Former Hubbardston tax collector forfeits retirement account
WORCESTER — Cynthia Washburn-Doane, the former Hubbardston tax
collector convicted last year of embezzling $535,000 in town funds, will
forfeit $25,000 in contributions she made toward her retirement account
to pay restitution to the town under a settlement agreement approved
Tuesday by a judge.
On Nov. 18, 2016, Ms. Washburn-Doane was ordered to serve a year in jail and pay restitution in an amount to be determined after pleading guilty in Worcester Superior Court to charges of embezzlement by a municipal officer, larceny of more than $250 by a common scheme and falsifying corporate books. Judge Janet Kenton-Walker sentenced the then 62-year-old Ms. Washburn-Doane to 2 years in the House of Correction, with 1 year to be served. The balance of the jail sentence was suspended for 3 years with probation.
As conditions of probation, Ms. Washburn-Doane was ordered to undergo a mental health evaluation and any related treatment deemed appropriate by the Probation Department and to pay restitution in an amount to be determined by the court within 20 days of her release from custody.
Prosecutors said at the time of the plea that Ms. Washburn-Doane stole $535,000 in tax proceeds over a 10-year span beginning in 2004 and ending when she resigned at the end of May 2014. Her resignation as tax collector, a position she had held for 25 years, came after financial irregularities were uncovered by the town and an audit was conducted.
Under an agreement Ms. Washburn-Doane made with the town on May 28, 2014, she consented to cooperating with a probe into irregularities in Hubbardston’s financial records. As part of the agreement, she said she would disclose what she knew about missing tax payments and agreed to pay the town $120,000 in restitution to help cover associated legal costs, money that was paid prior to her plea hearing.
When questioned by state police investigators, Ms. Washburn-Doane, who made about $30,000 a year as tax collector, admitted stealing the missing money, saying she had a daughter in college and used the stolen funds to pay her family’s bills.
In addition to the $120,000 paid by Ms. Washburn-Doane, the town recovered $210,000 in insurance proceeds, Assistant District Attorney John A. O’Leary said at the time of the plea hearing.
On Tuesday, Judge Kenton-Walker approved an agreement between Ms. Washburn-Doane and the town calling for her to pay $25,000 of her accumulated deductions in the Worcester County Regional Retirement System as restitution in the criminal case. The town agreed not to seek any additional restitution and to dismiss a civil suit that was pending against Ms. Washburn-Doane.
The former tax collector acknowledged as part of the agreement that having been convicted of a crime related to her former position with the town, she is not entitled to receive a pension or retirement allowance or any interest that had accrued on her accumulated contributions to the retirement system.
Judge Kenton-Walker adopted the agreement between Ms. Washburn-Doane and the town of Hubbardston as a final order of restitution in the former tax collector’s criminal case.
On Nov. 18, 2016, Ms. Washburn-Doane was ordered to serve a year in jail and pay restitution in an amount to be determined after pleading guilty in Worcester Superior Court to charges of embezzlement by a municipal officer, larceny of more than $250 by a common scheme and falsifying corporate books. Judge Janet Kenton-Walker sentenced the then 62-year-old Ms. Washburn-Doane to 2 years in the House of Correction, with 1 year to be served. The balance of the jail sentence was suspended for 3 years with probation.
As conditions of probation, Ms. Washburn-Doane was ordered to undergo a mental health evaluation and any related treatment deemed appropriate by the Probation Department and to pay restitution in an amount to be determined by the court within 20 days of her release from custody.
Prosecutors said at the time of the plea that Ms. Washburn-Doane stole $535,000 in tax proceeds over a 10-year span beginning in 2004 and ending when she resigned at the end of May 2014. Her resignation as tax collector, a position she had held for 25 years, came after financial irregularities were uncovered by the town and an audit was conducted.
Under an agreement Ms. Washburn-Doane made with the town on May 28, 2014, she consented to cooperating with a probe into irregularities in Hubbardston’s financial records. As part of the agreement, she said she would disclose what she knew about missing tax payments and agreed to pay the town $120,000 in restitution to help cover associated legal costs, money that was paid prior to her plea hearing.
