Washington Woman Sentenced for $300,000 Theft from Home for Developmentally Disabled

Thursday, June 28, 2012
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A long-time employee of a residential facility for the developmentally disabled in Bremerton, Washington, was sentenced today in U.S. District Court in Tacoma to 33 months in prison, three years of supervised release and $304,755 in restitution for theft of government funds, announced U.S. Attorney Jenny A. Durkan.  KRISTI OSBORNE, 46, who served as a Fiscal Analyst at the Frances Hadden Morgan Center stole $304,755 from three bank accounts she oversaw that held money belonging to the disabled residents and to the center.  At sentencing U.S. District Judge Robert J. Bryan said, “It is important that white collar crimes be treated seriously by the court.  This crime had far more impact than the restitution amount.  There is every reason for lots of people to be angry and feel betrayed.”

“This defendant held a position of trust with some of our most vulnerable citizens,” said U.S. Attorney Durkan.  “The impacts of the embezzlement are far reaching.  Not only did she drain bank accounts, her actions undermine public trust in the social welfare system.”

According to documents filed in the case, OSBORNE repeatedly forged documents and submitted false requests for funds under the guise that they had been requested for the benefit of center residents.  OSBORNE inflated the amounts that had been requested and kept the additional cash.  OSBORNE’s scheme used unwitting third parties to cash the checks and return the funds to her.  The embezzlement occurred between 2003 and November 2010, when her scheme was discovered by an audit team from the Department of Social and Health Services (DSHS).  OSBORNE took money from three different accounts.  She took $212,000 from the account that held funds belonging to the residents.  She stole $35,000 from a fund containing state and federal funds for facility maintenance.  And she stole $58,000 from a third fund made up of gifts and contributions the public had made to benefit the disabled residents at the Frances Hadden Morgan Center (FHMC).  DSHS has repaid the money that was stolen from the residents’ accounts.

In their sentencing memo, prosecutors detailed the seven year embezzlement scheme and the human impact it had on the residents and employees of the FHMC.  “Residents’ accounts were frozen after the initial discovery of the fraud.  The business office was temporarily closed.  Christmas events had to be scaled back due to lack of funds.  The two business office employees who OSBORNE supervised were suspected of involvement in the fraud and were suspended, “thoroughly investigated,” and “personally humiliated.”  One of the business office workers reports being accused by a client’s parents of having personally stolen the client’s funds.  In sum, the incident was hugely disruptive to FHMC, an institution whose residents, by nature of their condition, are highly dependent on routine,” prosecutors wrote in their sentencing memo.

Washington State closed the Frances Hadden Morgan Center in December 2011, with residents moving to community based group homes or other residential institutions.

The case was investigated by the Social Security Administration Office of the Inspector General, the Washington Department of Social and Health Services, and the Bremerton Police Department.

The case was prosecuted by Special Assistant United States Attorney Seth Wilkinson.  Mr. Wilkinson is an attorney with the Social Security Administration, specially designated to prosecute Social Security related cases in federal court.