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UC Sues Official Over Alleged Embezzlement : Courts: University contends woman approved phony claims exceeding $900,000. No criminal charges have been filed.

August 25, 1995|AMY WALLACE | TIMES EDUCATION WRITER

The University of California has filed suit against an administrator who allegedly embezzled more than $900,000 while working in the office responsible for protecting the university's assets from fraudulent claims.

While a manager in UC's Office of Risk Management, Diana Spaniol, 47, allegedly filed and then approved a series of phony claims that netted her and her daughter almost a million dollars over eight years, according to the lawsuit, filed this week in Contra Costa Superior Court.

Spaniol has been suspended from her post but has not been charged with criminal wrongdoing. The Alameda County district attorney's office and UC police are investigating.

The UC Board of Regents, which oversees the university's finances, is examining procedures to determine how so much money could be paid out without its knowledge.

"There's no question that the university has been asleep at the switch," said Lt. Gov. Gray Davis, a regent who is pushing for tougher internal controls in the wake of the Spaniol case.

Davis said Spaniol's alleged embezzlement was detected by "pure chance." The office where she worked had not been audited in more than a decade.

"This scandal was a sin of omission," Davis said. "Everybody performs better if they know someone is looking over their shoulder. When you put out the word that no one is looking, it's an invitation to disaster."

This is the second large expenditure in recent months that has come to the attention of the regents only after it was paid.

Earlier this week, the Board of Regents' audit committee met to discuss how to get a tighter grip on UC's self-insurance funds, which were used to pay settlements to Spaniol as well as whistle-blowers at UC Irvine.

In that case, $918,000 in settlements were paid to people who reported irregularities at the campus-sponsored fertility clinic. The regents only learned of the payments after they had been made.

At the audit committee meeting, UC auditor Patrick V. Reed said the university has instituted a new claim system and beefed up checks and balances that should help prevent unauthorized payments.

Each of the nine UC campuses will be assigned at least one certified fraud examiner, Reed said, and claims in excess of $1,000 will not be paid until verified by someone outside the risk management staff.

But Davis and several other regents said the board should consider further restrictions at the next regents' meeting in September.

"The authority to settle these claims is going to be brought back under the auspices of the regents," Davis said. "We won't be reading about major settlements in the newspaper."

The lawsuit filed this week, which also names Spaniol's daughter and ex-husband as defendants, sketches out an elaborate scheme that was allegedly lucrative enough to enable Spaniol to invest in real estate in the San Francisco Bay Area and Missouri.

In one incident, Spaniol allegedly paid herself $175,000 for a claim that was filed on behalf of "Diana Harvey"--one of more than a dozen aliases used in the scheme, the lawsuit said. Fabricated documents described Harvey as a 33-year-old UC employee who had been assaulted by a UC San Francisco professor who was arrested and resigned.

In fact, no such professor exists and no such incident ever occurred, the lawsuit contends.

The lawsuit says that much of the embezzled money was funneled to Spaniol's daughter, Heather Hollins. Over a four-year period, the lawsuit alleges, Spaniol wrote 17 checks totaling $439,000 to her daughter. In 1993, Spaniol allegedly purchased a $209,000 annuity to pay her daughter $1,000 a month for life.

To add validity to her phony claims, the lawsuit states, Spaniol sometimes forged letters, which purported to be from attorneys in UC's office of the general counsel.

Spaniol could not be reached for comment Thursday.

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