When questioned by state police investigators, Ms. Washburn-Doane, who made about $30,000 a year as tax collector, admitted stealing the missing money, saying she had a daughter in college and used the stolen funds to pay her family’s bills.
In addition to the $120,000 paid by Ms. Washburn-Doane, the town recovered $210,000 in insurance proceeds, Assistant District Attorney John A. O’Leary said at the time of the plea hearing.
On Tuesday, Judge Kenton-Walker approved an agreement between Ms. Washburn-Doane and the town calling for her to pay $25,000 of her accumulated deductions in the Worcester County Regional Retirement System as restitution in the criminal case. The town agreed not to seek any additional restitution and to dismiss a civil suit that was pending against Ms. Washburn-Doane.
The former tax collector acknowledged as part of the agreement that having been convicted of a crime related to her former position with the town, she is not entitled to receive a pension or retirement allowance or any interest that had accrued on her accumulated contributions to the retirement system.
Judge Kenton-Walker adopted the agreement between Ms. Washburn-Doane and the town of Hubbardston as a final order of restitution in the former tax collector’s criminal case.
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Q&A regarding former Tax Collector Case
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1. Can the Town add the new Tax Collector/Treasurer software to the amount of what CWD would pay back to the Town?
Response:
Yes, this can be added into the Town’s request for restitution, but
bear in mind that the Court will likely ask whether this was an expense
directly related to the former Tax Collector’s actions or was the
software upgrade a necessary and anticipated expense that the Town would
have likely incurred regardless of her actions. If the Town would have
purchased this or similar software anyway, this will likely be
discounted by the Court.
2. Can the Town put a lien on her property now that she has been convicted?
Response:
Ms. Doane's primary residence at 103 Old Princeton Road is owned with
her husband, as tenants by the entirety. She and her husband filed a
Declaration of Homestead protecting this property on April 11, 2014,
around the same time that her suspected fraud was being discovered.
Typically, a Homestead Declaration protects the home against liens and
creditors up to $500,000; however, Ms. Doane’s property is assessed at a
lower amount. The statute providing for Homestead protection contains
a clause regarding fraud. Specifically, G.L. c. 188, §3(b) states that
an estate of homestead is exempt from attachment, execution on judgment,
levies and sale for payment of debts, unless an exception applies, and
exception (6) provides: "upon an execution issued from a court of
competent jurisdiction to enforce its judgment based upon fraud…"
There is no case law currently that suggests a Homestead
Declaration could be invalidated under the facts of the Doane case, but
we could try to challenge the recording of the Homestead Declaration as
fraudulent, meaning it was filed deliberately to protect her primary
residence against any court judgment resulting from her embezzlement of
Town funds. This would require the Town to bring a lawsuit against Ms.
Doane.
One
obstacle in challenging the Homestead Declaration is the fact that
this property is jointly owned by Ms. Doane and her husband. While we
may be able to convince a court to render a judgment against Ms. Doane
for her criminal actions, we may not be able to secure a judgment
against her husband as well. Our firm handled a similar case involving
the Lunenberg School Superintendent, in which we were able to force the
sale of the marital home because the wife was a co-conspirator in the
fraud/theft of funds from the school district. Here, we have no proof
that Mr. Doane was involved, although if he looked at their joint bank
statements, he would have been aware of funds in excess of their incomes
being deposited.
Assuming
that Mr. Doane is not a co-conspirator, we could petition the court to
partition the property to force the sale of Cynthia’s share. Based on a
recent review of the title for this property, we identified two current
outstanding mortgages – the first to Country Bank for Savings, with a
principal balance of $32,070.66 and a second to Country Bank for
Savings, with a principal balance of $141,690.17, for a total of
approximately $175,000.00. Note that we do not know the current amount
owed on these two mortgages, however, the first was modified in 2014 and
the second in 2016, so I suspect the principal balances have not been
paid down appreciably. The current assessed value for the property is
$285,100.00. Given this, there appears to be approximately $100,000.00
in equity in this property at
this time. Depending upon whether the Court would order Cynthia’s share
of the property to be partitioned from her husband’s share or whether
the Court would order the sale of the entire property would determine
whether the Town may be able to collect all or half of any equity in
this property. Any lien or execution of judgment filed on behalf of the
Town would be paid after all outstanding mortgages have been paid.
