Lawsuit: Covington Goes After Due, His Family, Auditors, & More
The City of Covington has filed a lawsuit against former Finance Director Bob Due and many others including Due's family and past auditing firms hired by the city.
Attorneys representing the City of Covington argued for a restraining order Friday in Kenton County Circuit Court and asked that Due's assets be frozen. The order was granted.
Named in the suit are Due, his wife, Janet Patterson, six children, auditing firm Joseph Decosimo & Company, the Kentucky Secretary of State, auditing firm Von Lehman & Company, US Bankcorp Investments, Fifth Third Bank, KVS Information Systems, Charles H. Bilz Insurance Agency, Kentucky Retirement Systems, Kentucky County Employees Retirement Systems, the estate of Virginia Molique (Due's deceased aunt), and two unidentified financial institutions.
Due "intentionally and recklessly misdirected proceeds, monies and assets belonging to Plaintiff Covington through the embezzlement, theft, fraud, conversion, and unauthorized negotiations of checks, drafts, and other financial instruments which he deposited into his personal accounts and the accounts of family members," the suit reads.
The suit charges that Patterson, their children, the auditing firms, the two banks, and the deceased aunt "should have known that the various accounts, funds, and other assets acquired by Defendant Due... were funded and/or purchased through illegally embezzled or converted funds," the suit reads.
KVS Information Systems is named as being the company that sold the City its accounting software that was supposed to prevent such theft.
Bilz Insurance is the company "relied to provide adequate employee dishonesty insurance coverage".
KRS and CERS are the pension system in which Due regularly contributed money from his earnings.
Decosimo, the Cincinnati-based auditing firm that the city used in 2012, does not have a current registration on file with the Kentucky Secretary of State's office, a requirement to conduct business in the Commonwealth, the suit alleges.
The unidentified financial institutions are accused of holding one or more accounts that contain some of the wrongfully diverted funds, the suit says.
Due admitted to the theft
The lawsuit indicates that Due admitted to stealing at least $600,000 from the City when he spoke with city officials and police investigators on Friday, August 23, the day he was arrested.
Due pleaded not guilty to the multiple charges he faces during his appearance in court on Monday.
The suit alleges that after producing fraudulent checks written to some of the defendants named, Due would alter the electronic record of the subject instrument to an otherwise valid vendor. He would use his own signature and an electronic version of City Manager Larry Klein's signature to authorize the checks.
Other times, Due would conduct similar actions while logged into the system as other employees, without their permission or knowledge, the suit claims.
The checks would be deposited into accounts belonging to Due, his wife, or his deceased aunt at Fifth Third Bank and later US Bank.
The city accuses Due and his wife of using the funds for their own personal use, for their children's own use, or for the deceased aunt. Due is also accused of putting some of the funds into his retirement account.
Fraudulent checks were created as recently as August 6 and 17 in an amount of $17,000.
The suit goes on to say that even if Due's wife did not actively participate in the alleged embezzlement, it argues that she should have known about it.
The City demands a trial by jury.
Written by Michael Monks, editor & publisher of The River City News