More details emerged Friday morning regarding the alleged embezzlement of funds from the Collin Street Bakery by the company’s former controller Sandy Jenkins during a hearing before 13th District Court Judge James Lagomarsino.
According to the documents and witness testimony presented Friday, Jenkins managed to steal at least $16.7 million from the bakery through a check-writing scheme from the bakery’s accounts.
“The truth is, there’s more,” said Andrea Kim of the Dallas law firm Diamond McCarthy, one of four lawyers representing the bakery Friday morning.
Jenkins did not appear in court Friday. He was represented by local counsel Steve Keathley, who told the court he didn’t know where his client was.
FBI agents searched Jenkins’ Corsicana home on Wednesday, seizing two vans full of evidence from the home which were hauled out in boxes and bags, as well as two luxury cars in the driveway of the Third Avenue home.
The purpose of the hearing was to extend the restraining order against Jenkins and prevent him from using his credit cards and bank accounts or selling off his assets.
Testifying in district court were two bakery employees, Semetric Walker, chief accounting clerk, and Scott Hollomon, vice president of finances for the bakery, who talked about how the scheme was uncovered, and how it unfolded.
Jenkins had allegedly spent $1.1 million at Neiman Marcus, $10.9 million was sent to American Express, $166,134 was spent at deBoulle Diamond and Jewelry in Dallas, $101,303 on Lexus vehicles, and millions more on mortgage payments, credit card payments, even on a retirement fund from a previous employer, for a combined total of $16,330,049.98 in checks since 2004.
Another $437,035 was taken from petty cash with nothing to back up the withdrawals. Jenkins was in charge of petty cash, as well.
As Hollomon went through the lists of checks and assets, Kim asked if he and Jenkins were friends.
“I believed that we were, yes,” Hollomon said.
Walker’s attention to detail was credited with uncovering the scheme in the first place, according to Craig A. Harris, with the law firm Hiersche, Hayward, Drakeley, Urbach of Dallas.
“(Without her) Mr. Jenkins would still be in his position at the Collin Street Bakery, stealing their money,” he said.
Walker testified that she’s worked for the bakery since December of 2011, and is currently the senior accounting clerk. In 2012, Jenkins experienced a heart attack and was out of the office, so Walker took on some responsibilities that previously had been his, she said Friday.
Most of the bank statement reconciliation was done through the computer under Jenkins’ supervision, but on June 20 there was one check that didn’t match up. The $10,000 check to Capital One didn’t make sense, she testified. It wasn’t a bakery vendor. It didn’t have the right number on it. It didn’t fit. So, she took it to Jenkins for an explanation.
“He starts to fidget and move his hands a lot, and turned ghostly white,” Walker testified. Jenkins said he’d look into it and get back to her.
According to both Walker and Hollomon, check-writing at the bakery was strictly controlled. Checks could only be written from Jenkins’ computer, which wasn’t linked to the outside system, and from his printer, which had keys to control access to it. Jenkins authorized checks, printed them and then reconciled them. If the allegations are correct, it was a perfect system for theft.
Sure, Walker had noticed in the past that sometimes the check numbers didn’t match up.
“I was told it was some kind of computer glitch because it happened frequently,” Walker testified.
Jenkins tried to dismiss Walker’s concerns about the $10,000 Capital One check with a story that he’d paid a post office bill with a credit card because he didn’t think another check would go through. Walker argued with him that it didn’t make sense, and he generated another check to make the books balance for that month.
“Finally, to get him away from me I said I understood and he went back into his office,” Walker said.
Once he was appeased, however, she began her own investigation. Walker said she pulled up the checks written to the postmaster in the previous eight months and began trying to determine if there had been similar discrepancies. She found 16.
“I didn’t want to appear suspicious,” she said, explaining that it was something she could do on her own computer that wouldn’t catch Jenkins’ attention.
She went to lunch to think about what to do with her findings, but when she got back she already knew what she was going to do — she had to speak to Scott Hollomon, Jenkins’ supervisor, she said.
The other accounting clerk was on vacation, and when Jenkins left early, she went into see Hollomon. She had reason to be nervous. Hollomon and Jenkins were friends.
“I didn’t know what would happen to be me because of what I’d discovered,” Walker said.
She began by telling Hollomon she feared for her life. He told her to just say what she needed to say. She laid out what she’d found. Hollomon then went to his boss, Chief Operating Officer Larry Jenkins — no relation to Sandy Jenkins.
At that time, they thought the losses were about $284,000, the proverbial tip of the iceberg.
Hollomon testified that the next morning, June 21, he and Larry Jenkins confronted Sandy Jenkins about the $10,000 check, pressing him for details and asking him if he was responsible.
“ ‘I must have, it’s my job to write the checks here,’” Hollomon quoted Sandy Jenkins as saying.
They “piled on” the other checks and asked him for help in determining “how deep is the hole,” but when told the bakery would press charges, Sandy Jenkins stopped talking. Larry Jenkins fired him on the spot, and Hollomon went with Sandy to his office to gather some personal effects. He closed the door and asked his friend why.
“I felt a great deal of personal betrayal,” Hollomon testified. “I trusted him.”
Jenkins said he was ruined, that he would lose his wife and daughter and added that “if I did it, I guess I deserve it,” Hollomon repeated.
Hollomon took Sandy Jenkins’ bakery keys and phone and Jenkins was escorted from the building.
At that point, the accounting office began digging, pulling up almost a decade’s worth of records on voided checks and petty cash reports and trying to determine what had happened. According to Hollomon, Jenkins would monthly prepare a list of vendors to be paid and have it approved by Hollomon. He would then have checks written to his own personal creditors. Jenkins then manipulated the system and marked the checks to his creditors as “voided” checks and included checks that didn’t exist or which were torn up as having been sent to real bakery vendors.
The search uncovered checks to mortgage companies, credit card companies, jewelers, car companies, landscapers, and department stores, he said on the stand.
“It took us quite a while to work through this to determine which were real voided checks,” Hollomon said.
Asked why he didn’t catch the thefts earlier, Hollomon said it wouldn’t have made sense to look there.
“I didn’t see a reason to look at them. These were voided checks,” he testified.
The total missing amount was in excess of $16.7 million. The judge agreed to extend the restraining order. Kim asked for a fall date for the civil trial against Jenkins. The bakery is suing for its money back.
Asked after the hearing why the bakery didn’t catch the fraud earlier through an audit or other method, Kim explained that the bakery is at its heart a family owned business based on trust.
“Unfortunately, that trust was broken,” she said.
Kim said she’s a legal specialist in audit malpractice.
“Audits are not foolproof,” she said.