University of Louisville Business Chief Facing Fraud AllegationsSeptember 4, 2013 |
LOUISVILLE, Ky. — The executive director of a medical department at the University of Louisville wrote checks to himself from several medical practices linked to the school for amounts possibly exceeding $2 million over the last six years, an Internal Revenue Service criminal investigator said in an affidavit.
Perry “Chad” Vaughn, who oversees business affairs for the Department of Family & Geriatric Medicine and serves as a bookkeeper, cut at least 25 checks to himself for a total of $703,936 from the school and five affiliated practices in 2012 and 2013, IRS criminal investigator Robert Masterson said.
Masterson estimated that Vaughn, who worked at the school since 2002, may have taken more than $2 million for personal expenses by setting up bank accounts and moving money around over the last decade.
“The records of the Vaughn controlled account reveal that Vaughn paid his personal expenses, purchased homes & cars as well as transferred money to other accounts,” Masterson said.
Federal prosecutors obtained a temporary injunction on Aug. 30 stopping Vaughn from spending any funds in several accounts linked to his work at the university. A federal judge unsealed the complaint, injunction and Masterson’s affidavit Tuesday night.
The school fired Vaughn on Wednesday morning and is cooperating with a federal investigation, said Gary Mans, a spokesman for the university’s Health Science Center.
Emails sent Wednesday morning to Vaughn’s University of Louisville accounts were returned as undeliverable. Emails sent to a personal account listed in court documents drew no immediate response.
Vaughn’s attorney, John Edwin Olash, did not immediately return a message seeking comment.
Vaughn is scheduled to return to court Monday as prosecutors seek to extend the injunction on the expenditure of any more funds. Vaughn had not been charged criminally as of Wednesday morning.
The investigation started after a co-worker of Vaughn’s sent an email to the university’s audit services in October outlining concerns about Vaughn’s spending habits, which the co-worker thought exceeded his salary with the school.
The school began an investigation and launched an audit in January. During the probe, a co-worker described the quality of Vaughn’s work as declining and noted that he had a high level of absenteeism. The co-worker also noted that Vaughn took his family to Grand Turks and Caicos and multiple trips to Las Vegas and once showed off a check for $26,000 from a gambling tournament he entered.
As the investigation ramped up, Vaughn altered some bank statements and had others sent to a personal P.O. box instead of the school, Masterson said.
Masterson said Vaughn used the money to lease or buy cars, including a Mercedes, a Lexus and a BMW, as well as cover credit card bills and pay for houses in the Louisville area and Floyd County, Ind., where he currently lives.
In an interview with investigators on Aug. 21, Masterson said, Vaughn owned up to issuing himself 25 fraudulent checks for $703,000 and that his actions dated to at least 2007.
Vaughn said he diverted checks issued to the Department of Family & Geriatric Medicine to accounts he controlled for the affiliated practices, then issued checks to himself from those accounts, Masterson said.
Because the University of Louisville receives federal funds and Vaughn did not report the income from the checks on his tax returns, the IRS began investigating, Masterson said.