December 1, 2014

Compulsive Gambling Linked to Embezzlement

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Gambling addiction often plays out in private, away from media coverage.

When it does break into view, the reason often is embezzlement.

Marquet International, a Boston investigative and consulting firm specializing in corporate fraud, conducts an annual study of major embezzlement cases nationwide. Last year, it analyzed 528 cases in 2012 and identified the primary motive in 132 cases. The second most common motive was gambling; the first “desire for a lavish lifestyle.”

“Gambling continues to be a factor for many embezzlers,” the 2012 report said, adding, “All but two of the 37 gambling cases occurred in states where casinos and/or Indian gaming facilities are permitted.

Marquet International concluded that Oklahoma is one of 15 states that have the “highest risk for major embezzlement,” with projected losses of $36 million in Oklahoma in the next five years.

Among embezzlement cases that made headlines in Oklahoma:

• Former FBI agent Timothy A. Klotz pleaded guilty July 11 to embezzling more than $43,000 from funds used for paying confidential informants. A judge ordered him to stay out of gaming institutions. In a bankruptcy filing, Klotz listed $11,000 in gambling losses in one year. His embezzlement scheme lasted from 2007 to 2011.

• A recent audit from the State Auditor and Inspector’s office into missing funds at the Tahlequah Chamber of Commerce showed more than $400,000 was missing, including more than $120,000 spent at a local casino. Investigators with the Oklahoma State Bureau of Investigation are tracing the expenditures, according to reports, although no charges have been filed in the case to date. Executive Director David Moore resigned when the losses were made public.

• A former credit union manager was removed and the business was turned over to investigators, including the FBI, after she admitted more than $16 million in gambling activities, according to a story in the May 28 Credit Union Times. State and federal examiners found that about $10 million in non-member deposits made into the credit union were missing, with large sums being spent at a casino in Quapaw and in Kansas City. The FBI searched the home of a former manager and confiscated paperwork, tens of thousands of dollars in cashier’s checks, and gold coins. Charges have not yet been filed.

• In 2010, a former auditor with Oklahoma Commissioners of the Land Office, Roger Q. Melson, Jr., 56, of Edmond, pleaded guilty to 174 felony embezzlement counts, admitting he embezzled $1,2 million from state education funds to feed his gambling addiction. His defense attorney called Melson a “gamblaholic.” “He doesn’t gamble any more, and he goes to several support groups,” attorney Billy Bock said during Melson’s sentencing. Melson was sentenced to 10 years in prison and restitution.

• Former Muskogee Deputy Court Clerk Jackie Borovetz in 2008 was convicted of embezzling more than $600,000 in court funds. Court filings in her case show repeated complaints of indebtedness stretching back several years before her conviction. According to court records and published accounts, she spent the money at a local casino. Her attorney called gambling “an epidemic.”