The U.S. Secret Service and other federal investigators are looking into a former Geminus employee's suspected misappropriation of $636,000 in Emergency Rental Assistance funds during the coronavirus pandemic.
Regional Care Group and Geminus President and CEO Bill Trowbridge said the social service agency caught discrepancies in its records that led to the discovery of potential fraud by a former employee. An audit by the Indianapolis-based accounting firm Blue & Co. found a former employee misappropriated $636,000 by creating fictitious landlords to fraudulently request rental payments.
"An employee that created fictitious landlords circumvented internal controls to request rental payments from the Emergency Rental Assistance program for tenants that had already paid their rent," the accounting firm said in its audit. "An employee involved in the fraud has been terminated with evidence turned over to the authorities for prosecution and potential recovery. Additional finance personnel have been hired to improve internal controls surrounding the grant expenditure process. In addition, management has reported any suspicious payment activity made to landlords to the authorities and has suspended any future payments to those landlords."
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Merrillville-based Geminus managed $40 million in emergency rental assistance for Lake County during the COVID-19 pandemic, Trowbridge said. It was a federal program designed to help people stay in their homes if they lost a job, got sick or were furloughed when coronavirus resulted in lockdowns, social distancing and capacity restrictions.
The social service agency, which provides services like Head Start, abuse prevention, domestic violence intervention, substance use prevention, case management, residential services and truancy prevention service, often handles state and federal grant funds. It does periodic spot audits to ensure only the appropriate personnel are gaining access to certain files for instance.
Geminus strongly suspected fraudulent transactions took place based on what it found in its normal internal audit procedures in July 2022, Trowbridge said.
"We check to keep an eye on things," he said. "When we dug into it, we found oddities worth noting and immediately contacted the Treasury Department about potential fraud since it was their funds. We notified the insurance companies and now it's out of our hands. We know the Treasury Department has been working the case."
Geminus turned records over to the U.S. Secret Service, which is best known for protecting the president but is also the Treasury Department's investigative arm. It immediately took action to prevent further loss.
"It was just one employee. No one else collaborated within Geminus but it may have been a part of a bigger scheme outside the organization," Trowbridge said. "Overall, it appears that the Lake County ERA program was an apparent victim of a sophisticated plan involving several people, not just our employee, to defraud the federal government and its COVID relief funds. It is our impression that the scheme targeted multiple ERA programs."
The federal government system quickly set up the Emergency Rental Assistance program as it was looking to get out relief fast to people affected by the pandemic. Local social services agencies distributed the funds in some Indiana communities like Lake, St. Joseph and Vanderburgh counties. Geminus was selected because of its experience distributing funds.
"If you looked around the whole country, there was about $1.4 billion in pandemic fraud," he said. "Unfortunately, they were looking to get the money out in a very short time with loose rules aimed at getting money out the door. Some saw an opportunity. It was really unfortunate."
No one who was supposed to get emergency rental relief did not as a result of the misappropriation, Trowbridge said. Geminus distributed the rest of the $40 million before the program was shut down. Anyone from Lake County who didn't receive the emergency funds from Geminus would have just applied to get the funds from the state, he said.
"There were hundreds of millions for the whole state," he said.
Geminus dug deep into its records to ensure the misappropriation was an isolated incident, Trowbridge said.
"As an organization we pride ourselves on providing significant services and doing them well while being fiscally responsible. Unfortunately, this situation did not have as strong controls that could prevent someone determined to commit fraud," he said. "It seemed to be a crime of opportunity. Someone who knew how to do it took advantage. It's despicable. We fortunately found no other losses."
The misappropriation had not had any impact on Geminus's services to the community.
"The victim is the federal government and its COVID relief funds — not Geminus," he said. "None of the amounts in question come from our accounts and have no impact on our finances or services. All the ERA funds flowed from the federal government."
Trowbridge said the hope is the investigation should be resolved soon.
A look back at Northwest Indiana businesses that closed in 2023
A look back at Region businesses that closed in 2023
Beer Geeks, one of the Region's first, most beloved and most influential craft beer bars, closed after more than a decade and is being reimagined as a new concept.
The landmark 88-year-old castle-shaped White Castle in Whiting is coming down to be replaced with a newer, larger, more modern White Castle restaurant.
A longtime staple in downtown Crown Point poured its last drink.
The longtime Westforth Sports gun shop is closing.
The Silver Line Building Products plant at 16801 Exchange Ave. will be shuttered permanently.
Brewfest in Highland will close in what's been called "an end of an era."
David's Bridal filed for bankruptcy and could close all stores if no buyer emerges to save it.
The 88-year-old Whiting White Castle will be remembered with displays at museums in two different states.
For years, the "millionaire's club" met every morning in the corner booth of the historic 88-year-old White Castle at Indianapolis Boulevard and 119th Street in downtown Whiting. The landmark restaurant served its final slider Tuesday.
One of Northwest Indiana's most popular and enduring hobby shops is looking for a buyer after the longtime owner died.
J&L This N That Consignment Shop, a popular thrift store, closed in downtown Whiting after a run of several years.
A Calumet Region institution, Calumet Fisheries on the far South Side of Chicago, is temporarily closed after failing a city health inspection.
Just days after reopening after city health inspectors shut it down, Calumet Fisheries suffered a major fire.
Pepe's Mexican Restaurant is no mas in Valparaiso.
Beer Geeks in Highland rebranded as B-Side Bar & Lounge and then closed within a few months.
Troubled retailer Bed Bath and Beyond will permanently close its Valparaiso location as it shutters more stores nationwide as it looks to restructure and shrink its footprint to save the struggling business.
Peoples Bank has shuttered its branch in downtown Hammond.
Viking Artisan Ales will soon pour its last craft beer at its Merrillville taproom.
Old Chicago Pizza & Taproom is closing after 15 years at one of Northwest Indiana's most prominent highway interchanges.
The Chicago Auto Show, the nation's largest auto show, returns to McCormick Place Saturday, running through Feb. 19.