FBI joins investigation into Vermillion, spending record

The FBI has joined the Nevada attorney general's investigation of Kathleen Vermillion's use of charitable and city of Henderson funds amid concerns of financial impropriety, sources close to the Nevada Partnership for Homeless Youth confirmed Thursday.

The investigation is focused on Vermillion's finances, her roles in the charity and the Homeless Youth Foundation and her former job as a Henderson City Council member, a source close to the charity said.

A complaint filed against Vermillion with the attorney general's office last month by Arash Ghafoori, executive director of the partnership, points to concerns that Vermillion used the foundation to take funds from the partnership and pay her salary, make political contributions and pay DMV expenses, among others.

Both the FBI and the attorney general's offices would not confirm or deny an investigation exists, per department policies. Henderson spokesman Bud Cranor said the FBI has not contacted city officials.

Vermillion said Thursday that she welcomes the investigation, denies any wrongdoing and defends contributions she made.

"I've said from day one the FBI needs to be involved," Vermillion said. "All the fingers are pointing at me, all the bad press is pointed at me; if this proceeds, the truth is going to come out. ... But of course the investigation takes time, and I'll provide what documentation I have. I will let the FBI and AG offices make their conclusions, which quite frankly should have happened weeks ago."

Vermillion resigned from the City Council after the allegations surfaced and later resigned from the partnership itself.

Vermillion is suing the Clark County Commission and ex-boyfriend Commissioner Steve Sisolak, alleging he and others leaked her drug test results, which were positive for methadone. The drug test was ordered by the charity's board of directors. Sisolak is accusing Vermillion and her legal team of trying to extort $3.9 million from him.

And earlier this week it was reported that the charity could lose $100,000 in funding under a proposal by two Clark County commissioners who want the money used for other community needs.

Vermillion founded the partnership in 2000 and the Homeless Youth Foundation in 2008, according to the secretary of state's website. The foundation was established to "ensure the longevity and future financial security" of the partnership while managing its assets and distributing funds to other nonprofits committed to helping homeless youths ages 21 and younger, according to the foundation bylaws.

Three separate coffers of money that use federal, state, Clark County and Henderson funds, and are connected to Vermillion, appear to commingle at times, according to public documents.

According to minutes from a Nov. 17 charity board meeting, board members questioned why partnership funds were being transferred to the foundation. Vermillion told the board it was to pay her salary, according to the minutes. She was paid $125,000 a year.

As a council member, Vermillion gave $2,000 to Veterans in Politics, a nonprofit political group that endorsed her 2009 campaign, and another $3,000 in taxpayer money to the Nevada Partnership for Homeless Youth, according to city discretionary fund expenditure reports for fiscal 2010 through 2012.

A complaint filed against Vermillion with the attorney general's office by Ghafoori last month includes Homeless Youth Foundation financial documents that show $210,000 in transfers from the partnership, which funds the majority of the foundation's budget. The partnership "has no business" transferring funds to the foundation to pay Vermillion's salary and further alleges Vermillion was laundering money through the partnership, Ghafoori wrote in a letter to the attorney general's office.

Ghafoori wrote in his complaint that the Englestad Family Foundation donated $200,000 last year to be used to expand the partnership's drop-in center. Vermillion's transfers of the same amount of money left the partnership without sufficient funds to complete the construction under the Englestad donation, the letter reads. Ghafoori alleged that Vermillion told him to take an unrestricted donation from Bank of America in the amount of $200,000 to fill the gap and tell the bank it was for the drop-in center expansion.

Vermillion denied being involved.

Other foundation expenditures include a $1,000 charge for "Reid for Nevada" in 2010. According to campaign finance reports for Rory Reid during his run for governor in 2010, that same $1,000 appears the next day from Kathleen Boutin, which was Vermillion's married name. The Henderson address listed on the secretary of state's website for the foundation is the same one on Reid's campaign contribution report.

Vermillion said the Veterans in Politics money was for a table for 10 veterans to the group's upcoming gala.

She also questioned whether there was any proof that her signature appeared on documentation related to the contribution Reid reported.

Then she said the money attributed to Reid's campaign might have been for charity advertising but did not elaborate.

Other charges to the Homeless Youth Foundation include $300 to the American Civil Liberties Union of Nevada and $454 to the Department of Motor Vehicles. Neither the foundation nor the partnership has its own cars, a source close to the charity said.

Under federal law, theft or bribery concerning a program that receives federal funds may result in a prison term of up to 10 years.

Federal prosecutors in Las Vegas have charged corrupt politicians with another crime, known as honest services fraud, but the U.S. Supreme Court imposed limits on the law in 2010.

The honest services law has been widely used by the government to prosecute corrupt officials in both the public and private sectors.

The law makes it a crime to use the mail or telephone to further any "scheme or artifice to defraud," including a "scheme or artifice to deprive another of the intangible right of honest services."

According to the high court's 2010 opinion, prosecutors may continue to seek honest services fraud convictions in cases where evidence shows that defendants accepted bribes or kickbacks.

Review-Journal writer Carri Geer Thevenot contributed to this report. Contact reporter Kristi Jourdan at kjourdan@reviewjournal.com or 702-455-4519.