As
for recording a lien against the property, the Town would have to
initiate a lawsuit against Ms. Doane, for conversion, misrepresentation
and similar claims, and rely upon her guilty pleas on the criminal case.
The court would have to enter judgment in favor of the Town, and we
would seek an execution of that judgment and file a lien against the
property. Please note that the statute of limitations for most tort
actions is three years, and therefore, any lawsuit brought by the Town
in the nature of a tort would have to be brought while Ms. Doane is in
jail. Alternatively, the Town could wait for the restitution hearing in
the criminal case to see if restitution will be ordered. If you recall
at the sentencing, the Judge said that the Court has to consider Ms.
Doane’s ability to pay in
ordering restitution as a condition of probation. See Comm. v. Henry,
475 Mass. 117 (2016). Since Ms. Doane will be 62/63 years old at the
time of her release from the House of Corrections for larceny, her
opportunities for employment will be limited, making it unlikely that
restitution would be ordered.
3. Can
the Bond company go after her assets as well, to restore what they had
to pay out to the Town, and if so, how do we make sure that we are paid
first prior to the Bond company being compensated?
Response: I
have contacted the attorney representing the bond company, National
Grange, and although the bond company could seek restitution from Ms.
Doane for the $210,000 the bond company paid to the Town in the
settlement, they have not done so thus far. If they decide to initiate
legal proceedings against her, it is my understanding that they would
seek a court judgment and an execution on that judgment, just as the
Town would have to do if the Town sued Ms. Doane. Typically, whichever
execution for judgment is recorded first against the property title
would be paid first out of any proceeds, after mortgages and liens for
taxes are paid.
4. Can we go after the former auditing firm, and if so, when can that process begin?
Response: The
Town could sue the former auditing firm, with one cause of action being
negligence or negligent misrepresentation. The statute of limitations
for such an action is 3 years, so a suit would have to be filed sometime
in 2017, within three years to the date that the Town first discovered the fraud.
The
cause of action is as follows: One who, in the course of his business,
profession or employment … supplies false information for the guidance
of others in their business transactions, is subject to liability for
pecuniary loss caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or competence in
obtaining or communicating the information.” Nycal Corp. v. KPMG Peat Marwick LLP, 426 Mass. 491, 495-96 (1998); Bowler v. Arthur Andersen, LLP, 2005 Mass. Super. LEXIS 529.
“Reasonable
care” is defined by industry standards. I believe industry standards
for audit opinions are referred to as “generally accepted auditing
standards," or “generally accepted accounting principles." Reisman v. KPMG Peat Marwick LLP, 57 Mass.App.Ct. 100, 103, n.3 (2003); Bank of Am., N.A. v. BDO Seidman, LLP, 2012 Mass. Super; Bily v. Arthur Young & Co.,
3 Cal. 4th 370, 379-84 (1992). These are very specific standards which
would likely require another auditor or similar expert to interpret and
apply, and in particular, to testify in court that the Town’s former
firm failed to exercise reasonable care. The Town’s current auditor may
be able to help the Town figure out what standards the former auditor
breached, but it
would definitely require hiring an expert. Please note that one auditor
may be reluctant to testify against another auditor.
The
Town may also pursue a contract claim, which has a statute of
limitations of 6 years, but in order to prevail, it may be necessary for
the contract to contain some type of warranty for the quality of work.
The contract was not per se breached; rather, the auditor provided an
opinion, which was what was contracted for, it was just that the opinion
was unreliable. The Town would have to point to some provision in the
contract that guaranteed a certain quality of work, and prove – again by
showing that the auditor deviated from usual standards – that the work
did not meet that quality.
I
have reviewed the engagement letters, or contracts, between the Town
and its former auditors from 2009 through 2013, and all contain similar
terms. The agreement contains no explicit warranty. The agreement dies
outline the responsibilities of each party, and I note that management,
meaning the Town, is responsible for establishing, maintaining and
monitoring "effective internal controls." Management is also
responsible for implementing "programs and controls to prevent and
detect fraud" and for informing the auditors of "employees who have
significant roles in internal control." Still, the auditors represent
that they will reasonably assure whether the Town's "financial
statements are free of material misstatement, whether from...(2)
fraudulent financial reporting,
(3) misappropriation of assets, or (4) violations of laws...that are
attributable to ... acts by...employees acting on behalf of" the Town.
