This reporting is made possible by the Northern Michigan Journalism Project, led by Bridge Michigan and Interlochen Public Radio, and funded by Press Forward Northern Michigan.
FRANKFORT — On a Tuesday morning in July 2024, retired schoolteacher Gayle Brown stood in a Benzie County courtroom, addressing a man who’d pleaded guilty to stealing tens of thousands of dollars from a historic lighthouse.
Brown, a previous board member of The Friends of the Point Betsie Lighthouse Inc. in Frankfort, admonished Casey Jon Ottinger, 38, the organization’s former executive director, for a “blatant” cash grab of more than $70,000.
“Casey managed to take the money from the tours,” Brown said. “He also did some real interesting rentals where he was able to pocket the money. He was pretty blatant in what he did. He had a bad habit.”
Embezzlement cases prosecuted in Detroit, Grand Rapids, Lansing and other large cities garner million-dollar headlines, such as the recent conviction of former Detroit Riverfront Conservancy chief financial officer William Smith for embezzling $40 million from the conservancy.
But nonprofit management experts say smaller cities and rural communities are not immune to devastating losses. In fact, on a per-capita basis, embezzlement is more common in some rural areas than in many more populous communities, according to Michigan State Police data.
In Cheboygan and Presque Isle counties, for example, officials worked for two years with state housing authorities to investigate and prosecute a landlord accused of defrauding an emergency rental assistance program of about $150,000.
In Ford River, an unincorporated community near Escanaba, a volunteer fire department lost tens of thousands from an equipment fund. And in Marquette County, members of a small nonprofit chamber of commerce voted in 2024 to dissolve the organization after a former director was charged with embezzling thousands.
A common pitfall for small-town nonprofits less likely to trip up larger organizations happens when staff, board members or volunteers take on more than one job. For organizations of one or two people, multi-tasking may feel like a necessity, but it creates the potential for employees to get away with theft.
“If one individual, like the bookkeeper, is the one making bank deposits, writing and signing checks, and reconciling the bank accounts, it is easy for them to steal money or misappropriate it to specific vendors or other individuals,” said Jamie Caldwell, founder of Traverse City-based JCaldwell Consulting, which advises nonprofits and other firms on financial practices. “They could pocket the cash or just write themselves checks.”
“Let’s face it: There’s a lot of financial pressure out there,” said Patrick Heraghty, executive director of Alpena’s Community Foundation for Northeast Michigan. “Something that starts out small can snowball.”
‘It really does shake people’s trust’
The sense of being betrayed from within can be as damaging to an organization, its staff and supporters as the financial hit, law enforcement and nonprofit officials said.
Benzie County Prosecutor Sara Swanson, who worked with the State Police and the Friends group on the historic lighthouse embezzlement case, said those working in small organizations often know and like their colleagues, making a loss particularly distressing.
“It really does shake people’s trust,” Swanson said. “We deal with all sorts of terrible crimes, but this really affects people who’ve put these individuals in a position of trust. And to be betrayed like that? It’s more than just financial.”
Trust was breached in many small northern Michigan nonprofits in recent years.
Law enforcement documents show a board member of the Greater Ishpeming-Negaunee Area Chamber of Commerce reported more than $20,000 missing from the chamber’s bank account shortly after they’d promoted a staff member to the top job.
Samantha LaJeunesse was accused of gambling away at least some of that money with cell phone betting apps. She was later sentenced to 30 days in jail, probation, and $26,650 in restitution after pleading no-contest to a single embezzlement charge.
The chamber faced other problems, too, before dissolving and naming another nonprofit, the Lake Superior Community Partnership, as receiver of future assets, including the money LaJeunesse was ordered to pay back.
“Most companies don't prosecute because they don't want this information to be made public. ... Which just allows this ex-employee to do the same thing to a different organization.”JAMIE CALDWELL | JCaldwell Consulting, Traverse City
A Lake Superior Community Partnership spokesperson, Christopher Germain, said in a statement leaders there hoped the sentence would end disruptions experienced by the western Marquette County business community.
“Any restitution funds directed to the LSCP will be responsibly used to pay any remaining obligations, with the remainder allocated to support the continued operation of the West End Economic Hub,” Germain said.
Embezzlement — the act of stealing money you’re trusted with — is a common crime, with more than 10,000 incidents recorded statewide between 2019 and 2023, according to the most recent data from the Michigan State Police. The data doesn’t distinguish between nonprofit, for-profit or individual victims.
Embezzlement can keep rural police agencies just as busy as big-town departments. The Michigan State Police-Alpena Post investigated roughly 70 embezzlement cases per 100,000 residents in its seven-county coverage area between 2019 and 2023, while the Kent County Sheriff’s Office investigated 52 cases per 100,000 residents in that time. Detroit police investigated 87 cases per 100,000 residents.
The data shows most people get away with the crime, with 41% of embezzlement cases solved statewide between 2019 and 2023.
“Most companies don't prosecute because they don't want this information to be made public,” Caldwell, the financial consultant said. “They let the employee go or ask them to resign and go their separate ways. Which just allows this ex-employee to do the same thing to a different organization.”
‘How do you rebuild that trust?’
When police do nab someone, prosecutors work to make sure the stolen money is repaid.
The Cheboygan County landlord, Mitchell James, 61, was eventually charged in the housing fund case, and Todd Anthony Holland, 67, the former volunteer Ford River fire department treasurer, was charged in that case. Both men were sentenced to jail time and ordered to pay restitution.
