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City loses claim for stolen funds

The city of West Linn recently lost the opportunity to recover up to $150,000 of the amount stolen by former finance director Elma Magkamit.

The Hartford insurance denied the city's claim on the policy that insures the city against employee theft.

The company stated that one clause in the policy specifically makes a person with a title such as finance director an exception to the coverage.

Magkamit pleaded guilty to 57 counts of theft in the embezzlement of more than $1.4 million of city funds. She was sentenced to pay restitution of nearly $2 million and to serve more than eight years in a state penitentiary.

City Manager Chris Jordan said that the city attorney also studied The Hartford employee theft insurance policy and agreed with the insurance company that Magkamit, considered in a high-risk position for theft, was not covered by the policy.

'The Hartford denied the claim,' Jordan said, 'pointing to language in the policy that specifically excluded tax collector or treasurer or by whatever job title that person goes by. After reviewing the situation and talking to our attorneys, we concluded that the finance director in West Linn would qualify under that exclusion.'

Jordan also said that his position as city manager also would be excluded from employee theft coverage under that policy. The city has since changed its theft insurance coverage to another company.

Current interim finance director Andy Parks, who is working part-time for the city on a consultant contract, carries his own $1 million bond against theft.

Another source of recovery for the largest theft of public funds in the state's history is bonding, according to Jordan. The city charter only requires that a surety bond be held on the performance of the city manager, Jordan said, but 53-year-old Magkamit did have a $100,000 bond separate from the employee theft insurance.

'We are receiving $100,000 from the bond that Elma had,' Jordan said.

In addition, recovery of funds will come in several other forms: the sale of Magkamit's car (approximately $16,000), the sale of her family home (approximately $80,000), proceeds of her public employee retirement account (approximately $100,000), and any funds that she might earn during her lifetime.

After recovering the bond and proceeds of Magkamit's assets, it would seem that there would be at least $1.5 million due in her restitution, which will continue to gain interest as time passes.

The city also is considering its chances in the courts if it chooses to accuse the Tigard firm of Pauly Rogers and Co. PC of negligence in its work in previous years as the city's independent auditor.

'We have entered into some discussions with the former auditing company,' Jordan said. 'We believe that there is some responsibility on them as well. But it will have to be handled by attorneys.'