Because the audit will not examine all transactions, the auditors warn
that "there is a risk that material misstatements may exist and not be
detected."
Because
the agreement contains no express warranty, but in fact contains
numerous disclaimers, any claim that the Town would bring against the
auditors would have to be for negligence or breach of the standard of
reasonable care, discussed above. It would also be helpful to locate the
auditor's reports for those relevant years to see if they noted any
irregularity or inconsistency with respect to the cash payments the
former Tax Collector reported as having received versus cash deposits
actually made with the bank or versus cash payments typically received
by a Town similar to Hubbardston. These reports would help us determine
whether the former auditors detected anything at all that may have been
unusual or whether they did report unusual activity but there was not
further follow up.
Auditors
typically carry some type of professional liability insurance, which
would be a benefit to the Town, regardless of the cause of action
filed. The auditor’s insurance carrier may even be inclined to settle
with the Town to avoid any damage to the reputation of the firm.
5. Can the Town go after the Comet Pond Trust property?
Response:
I believe you are referring to the so-called family compound off Old
Princeton Road, numbers 64W-64Z. We have reviewed the title to this
property, which is held by a trust, dated December 27, 1951, recorded
with the Worcester Registry of Deeds in Book 3389, Page 453 (the
"Trust”). The Trust relates to certain property located on Old
Princeton Road in Hubbardston.
It
is my understanding that Cynthia Washburn Doane is the daughter of
Frank H. Washburn III, an original trustee of the Trust, who died on
April 5, 2013. His probate estate reveals that his wife, Frances,
predeceased him, and that Cynthia had no siblings.
In
addition to being an original trustee of the Trust, Frank H. Washburn
III was the owner of the more northerly of the two buildings located on
the Trust property. This building is not considered part of the real
estate, and thus is not part of the Trust property.
The
Trust provides that the trustees “may by a majority vote add as a
cestui que trust (i.e., a beneficiary) any person who is a lineal
descendant of the late Dr. Frank H. Washburn or is the husband or wife
of any such descendant.” I assume that Cynthia and her husband have
been added as beneficiaries of the Trust.
Basically,
any beneficiary of the Trust or owner of a building has the right to
occupy the real property or building, as the case may be, during their
lifetimes. “Upon the death of the cestui all his interest in the trust,
including the ownership of any building which he may have owned at the
time of his death, shall cease, and neither his heirs, administrators or
executors or any trustee in bankruptcy or other representative of his
creditors shall have any interest in the trust property and the
buildings, if any, heretofore owned by him shall thereupon be owned by
the trustees.” At that point, the descendants of the deceased person
are eligible to be chosen as cestuis.
In
my opinion, Cynthia has, at most, a life estate in the real estate
owned by the Trust, and the building located on the Trust real estate.
Obtaining a judgment against such an interest would, in my further
opinion, be quite difficult. Then the question becomes, even if
successful, would a creditor be able to levy on anything more than a
life estate. In my opinion, the interest would be limited to the
remainder of the lives of Cynthia and her husband.
Further,
the Trust states that no “representative of [a cestui’s] creditors”
shall have any interest in the trust property or the building. This
language may not be sufficient to protect the Trust's assets from
creditors. Again, however, Cynthia's interest in the Trust is limited,
in my opinion, and therefore, her interest may not be of significant
value to satisfy any levy or execution of judgment that the court may
order.
6. Can the Board attend and speak at the Parole Hearing?
Response:
The Parole Board Regulations do not specifically state who can speak at
parole hearings. In fact, the regulations state that “generally parole
hearings are not open to the public”. See 120 CMR 300.02. However, it
appears that the Town could submit information in written form regarding
the individual’s parole under 120 CMR 300.05(2). The victim witness
coordinator who sent you the letter should be able to answer
this. Please let me know if you would like me to contact her on your
behalf.
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