Fraud Probe Uncovers $1M Embezzlement in Tiny Washington Town

A recent audit by the Office of the Washington State Auditor has revealed that Morton’s clerk-treasurer embezzled over $900,000 in public funds.

Washington State Auditor Reports Major Embezzlement Scandal in Morton

In a shocking revelation, the Office of the Washington State Auditor has uncovered a staggering $937,584 embezzled by the clerk-treasurer of Morton, a small city nestled in the Cascades of Washington State. The large amount of fraud, detailed in a report released today, spans nearly ten years and highlights significant lapses in oversight and accountability.

Morton, a city with a population of approximately 1,100, fell victim to a long-running scheme of financial mismanagement orchestrated by its clerk-treasurer, employed by the city since 2012. The auditor's investigation was triggered by unusual activity of more than $10,000 in ATM cash withdrawals from the city’s bank account, a practice very unusual for government entities.

The investigation also revealed a series of red flags that went unheeded by city officials while it happened. In 2013, the clerk-treasurer authorized a $2,400 city check to herself, which was later defended by the then-mayor as a personal loan. The auditor’s 2015 report questioned this loan, recommending repayment and cautioning against using public funds for personal loans.

Clerk-Treasurer Falsely Reported Retirement & Claimed Funds

In 2019, the clerk-treasurer falsely reported to the state Department of Retirement Systems that she had left her position and withdrew her retirement funds. The state agency later discovered she was still employed, raising additional concerns. Despite the warning signs, Morton’s city council and mayor failed to find the misappropriations.

Auditors eventually found that the clerk-treasurer exploited her exclusive control over payment processing, check writing, and bank reconciliation. This unchecked authority allowed her to execute fraudulent transactions, including diverting customer cash payments and falsifying records to cover her tracks.

A separate investigation revealed questionable expenditures by Morton’s former police chief, who made personal purchases on a city credit card and managed a bank account holding police-related donations. The police chief’s misuse of funds amounted to $199 in personal charges, not even close to the amount allegedly taken by the clerk-treasurer.

“This Case is an Important Reminder That the First Line of Defense Against Public Fraud”

State Auditor Pat McCarthy emphasized the importance of robust financial controls to prevent such fraud in a statement. “This case is an important reminder that the first line of defense against public fraud is having strong financial controls in place today, not having an audit after the fact,” McCarthy said.

Morton’s case is the third six-figure loss of public funds reported by the State Auditor’s Office this year, following similar incidents involving the state Office of Administrative Hearings and the town of Cusick. The official statement can be found here, and the full report on the fraud investigations and audits is available on the State Auditor’s Office website by clicking here.