about the audit and declined further comment.

"We take all questions and allegations of improprieties that would impede our mission to serve the Las Vegas Valley's homeless youth very seriously," said John Simmons, who chairs the partnership board. "Our leadership has meticulously scrutinized recent discrepancies in expenditures and had the forensic audit conducted in a manner that would leave no questions unanswered."

Officials have said publicly that they intend to dissolve the foundation.

Meservy did not specify in his report exactly how much money is alleged to have been spent or transferred questionably or fraudulently.

Documents included in a copy of the audit obtained by the Review-Journal show hundreds of thousands of dollars in banking transactions.

Vermillion: irs audit would be better

Vermillion said she has nothing to hide and will continue to defend herself against the allegations.

She said that she welcomes any law enforcement investigation and that she would request an Internal Revenue Service audit of the foundation because the federal tax agency would do the audit right.

"I was hoping and expecting that they would do what they said they would do, which is a thorough and complete audit," she said. "They clearly didn't."

Contact reporter Kristi Jourdan at kjourdan@review journal.com or 702-455-4519. Contact reporter Brian Haynes at bhaynes@reviewjournal.com 702-383-0281.