BSU contacts prosecutor about fraud
MUNCIE Ball State University has reached out to Delaware County Prosecutor Jeff Arnold regarding two investment scams that cost the university $13.5 million.
The prosecutor says he received an email from Deborah Daniels, a former federal prosecutor, that said “she was hired by BSU to conduct an internal investigation. She asked me to call her.”
Arnold was tied up in a murder trial at the time, then he was off for a week, and then when he tried to telephone Daniels, she was on vacation.
“I tried to call her again yesterday and today, and we still have not talked to each other,” Arnold said on Tuesday.
A sister of former Gov. Mitch Daniels and an Indianapolis attorney, Daniels was hired by Ball State to evaluate the university’s internal controls and investment portfolio and create a “management action plan.” BSU also hired the CPA firm Crowe Horwath for the review.
The plan includes best practices for selection of brokerage firms, state of the art investment software, a whistle-blower hotline operated by an independent third party, greater separation of duties in the controller’s office and ensuring that a single safe-keeping firm holds all securities.
Rick Hall, chair of the university’s board of trustees, told The Star Press more than six weeks ago that other information gathered by Daniels and the CPA firm would be provided to the prosecutor, who “will make a decision as to who should be prosecuted.”
On Oct. 24, 2011, Ball State fired Gale Prizevoits, its director of cash and investments, for "incompetence, dishonesty, substantial and manifest neglect of duty, willful disobedience of university rules and regulations and gross misconduct."
BSU officials have said Prizevoits altered records to conceal her investment of university funds in highly speculative mortgage bonds and supposed U.S. Treasury STRIPS.
Fraudsters George Montolio, 46, Bronx, New York, and Seth Beoku Betts, Boynton Beach, Florida, were convicted in federal court in Manhattan and sentenced to federal prison for their roles in the scams.
Ball State officials have said federal prosecutors found no evidence that Prizevoits had received any kickbacks from the two separate investment-fraud schemes. However, BSU officials have been saying for months that they plan to approach Arnold regarding whether other crimes might have been committed.
Records disclosed by Ball State show that Prizevoits also was responsible for altering records that could have alerted the State Board of Accounts (SBoA) to the investment frauds during 2008-10.
When SBoA discovers misappropriation of public funds, it refers its findings to the Indiana attorney general, who is authorized to seek triple damages from the responsible party. However, the attorney general has not demanded that Prizevoits repay the university treasury because it was never given an audit report by the SBoA.
The Star Press asked BSU spokesman Tom Taylor for comment last Tuesday morning.
Contact Seth Slabaugh at (765) 213-5834.