Posted: 3:11pm on May 19, 2011; Modified: 7:19pm on May 19, 2011

http://www.kentucky.com/2011/05/19/1745962/sheriffs-bookkeeper-pleads-guilty.html

LONDON — A former bookkeeper for the Whitley County Sheriff's Office has admitted helping steal money from the office.

Vicky Paul, 51, pleaded guilty to one felony charge of conspiracy to commit money laundering Thursday in federal court in London.

Paul faces up to 10 years in prison when she is sentenced in September. She also agreed to pay $25,000 in restitution to the county to make up for what she stole.

The former sheriff involved in the thefts, Lawrence Hodge, pleaded guilty last week to three felonies, including a similar count of scheming to launder money that he stole from his office.

Paul's plea came the same day state Auditor Crit Luallen's office announced it had given the FBI findings from two new audits of Hodge's office from 2008 and 2009.

Those audits found a raft of accounting problems and raised the total shortfall in Hodge's office during his tenure to $230,040, according to a news release.

However, audits have not been completed of Hodge's entire eight-year term.

Earlier audits played a role in the charges against Hodge.

Federal authorities will have to determine if the latest findings warrant additional charges, said Robert McBeath, attorney for Luallen's office.

Hodge was in office from January 2003 through the end of 2010. Paul, who worked in Hodge's office from 2003 until July 2008, collected taxes, handled banking and prepared financial reports.

In court and in her plea agreement, Paul described how she helped Hodge siphon off money from tax collections and falsify the books to try to cover the activity.

The scheme involved creating a surplus by incorrectly recording the amount of taxes people paid.

For instance, if someone paid $100, she and another office worker who was involved might put down that the person paid $75, Paul said.

One way to do that was when people paid their taxes late and paid late fees or penalties, Paul would take the full amount, but put on the books that the person had paid taxes on time, at a lower amount.

Hodge would take half the surplus built up through the fraudulent accounting. Paul and the other clerk would split the other half, according to court documents.

Paul also acknowledged writing checks to Hodge from an account that was supposed to be used to make drug buys or pay informants, but which she knew he was cashing and using for his own purposes, including to buy drugs he abused.

Altogether, Paul conspired with Hodge to steal or launder $222,914 from 2005 to 2008, her plea agreement said.

Sheriffs in Kentucky collect taxes that go to other local agencies such as schools, libraries and health departments, so the thefts shortchanged those agencies.

The thefts started Hodge's first year in office and just kept growing, Paul said.

"It just kept snowballing," she said.

Hodge's police vehicle burned at his house in the spring of 2007. Hodge and Paul used that as an excuse to say that tax records had been destroyed in the fire, according to Paul's plea agreement.

Hodge agreed as part of his plea deal to serve 15 and one-half years in prison, pay $50,000 to the federal government and pay restitution of $64,897 to Whitley County.

He is to be sentenced in August.

Hodge also faces more than 20 felony charges in state court of stealing about $350,000. That case probably won't be resolved until after Hodge is sentenced in federal court, said Commonwealth's Attorney Allen Trimble.