Delta County Circuit Court records show Holland accepted a plea agreement that specified he’d spend less time incarcerated if he paid back the approximately $70,000 he was accused of taking prior to his sentencing hearing.
“Otherwise, the judge could throw the book at him,” said Delta County Prosecutor Lauren Wickman.
Wickman said that, after meeting with the fire chief and township officials, it was clear they wanted their money back more than they wanted to see an overly severe punishment.
“They were hurt,” Wickman said. “It was this feeling of, ‘You’re supposed to have our back in a fire, and here you are taking from our own coffers.’”
Heraghty, of the community foundation in Alpena, said successful prosecutions with restitution orders are key to how a nonprofit and their supporters recover from loss.
“How do you rebuild that trust? For me personally, it would be prosecuting to the full extent of the law,” Heraghty said. “And clear communications with donors, with supporters, what happened and how it happened.”
The Friends of the Point Betsie Lighthouse, in the Benzie County case, did a lot of things right that helped complete a successful prosecution there, Swanson, the prosecutor, said.
They kept good records, reported the theft, paid for a forensic audit, worked with law enforcement, submitted victim impact statements and spoke out in court.
Traverse City attorney John Grogan represented the Friends group and estimated that, over the past several years, he’s filed appearances in about 20 embezzlement cases, some for plaintiffs and some for defendants.
For plaintiffs suing to get their money back and assisting with a criminal prosecution, a forensic audit is crucial, he said.
“You must be willing to endure further financial sacrifice insofar as not only the time but the cost of conducting the investigation,” Grogan said, adding that county prosecutors may not have the money or staff for forensic audits.
If a nonprofit can’t shoulder this cost, “in many cases, the criminal will walk free,” Grogan said.
A forensic audit, which the Friends in 2024 hired Rehmann Corporate Investigative Services to perform, is conducted by accounting professionals who look for evidence that can be used in court.
The former Friends group executive director, Ottinger, pleaded guilty last year to felony embezzlement of $1,000 to $20,000 by an agent or trustee, court records show, as part of an agreement negotiated between his attorney and the prosecutor’s office.
Anthony Ciccheli, who represented Ottinger, did not respond to a request for comment from his client, though Ottinger did speak at his July 9, 2024 sentencing hearing.
“Its not just the consequences that I face today,” he said, “it’s the damage that I did to this organization, to the people that are on the board, the people that I looked up to, and despite my actions, I really cared about, and I hurt them.”
Ottinger was sentenced to 90 days in jail, three years’ probation, and $70,736.50 in restitution.
Court staff said he’s been making $400 payments every two weeks.
At that rate, the Friends of the Point Betsie Lighthouse would be made whole sometime in the fall of 2033.
“Its not just the consequences that I face today, it’s the damage that I did to this organization, to the people that are on the board, the people that I looked up to, and despite my actions, I really cared about, and I hurt them.”CASEY OTTINGER
‘Three accounts, all drained’
Heraghty said the staff working in his finance department never goes to get the mail and never opens the mail. That task is another person’s responsibility, and they log every check or credit card payment that comes in before those funds ever get to the accounting team in the finance department.
The accounting team never goes to the bank, aren’t signatories on the foundation’s bank accounts, and, while they can see online transactions, they can’t move or withdraw money.
“We require dual signatures on all our checks, we do an annual audit — we bring in an independent CPA — and we also reconcile our accounts monthly,” Heraghty said.
He acknowledged that hiring outside help can be expensive, especially for small organizations with small budgets, but he said it’s still important to monitor anyone with access to money.
Especially those in trusted positions of authority.
Such a slip-up may be what happened last year at Club Cadillac, a social and professional organization for adults in Missaukee and Wexford counties recovering from mental illness.
In November, the president of the club’s advisory board discovered more than $40,000 missing from the board’s accounts.
“Three accounts, all drained,” said Kristen Kenny, advisory board president.
Court and police records as well as previous reporting show one of those accounts contained money club members raised, a dollar or two at a time, with group activities like holding a bake sale or operating the club snack bar.
Another account held a $25,000 state grant the board received as seed money to start an affordable housing project so vulnerable members could have a safe place to live.
Michigan State Police began investigating a person of interest and Wexford County Prosecutor Johanna Carey in July charged the advisory board’s former treasurer, Sandra Gail Bottoms, 59, with embezzlement by an agent or trustee. A jury trial is scheduled for Oct. 10 in 28th Circuit Court.
“This was like salt in the wounds,” Kenny said of discovering someone she and others befriended and believed in may have abused their trust.
Embezzlement-proofing your organization
Heraghty said he’s glad he’s never had to respond to an embezzlement case among any of the funds at the community foundation, which covers nine counties from the Straits Area south to Iosco, works with three affiliate community foundations, and has $85 million under management.
Heraghty said nonprofits need to make sure board members not only understand how to read a financial report but do so frequently, preferably every month.
Have a whistleblower policy that protects those who report suspicious financial activities.
Require two signatures on checks, reconcile account books monthly and, if the organization can afford it, have a certified public accountant conduct an annual audit.
As much as privacy rules allow, make board meeting minutes, bylaws, and financial documents available to the public.
And be willing to adjust the organizations’ procedures in response to experience.
Decades ago, Heraghty said, the community foundation shared a building with another nonprofit where an employee was accused of embezzling. The missing money came to light when the employee went on vacation and someone else filled in.
“You have to take at least five consecutive days off a year,” Heraghty said of the Community Foundation for Northeast Michigan’s rule for administrators and directors of large funds. “Our vacation policy came from that experience.”
