Hundreds of thousands “misappropriated” by former Naknek Electric manager

Sep 29, 2016

Forensic audit of the books back to 2010 nearly complete, with more than $400,000 already paid back by former GM Donna Vukich.

About 20 co-op members showed up for the August 29 NEA board meeting to hear the latest about hundreds of thousands of "misappropriated" dollars.
Credit KDLG

KDLG: The Naknek Electric Association is working to collect hundreds of thousands of dollars embezzled over several years, and repair its reputation with a furious membership. The theft was discovered as new manager Dianne King took the helm from longtime manager Donna Vukich, who retired in March. King and an independent audit turned up the missing money, and NEA’s governing board ordered a forensic audit of the books to at least 2010.

“Some expenses paid for by the Association should have been the responsibility of a former employee and are now being questioned,” board president Nanci Morris Lyon wrote to members in a July letter. “NEA’s board unanimously directed the manager and attorneys to do a full investigation and recover the funds through negotiation, and if necessary, legal means. To date the Association has been repaid a large portion of the funds that were identified as misappropriated.”

Vukich was the former employee who has since paid back $405,000 to NEA. She has been in her husband’s home country of Croatia for several months.

Twenty or more co-op members turned out for the August 29 meeting of NEA’s governing board, some with stiff comments and questions to deliver.

“This was almost $500,000. How did it get by you guys?” one person asked. Others in the audience called out their disappointment in Vukich, the auditors, and the board members. Some asked the board to go after bonuses and benefits paid to Vukich, and several insisted the board turn the matter over to the state for criminal prosecution.

“Bank robbers would love to have this deal,” another person called out, upset to think the board might put the matter to rest if all the money is paid back.

The board convened with its attorneys in executive session to determine what details of the investigation could be shared at the August meeting.

“It is the advice of our attorney, in the interest in looking out for the board and NEA itself, we don’t want to make claims that we have not been able to prove yet, to stay clear of defamation of character suits in the future,” Morris Lyon said, promising to offer more updates and information after the audit is completed and the attorney advises it prudent to do so.

King said two lump sum payments had been made thus far, the first for $237,000, and the second for $168,000. An audit back to 2014 was complete as of the August board meeting, and work was underway to check the books through 2010.

“And if something is found, will we continue to keep going back?” asked a person in the audience.

“Absolutely,” said Morris Lyon.

The specifics of how the money was taken have not been fully disclosed, but the board and its attorney Andrew Fierro alluded to credit card payments online and over the phone that had pulled purchases away from oversight. Speaking in general terms about “these types of cases,” Fierro said embezzlers evade detection through “mischaracterized expenses, overstated expenses, and multiple reimbursements.”

“It just doesn’t happen by somebody writing themselves a check every month and then it piles up and we have a large amount of money,” he said. “It’s usually never that way at all. It takes various ways and forms, and when it’s not done in house, when something is purchased over the internet, then that takes it even further afield from the office procedures.”

The question of criminal prosecution remains to be determined. Morris Lyon said a federal investigator had already looked at the case and declined to take it on. The board could still turn findings from its internal investigation over to the state, but she said they are moving cautiously for now.

“We’ve been advised against it at this point until we know exactly where we’re at, because if we do move forward with any legal procedures, we again risk NEA, the membership, the board, in defamation lawsuits,” she said. “Once we do decide that we’ve concluded the investigation, have our numbers confirmed, and know what they are, at that point, we will be able to choose to move forward or not.”

That answer rankled the members present at the August meeting. One person said it would not be good for the youth to see the case go unprosecuted, another called for the alleged thief to be “banned from [NEA] membership,” and another wanted her “ostracized from the community.”

Fred Pike, a former manager and mayor of the Bristol Bay Borough, picked careful words to express his disappointment. “Living in the community for as long as we have, and putting the trust in the board and the people that they hire, and having someone that was hired from our community misappropriate that amount of money was a real disservice,” he said after the meeting.

Pike said he and his wife were shocked when they learned that Vukich, who he did not refer to by name, was suspected of stealing money from NEA. She was someone they had known for decades, had had over to the house for dinner, and had seen as a prominent figure in Naknek. Now he wants her prosecuted.

“It’s important that the board do what they can to put this before the state, and hopefully the state will follow through and prosecute this individual so that it sets an example that we don’t tolerate that sort of thing in our small communities,” he said. “If you get caught stealing from a bank, and you give the money back, you still go to jail.”

During her long tenure, Vukich spearheaded the NEA attempt to produce geothermal energy, a costly endeavor she said in a 2012 KDLG interview dated to discussions in the late nineties. The ambitious project failed and NEA settled tens of millions in debts through bankruptcy.  

Morris Lyon downplayed the impact of the stolen funds on the electric cooperative's bottom line.

“The board now feels confident reporting that the amount of misappropriated funds is not enough to affect payroll, benefits, cash flow, credit worthiness, or ongoing operations in any material way,” she wrote in the July letter. “NEA’s annual revenues are nearly $7 million and the Association has a net worth of nearly $10 million. The Association will remain current on all debts incurred as a result of Chapter 11 bankruptcy.”

NEA hopes to answer more questions for its members ahead of the October meeting. So far the Association has not disclosed the exact amount of misappropriated funds, what the money was used for, nor what source of NEA funding was tapped into. NEA says new policies and controls are in place to better prevent this theft from occurring again.

Attempts to reach Donna Vuckich for comment have not been successful.

Reach the author at dave@kdlg.org or 907.842.5281.

A letter sent to co-op members in July laid out some of the details of suspected embezzlement. This copy was forwarded to KDLG by a member upset by the "negotiations" rather than prosecution.
Credit KDLG