Anatomy of an Embezzlement

Fair financial records show a pattern of irregularities, numerous red flags



If you look at any of the various checklists of how to protect an organization from fraud, which you can find through an easy Google search, it's hard to argue the Humboldt County Fair Association wasn't a plum target for embezzlement.

Did it do thorough background checks for new hires? Nope.

Did it have written fiscal policies, procedures and protocols? Nope.

Was there a division of fiscal duties to incorporate checks and balances? Nope.

Was there a system of regular and diligent reviews of financial records? Nope.

Were regular external audits performed? Nope.

And without any of those protections in place, one could say the association was even more vulnerable to fraud in February of 2021, when it hired Nina Tafarella — operating through her company Clean Books Now — to step in as its bookkeeper. Seven months earlier it had fired its general manager amid COVID-19 concerns and budget woes that had left the association teetering on the edge of insolvency. At the time, Humboldt County Farm Bureau executive director and former fair employee Katherine Ziemer, who was hired by the fair association as an interim manager, was just three months into a 12-month contract, splitting the job with Mary Ann Renner and trying to get up to speed on an organization she hadn't worked for since 1988 while preparing to put on a fair that many believed would either resuscitate the struggling organization or seal its fate.

Now rocked by Tafarella's Nov. 15 arrest on suspicion of embezzling from the association and a Eureka nonprofit, and subsequent allegations that Tafarella's theft from the fair might total hundreds of thousands of dollars, the association is trying to chart a path forward, implementing new fiscal controls and outsourcing its bookkeeping, while looking to hire a new general manager to replace Rich Silacci, who will step down Jan. 28 after just 13 months on the job.

Tafarella has not been charged in the case, which local authorities say has been turned over to the FBI and the U.S. Attorney's Office for further investigation and potential prosecution. Attempts to reach her for this story were unsuccessful, and the FBI declined to comment, saying its policy is to confirm neither "the existence or nonexistence of an investigation."

A Journal review of the association's financial records, meanwhile, has identified a pattern of seemingly suspicious accounting entries that continued for 13 months, extending from August of 2021 until it seems to have stopped abruptly in September of 2022. Complicating the review, however, is the fact that various financial records — including nearly a month of entries for the association's operating account into its 2021 general ledger and multiple months' payroll reconciliations reports — have gone missing or were never created.

But there's a clear pattern, much of it seemingly centering around direct deposit payments listed in the name of a fictitious employee and made to an unknown account or accounts. Former Ferndale Enterprise Publisher Caroline Titus was the first to raise questions about repeated payments listed in payroll reconciliation reports, beginning in August of 2021, as being made to a "Bryce J. Bill," a name that doesn't belong to any fair association employee but closely resembles one, differing by just two letters. Under questioning from Titus at a recent Finance Committee meeting, fair officials confirmed that no one by the name of Bryce J. Bill has been employed by the fair, and Silacci recently told the Journal he believes the embezzlement scheme centers around these payments.

Unfortunately, the monthly reconciliation reports documenting the payments stop after October of 2021, picking up again briefly in February and March of 2022, after which the fair says none exist. And the authenticity of the two 2022 reports has been called into question, as it's unclear who created them and when.

What we know is that in August, September and October of 2021, the documents indicate a total of 24 payments were made in Bill's name, totaling $37,018.25, while the reconciliations from February and March of 2022 indicate eight payments were made in Bill's name, totaling another $17,436.25. We also know that while other payments from the payroll reconciliation reports are mirrored on the association's general ledgers, which is designed to record every transaction the association makes in a calendar year, these payments to the fictitious Bryce J. Bill are not. Instead, for each of these payments, the general ledger states "*Revenue EFT Internal (deleted)," indicating the payee's name was deleted from the ledger through the accounting software QuickBooks.

The first instance of one of these deleted payee entries in the 2021 ledger comes June 28, which aligns with a payment to a Leonora J. Lewis for $895.98 listed on the month's payroll reconciliation report. According to Silacci, he could find no record for someone by that name having worked for the fair and it's the only time the name appears in the payroll reports or the general ledgers. The following month, in July of 2021, two deleted payee entries appear — both of which align with payments listed on the month's payroll reconciliation report to a Ben J. Beckner totaling $1,354.92. Again, Silacci said he could find no record of someone by that name having worked for the fair and the two entries are the only times the name appears in the payroll reports or the general ledgers.

The name Bryce J. Bill first appears on a payroll reconciliation report in an entry dated Aug. 9 to document a $428.41 direct deposit payroll payment. From there until Oct. 29, the records are incredibly consistent in that every entry deleted from the general ledger aligns directly with a payment listed to the fictitious Bill on the payroll reconciliation report. The general ledger then contains a payment in the amount of $1,169.82 to a deleted payee on Oct. 29 — a payment that is entirely absent from the October payroll reconciliation report.

