As of March 22, no one named in the warrants had been arrested or charged. District Attorney Ron Moore has reported that no elected officials have been named in the warrants.
Many city employees — including the mayor and City Council members — have the option of establishing flexible-spending accounts as part of their benefits. They can use these accounts to set aside pretax earnings to pay for certain child-care and medical expenses not covered by health insurance. The city then reimburses the employee for up to $6,000 a year of qualifying expenditures.
According to the warrants, however, some employees were either paid in advance for purchases they hadn't made yet or reimbursed for more than the actual cost of items they did buy. Employees were also allowed to join the plan midyear, in violation of regulations, the warrants indicate.
"Council members are eligible for medical insurance with the city. Those who sign up for that insurance are eligible for the flex program," spokesperson Dawa Hitch told Xpress, adding that federal law bars the city from revealing which elected officials have participated in the program.
Confessions and accusations
The fraud probe — which involves the district attorney's office and the State Bureau of Investigation as well as the APD — actually began in December, the warrants show.
The most recent warrant, served March 12, states that Human Resources employees Liz Oldre and Laura Masters had written separate letters to the police, submitting copies of flexible-spending documents they'd removed from city files because "of fear of retaliation and concern that [Human Resources Director] Lisa Roth and [Assistant Director] Robin Nix would 'alter' the documents." Masters' letter, the warrant states, "alleged that Lisa Roth did not comply with the flexible-spending plan and open-enrollment/insurance regulations."
Before the March 12 search, the warrant notes, police interviewed Nix, who told them "It was common practice for employees to be paid 'up front' for a year of child-care expenses or dental quotes, where the dental work had not even been completed yet," and that "Human Resources management acknowledges that these past practices have allowed employees the opportunity to commit fraudulent acts with the flexible-spending money."
According to the warrant, Nix admitted that she, herself, had on several occasions claimed reimbursement far in excess of the price of an item. In one case, she said she bought a mattress for $2,000, but was "reimbursed" $4,099. Nix also asserted that Oldre had waived the annual flexible-spending limit for some employees.
Roth was interviewed as well, the warrant indicates, and she "stated that she has become aware of problems that existed within the flexible-reimbursement program that she had not known about. ... Roth stated that as a result of the reviews that she has done since this matter was discovered, she is fairly confident that others in the city of Asheville may have violated the conditions of the flexible-reimbursement program."
During the March 12 search, police seized information on every employee enrolled in the program from Jan. 1, 2005. to the present. And on March 17, the APD released a statement asserting that "Asheville police and the DA's office ... reviewed 113 files of employees who received flexible-spending reimbursements of more than $1,000. There was no indication that any of those 113 employees participated in any criminal wrongdoing." The announcement also indicated that the investigation is ongoing.
The other two warrants detail searches conducted in December and January. The first one, authorizing a search of Masters' Asheville Savings Bank account, states that both Masters and Oldre may have been involved in fraud and may have exceeded the flexible-spending cap by thousands of dollars, with Masters claiming $7,200 in 2007, $14,760 in 2008 and $14,500 in 2009. Oldre claimed $7,109 in 2009. The other warrant authorized a search of city records related to "questionable claims" Masters allegedly submitted for reimbursement.