Convicted former redevelopment officials Carolyn Y. Smith and Dante Dayacap have been ordered to pay back $435,018 they embezzled, at a rate of $100 a month.
At that rate, it would take them 181 years to fully repay the city. Put another way, if each defendant lives another 30 years, they’ll each pay back just $36,000. Neither faces jail time.
The punishment annoyed a lot of the people who read the coverage of the sentencing. Here’s a comment left by reader Will Dawson on our story:
WOW! I want to steal $ 435,000.00 and pay it back @ that rate. My life expectancy is 12-15 years so I would only pay $ 14-18, 000 before I die. Now that’s an investment strategy for me!
And here’s what U-T San Diego reader David MacCarthy said about the newspaper’s story:
I missed 1500.00 in income reporting: Served 3 months in prison, paid restitution for investigating me, and probation for 3 years. I would have been smarter to fudge on 1,5oo, ooo dollars.
The repayment figure has also gotten the attention of two agencies that are in the position to do something about it. The City Attorney’s Office and the County Probation Department both told me they plan to investigate Smith and Dayacap’s finances to see if the two admitted embezzlers can actually afford to pay more than $100 a month.
The question now becomes whether Smith and Dayacap actually have more income or assets than they have so far claimed.
If both defendants are broke, there’s essentially not much the city can do to get the taxpayer’s money repaid sooner. But if either owns property, if they have savings, or if they are receiving a greater income than they have so far claimed, the city or the Probation Department can take action.
Here’s how it works:
Investigating the Finances
Step one is that both the Probation Department and the City Attorney’s Office will do an investigation of Smith and Dayacap’s finances.
Often, the Probation Department does this sort of investigation prior to sentencing. The point is to figure out, up-front, how much money the defendant has and how much they can afford to pay back each month. But that didn’t happen in this case.
Rather, the probation officer simply held one interview with each defendant and their attorneys. He asked each about their finances, but hasn’t yet verified the claims Smith and Dayacap made in that interview. You can read what the probation officer wrote about Dayacap here and Smith here.
Mack Jenkins, the county’s chief probation officer, said his office will now be conducting a full financial investigation as part of Smith and Dayacap’s probation. If, during that investigation, the probation officer discovers that the defendants actually have more assets, savings or income than they have claimed, he can ask a judge to increase the rate at which the city gets paid back, Jenkins said.
“We will continue to work with the court on this,” he said.
Taking the Civil Route
As I outlined in this story, another option is for the city to sue Smith and Dayacap in civil court.
A spokesman for City Attorney Jan Goldsmith said an attorney and an investigator have been assigned to look into whether suing Smith and Dayacap would be worthwhile.
“We will determine whether there are options for a more expedited recovery,” the spokesman said by email.
Essentially, that involves doing the same sort of investigation the Probation Department’s doing to establish if the defendants have assets, savings or income that the city can get hold of.
Cash, Property and Retirement Plans: What Can the City Get?
Whether the city can actually get any additional money from Smith and Dayacap ultimately depends on whether they have any in the first place, and whether the city is, by law, allowed to take any money or assets they own.
This gets complicated.
There are all sorts of legal rules about what the defendants can and can’t be ordered to cough up. But there are three main points:
• If Smith or Dayacap have more cash in their bank accounts than they have so far claimed, or if they are getting more income than they have claimed, the city can go after that money. That’s done by asking the court to issue what’s called a “writ of execution” & essentially an order to the county sheriff to take ownership of the cash. The sheriff then passes that money on to the city.
• If either party owns property (Smith’s probation report says that she owns a house), the city could try to force them to sell that property to get cash to pay back the public. Whether this is worthwhile will ultimately depend on how much the property is worth, and whether it’s worth fighting a potential legal battle to get hold of it, said Paul Pfingst, a former district attorney who is now a defense lawyer.
“Sometimes, you have to spend five dollars to get two,” Pfingst said.
• The other assets Dayacap and Smith may still own are their retirement plans. Throughout their tenure at SEDC, both employees benefited from a retirement plan that paid either 12 percent or 15 percent of their total compensation into a retirement account similar to a 401(k).
And, as we discovered in 2008, those retirement accounts were also fattened by the hundreds of thousands of dollars in illegal, secret bonuses Smith and Dayacap paid themselves.
If neither Smith nor Dayacap has cashed in those retirement plans, Pfingst said, they are essentially untouchable. Even if each has $1 million in their retirement plan, the city has no claim to that money.
However, if either of the defendants has cashed in their retirement, that’s money the city can go after. And, if either is already taking monthly payments from their plan, that would be considered income, and the Probation Department, or the city, could ask a judge to increase the defendant’s monthly payments accordingly.
I’ve called The Southeastern Economic Development Corp., Smith and Dayacap’s former employer, to try and figure out what happened to their retirement accounts when they left the agency in 2008. The accounts may have been cashed out at that point, or they may have been rolled over into new retirement plans.
SEDC President Jerry Groomes told me the agency’s lawyers are currently working out what they can tell me about those retirement plans.
Will Carless is an investigative reporter at voiceofsandiego.org currently focused on local education. You can reach him at email@example.com or 619.550.5670.
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