A grand jury has indicted a Texas-based IT company where former Geauga County IT Director Stephen Decatur once worked for conspiring to defraud the county of more than $1.5 million.
ITERSource Corporation, a privately held company in The Woodlands, Texas, was charged with two counts of complicity to commit aggravated theft, first-degree felonies, one count of complicity to commit having an unlawful interest in a public contract, a fourth-degree felony, and complicity to commit theft in office, a third-degree felony.
Also indicted on the same charges are company President/CEO Eugene Joseph Krus Jr., 63, and Vice President Administration and Operations William E. Kelly Jr., 73, both of The Woodlands.
“These grand jury indictments are part of the investigation into former Geauga County IT Director Stephen Decatur’s alleged embezzlement of county funds,” Geauga County Prosecutor Jim Flaiz said in a March 1 press release announcing the indictments.
The indictments allege the unlawful conduct occurred between Feb. 1, 2010, and June 30, 2017.
The indictments come on the heels of a meeting Flaiz and prosecutor’s office investigators had with company officials in Texas late last month.
An arraignment date has not yet been set by the court, but will likely occur within the next 30 days.
When reached for comment Thursday afternoon, Krus directed all inquires to ITERSource’s attorney, Michael J. Hinton of Houston law firm Hinton & Bailey LLP.
“I really don’t have anything to say. This is something new to us, we just learned about it,” he added.
Hinton said he had not had a chance to study the indictment and wanted to talk to Flaiz.
“Obviously, Joe (Krus) and Bill Kelly are very disappointed that they got indicted,” said Hinton, a former prosecutor.
“We understand that the grand jury just felt like it was a case where they had to refer to the court for disposition,” he added. “They did not find these gentlemen guilty of anything.”
Hinton also said he understood Flaiz was doing his job as county prosecutor.
“The county has been terribly wronged by these other individuals and I’m afraid our guys got duped along the way,” he said, adding he would have no further comment until he talked to Flaiz.
In his March 1 press release, Flaiz said “irregularities” were discovered in the auditor’s office during the investigation into Decatur’s actions.
“It was learned that the former IT director was utilizing his daughter’s company, SMCS Tech, for county IT work,” Flaiz said.
While investigating SMCS Tech, it was discovered that SMCS Tech had been receiving significant wire transfers from another county vendor, ITERSource Corporation, since approximately 2009.
“It was then learned that Mr. Decatur, who had previously done work for ITERSource prior to being employed by Geauga County, approached ITERSource in 2009 to supply IT services to Geauga County,” explained Flaiz. “An arrangement was made where ITERSource would bill the county for IT services, keep a percentage of the money and utilize Mr. Decatur’s daughter’s company as a subcontractor.”
During a Jan. 29 press conference, Flaiz said monies being paid from an out-of-state vendor to SMCS Tech ended up in Decatur’s pocket.
“In some instances no work was performed or our employees in house were already performing that work,” he added.
In addition, as part of Special Prosecutor Bryan Kostura’s independent investigation of the Geauga County Auditor’s Office, communications were found between Decatur and representatives of ITERSource “engaging in competitive bid rigging,” according to an affidavit in support of a Jan. 19 search warrant authoring Kostura to seize property from county Auditor Frank Gliha’s office.
The warrant identified the crime being investigated as dereliction of duty, a second-degree misdemeanor.
The affidavit also stated Decatur worked as a contract employee at the Texas company in 2004, several years before he was hired as the county’s director of information technology.
That warrant and affidavit subsequently were sealed in Chardon Municipal Court.
Documents show Gliha authorized payments to ITERSource and SMCS Tech LLC, a Fairlawn-based company registered to Decatur’s daughter, Stephanie Stewart, in excess of competitive bidding requirements under Ohio law.
SMCS, a company that appears to exist on paper only, was paid almost $260,000 for IT services from Nov. 10, 2016, to Sept. 28, 2017, Geauga County Prosecutor Jim Flaiz said during the Jan. 29 press conference.
According to sources familiar with the Decatur investigation, ITERSource was paid more than $1.5 million for IT services over the eight-year period. Decatur directed company officials to use his daughter’s company as a subcontractor and those officials knew Stewart was his daughter.
In fact, Stephanie E. Decatur, as principal of SMCS, had secured a memorandum of understanding with ITERSource’s chief operating officer/vice president operations in April 2009, according to court records.
The auditor’s office had received invoices from ITERSource as early as June 2009, the records show.
Pursuant to state law, Gliha serves as chief administrator/secretary of the county’s Information Technology Department. Under that same law, he had the authority to name a deputy to administer the automated data processing (ADP) center, and Gliha kept Decatur in that role after originally being hired by former county Auditor Tracy Jemison.
The 59-year-old Decatur and his 35-year-old daughter were both charged in 334-count indictments filed in Geauga County Common Pleas Court in January alleging they engaging in a pattern of corrupt activity and aggravated theft, both first-degree felonies, from Feb. 1, 2010, through Oct. 25, 2017.
There are also counts for theft in office, money laundering — 322 counts — and having an unlawful interest in a public contract as well as telecommunications fraud and receiving stolen property.
Decatur and Stewart primarily used the stolen funds for daily living expenses, Flaiz previously said.
Specific counts against Stewart, of Akron, include complicity to commit theft in office and complicity to having an unlawful interest in a public contract, according to her indictment.
Decatur was arrested in October after an employee in auditor’s office alerted prosecutors about “irregularities” relating to SMCS. His case was bound over to common pleas court and assigned to retired Wayne County Common Pleas Court Judge Robert J. Brown.
Cleveland lawyer Laurence Turbow is representing Decatur, posted a $25,000 bond after his initial court appearance and currently is out of jail with a monitoring bracelet.
Stewart also was sprung from jail after posting an identical $25,000 bond. She also is wearing a monitoring bracelet.
Cleveland attorney Kimberly Kendall Corral is representing her.
No other court appearances for either Decatur or Stewart have been scheduled.