According to the association, it doesn't have payroll reconciliation reports for November and December of 2021 or January of 2022, so there's nothing to cross reference with the general ledger for these months.

The ledger, however, lists 10 payments in November with deleted payee information totaling $25,294.54. It includes only three entries in December of 2021: a payment to the IRS, another to the California Economic Development Division and one with a deleted payee in the amount of $1,990.17.

In January of 2022, the fair association welcomed Silacci as its new general manager after operating for a couple of months without one after Ziemer's contract through the Farm Bureau came to an end. Nonetheless, it was a busy month for payments made to deleted payees, according to the general ledger.

The ledger includes 10 deleted payee entries that month, totaling $33,380.89. Things slowed the following month, when, perhaps coincidentally, the payroll reconciliation reports resumed. Why the reports resumed and who compiled them is a bit of a mystery.

Ziemer told the Journal she compiled them during her time at the association, which came to a close Oct. 31, 2021, and did not directly hand the task off to anyone. The reports for February and March of 2022 state they were reconciled by former board member and Finance Committee Chair Duane Martin, who stepped down from the board in November of 2020, though Martin said he had nothing to do with the reports and doesn't know why his name would be attached to them.

Martin said he helped Ziemer finish the association's 2020 financial reports and records but had no involvement after that.

"When I was done, I was done," Martin said. "I was not around then. I offered my assistance; they did not accept it. I later offered my assistance to Rich Silacci, and he did not accept it."

Silacci told the Journal he does not know who compiled the February and March reconciliation reports or why they would have borne Martin's name.

But while it's unclear who created the reports and why, it is clear the discrepancies continued.

The general ledger contains four payments with deleted payee information in February of 2022, all aligning with payments listed as made to Bill on the reconciliation report, totaling $10,410.

The March reports are more difficult to decipher. The general ledger includes a total of nine payments with deleted payee information. The first four of these align with payments listed on the reconciliation report as made to Bill. Of the other five, two simply leave the payee information blank, two are listed as made to the Internal Revenue Service in identical amounts and the last is listed as made to a confirmed fair employee. There are irregularities, however, in how these payments are listed on the reconciliation form. While the two payments listed to the "Internal Revenue Service" spell out the agency's full name, all other IRS payment entries use the abbreviation. Similarly, the confirmed fair employee's name is listed in the report without a middle initial, which appears in all other listed payments to her in the reports. This seems to indicate different QuickBooks entries were made for the employee and the IRS for these payments, prompting questions about where exactly those direct deposit payments ended up.

The March payroll reconciliation report is the association's last, as Silacci said there's no record of them being done after that month and he doesn't know why they stopped. In fact, Silacci said he didn't even know the reconciliation reports existed until the association began compiling records to turn over to investigators and in response to public records requests.

"I don't have any explanation for why they stopped," he said. "Everyone went looking for them when this investigation started and they are not there, and I can't give you an explanation of why."

But while the reconciliation reports stopped, payments made to deleted payees continued, with 48 listed in the general ledger from April 1 through Sept. 2, with the last payment to a deleted payee listed on that date in the amount of $1,724.63.

All told, the general ledgers list $218,296.80 in payment made to deleted payees from June of 2021 through Sept. 2, 2022. It's worth noting the ledgers don't list a single payment to a deleted payee prior to Tafarella's hire nor after her departure from the association.

It's unclear why the pattern stopped abruptly Sept. 2. While the Eureka Police Department had been investigating Tafarella on allegations that she had embezzled approximately $23,000 from a Eureka nonprofit since May of 2022, a spokesperson indicated nothing occurred around Sept. 2 that detectives believe would have tipped Tafarella off to the fact she was under criminal investigation. Similarly, Silacci said he's not aware of anything occurring at the fair association around that time that would have caused someone embezzling to change their behavior. Silacci said he'd grown frustrated at that point that monthly financial statements presented to him and the board never seemed to balance and that the fair's financial records seemed "convoluted." He said he'd also grown concerned about whether funds restricted for specific projects were being safeguarded, and had resolved to hire an outside firm to review the association's bookkeeping practices. But Silacci said he never voiced that to anyone at the association before making an official request to the board Nov. 7, and he concedes embezzlement was not something he suspected.

What seems clear, however, is there were numerous red flags, if anyone had taken it upon themselves to look for them.

