Spokane council members call for criminal investigation into alleged fraud at Guardians Foundation

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Guardians Foundation CEO Mike Shaw told KREM 2 that they are currently conducting an internal investigation into a former employee for potentially mismanaging funds.

SPOKANE COUNTY, Wash. – Two Spokane City Council members are calling for a criminal investigation into the housing and homeless system after council members allegedly received information about potential fraud. Additionally, the Guardians Foundation is conducting an internal investigation into a former employee who allegedly embezzled money.

According to a news release, the Spokane city administration recently notified several city council members of possible financial fraud within the city-funded network of homeless service providers, later determined to be the Guardians Foundation.

Council members Lori Kinnear and Karen Stratton are calling for an immediate criminal investigation due to the nature of the potential fraud.

“The administration has knowledge of this information and apparently has a copy of the police report,” Stratton said in a written statement. “Before we go any further, the Council needs to see the police report to formulate our next course of action.”

Council members reportedly began receiving briefings Friday evening and additional briefings Monday morning. According to the city, council members heard varying amounts of potential fraud ranging from $100,000 to $1 million.

“Due to different sources of funding, this could potentially become a federal investigation,” Council member Kinnear said in a written statement. “That is why we are keen to receive information through a criminal investigation. The city of Spokane is already in a fragile state of homelessness; adding fraudulent activity weakens our progress and is frankly unacceptable.

Guardians Foundation CEO Mike Shaw told KREM 2 that they are currently conducting an internal investigation into a former employee for potentially mismanaging funds. He added that the investigation had started on the basis of information discovered during an internal audit.

The investigation showed that some funds had been transferred to personal accounts,” Shaw said. “That was enough to make me decide that I should file a criminal complaint.”

Shaw said the amount of money taken by the former employee is “significant”, but is not close to what the city council had previously estimated.

Julie Humphreys of the Spokane Police Department told KREM 2 that someone affiliated with the Guardians Foundation called Crime Check on September 29. The SPD said it did not know what was discussed in this Crime Check report, but was opening an investigation.

Shaw said he’s been in briefings with the city and the mayor is in executive session.

Council Member Michael Cathcart sent KREM 2 the following statement regarding the investigation:

I was just informed early Saturday morning of what is going on. I expect an executive session today with the administrator and the board to discuss this. A forensic audit is underway and is expected to be completed by 10/31. We need to hold accountable anyone who might get away with taxpayers’ money and in this case it is potentially even more egregious as those dollars are intended to provide services to the homeless.

City spokeswoman Kirstin Davis released the following statement on behalf of Mayor Woodward regarding the investigation:

The Guardians Foundation informed the city that it had filed a police report regarding concerns about the handling of funds by an employee within the organization. Mayor Nadine Woodward has ordered an internal audit of invoices submitted to the City by the Guardians and payments made to the organization. This factual investigation is ongoing and the City will provide any evidence of irregularities to law enforcement. Any additional comments will come after the survey process is complete.

KREM 2 has contacted the Spokane County Sheriff’s Office, Council Member Betsy Wilkerson, Council Chair Breann Beggs, Council Member Kinnear and Council Member Stratton and Spokane Regional Emergency Communications for comment. KREM 2 has not yet received a response.

This is a developing story. Check back for updates.

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