COTTAGE GROVE — Fired nine months ago after embezzlement allegations against her first surfaced, a former longtime Cottage Grove city finance department employee was arrested Wednesday on charges that she stole nearly $13,000 in public funds during an 18-month period.
Sheila L. Smith, 44, was being held Wednesday evening in the Lane County Jail on 12 felony counts of first-degree theft. She is expected to be arraigned later today in Lane County Circuit Court.
Smith worked 25 years for the city before she lost her job as a senior accounting technician last winter, not long after a utility customer confronted city workers with questions about his bill.
While investigating the customer’s inquiry, Cottage Grove officials conducted a cursory review of utility accounts and found several financial discrepancies. They initially thought a computer programming error was to blame, but quickly shifted their focus and began to suspect that money had been embezzled, City Manager Richard Meyers said Wednesday.
Police allege that Smith exploited a weakness in software used by the city to steal a total of $12,882 between June 2011 and January of this year. Without elaborating, Meyers said “documentation was fixed” within the system, and that the embezzlement had gone unnoticed because relatively small amounts of money were allegedly taken in a number of separate instances.
Many of Smith’s longtime coworkers reacted emotionally upon learning that she was a person of interest in the case, Meyers said.
“It had a significant impact on employees,” Meyers said. “There was shock, there was anger, and there were tears. These are people who know (Smith) well, know the family, and knew what the (investigation’s) results were going to be.”
The city had already been shopping for new financial software when the alleged thefts were discovered. A new system that includes added security measures will prevent any employee from carrying out an embezzlement scheme similar to the one that Smith is accused of perpetrating, Meyers said.
Contacted Wednesday afternoon by telephone, Smith’s husband said he was unaware that she had been arrested. He declined to talk about the case and referred questions to Eugene attorney Hugh Duvall, who could not immediately be reached for comment.
Meyers said the city’s insurance carrier will cover the $12,882 loss. The company, City/County Insurance Services, also provided $5,000 to the city to help pay the $14,880 cost of a forensic audit completed as part of the investigation, Meyers said. The rest of the cost of the audit, nearly $10,000, falls to the city.
Thousands of city payroll and billing transactions dating back to 2007 were reviewed during the audit, Meyers said.
Investigators suspect Smith began embezzling money prior to mid-2011, but Meyers declined to say how much additional cash may have been taken. He said if Smith is convicted of stealing from the city, Cottage Grove officials will ask that she be required to repay an amount that has yet to be determined, in connection with earlier thefts that may have occurred.
Smith was hired by the city in 1988 as a utility clerk and was promoted several times before being named Cottage Grove’s senior accounting technician in 2002. She was one of five city finance department employees, Meyers said.