Perhaps the most obvious of those is the payroll reconciliation reports that include payments listed to a fictitious employee. (Ziemer declined to answer any questions specific to the payroll reconciliation for fear of compromising the criminal investigation.) But there are plenty of others.

The reconciliation reports themselves and the statements of financial position do not reconcile with withdrawals from the association's payroll bank account, which in some months were some $20,000 in excess of what was reported elsewhere. Silacci said he simply took Tafarella's word in her reports and never attempted to check them against the general ledger or the association's bank accounts.

"I was relying on the reports that were given to us," he said. "It appears those were manipulated."

The March 2022 payroll reconciliation report itself seems to contain a host of red flags, in addition to the payments made to Bill. Perhaps most glaringly, the payments to Bill themselves include "(deleted)" next to Bill's name, apparently indicating information had been removed from the general ledger. The report also includes seven payments totaling more than $6,500 with payees simply left blank, as well as payments listed to both the "IRS" and the "Internal Revenue Service" and to an employee whose name is listed alternately with and without a middle initial, all of which should raise questions for someone familiar with QuickBooks.

Martin said when he left the association board in late 2020, payroll was being handled by an outside accounting firm. He would compile employee time cards and send them out to the firm and, when it sent back checks, he would review them and the accompanying reports before checks were signed by the general manager or board president. It's unclear when the association brought the payroll function back in-house, as Martin said the outside firm was doing it when he left, but Ziemer said she had no knowledge of that, despite their tenures having overlapped.

"That, I knew nothing about," Ziemer said. "I can't tell you because I did not know that [firm] was doing payroll."

As the fair board moves forward with hiring an outside firm to handle payroll and some other fiscal functions, and works to implement other financial safeguards based on the recommendations of a local accounting firm, officials say issues with staffing and turnover added to an environment that seems to have been ripe for fraud.

When Ziemer returned to the fair through the Farm Bureau in November of 2020, she was splitting the full-time manager position with her colleague Renner. Before they hired Tafarella in February, Ziemer said she and Renner were the fair's only two office employees, struggling to come up to speed and plan for a fiscally crucial fair in August. Martin had been volunteering to do the association's bookkeeping as a board member, which he said was limited to handling accounts payable and reconciling payroll, but resigned his post on the board at the end of the year, prompting the hire of Tafarella, who stepped into an office with little institutional memory.

Ziemer said she checked Tafarella's references but did not put her through a full background check.

"We were trying to make a go of it and trying to help out the board," Ziemer said. "It was more daunting, probably, because of the lack of organization — for a while, there had been just no manager. ... It was a make-or-break year (for the fair). We had to be successful, we had to make it be positive because it was going to be the foundation for the future."

Silacci said he believes chronic short staffing through Tafarella's tenure with the association probably left "a lack of oversight."

"I do think that contributes to quite a bit of it — being short-staffed with an overwhelming job," Silacci said.

In her roughly 20 months working for the fair, Tafarella billed the association, through her Clean Books Now business, a total of more than $36,000 for her services.

In the months since Tafarella's arrest, the association board and its staff have said they now see that hiring an outside firm to handle payroll is worth the expense, providing a layer of checks and balances that would be difficult to achieve in-house in such a small organization. Additionally, Association Office Manager Moira Kenny has recommended the association sign up for a fraud prevention service offered by its bank, which would flag any unusual payments, refusing to clear them until getting specific authorization from two of the association's designees, adding another layer of checks and balances.

The full impact of the alleged embezzlement is not yet clear, as an outside firm hired by the association is still working to reconcile its 2021 and 2022 financial records. When that's done, the association will have to correct its tax filings for those years, Kenny told the Executive Committee on Jan. 23.

But thanks to an influx of outside money and a successful 2022 fair, Silacci said the association is on firm financial footing, ending 2022 with more than $1 million in the bank.

Perhaps ironically, the influx of outside cash that helped lift the fair association from the brink of insolvency also added to the seeming perfect storm of factors that may have allowed someone to embezzle hundreds of thousands of dollars. While the association entered 2020 running on fiscal fumes, it had suddenly become relatively flush with cash, receiving more than $700,000 in COVID-19 relief monies and state and county subsidies in 2020 and 2021, which may have relaxed oversight, as the funds removed the immediate fear the association would fall into the red or bounce its checks.

Noting she's limited in what she can say due to the investigation, Ziemer said the situation should serve as a reminder to businesses and organizations to be vigilant. This, she said, can happen to anyone.

"I'm so sad about this," she said. "It's very sad and very troubling, and it happens to other businesses and you never expect it to happen when you're in charge. I'm just mortified that someone would do this."

Thadeus Greenson (he/him) is the Journal's news editor. Reach him at (707) 442-1400, extension 321, or

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