BIRMINGHAM – U.S. District Judge L. Scott Coogler today sentenced the former executive director of the Jefferson County Committee for Economic Opportunity to two years in prison for stealing close to $500,000 from the non-profit organization, announced U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Richard D. Schwein Jr.
RUTH GAYLE CUNNINGHAM, 64, was executive director of JCCEO for more than 20 years before resigning the job last March. She pleaded guilty in September to theft from a government program that received more than $10,000 in federal funding or assistance. Her daughter, Kelli E. Caulfield, 31, pleaded guilty last year to conspiring with her mother to defraud JCCEO. Cunningham paid $492,195 in restitution to JCCEO, which was part of her plea agreement with the government, before today’s sentencing. She must report to prison April 28.
JCCEO is a community action agency that administers programs, including Head Start, for low-income and disadvantaged residents. Between late 2008 and April 2010, while Cunningham and her daughter were running fake invoices through the agency and using agency funds to pay mortgages on personal investment properties, JCCEO was paying Cunningham a salary of as much as $150,000, plus bonuses, benefits and retirement contributions.
“At the same time Cunningham was being showered with accolades, benefits, and praise for her work at the JCCEO, she was stealing funds which could have been used for community programs,” the government said in its sentencing memorandum.
“Gayle Cunningham was able to steal money intended to help some of the most vulnerable members of our community because she traded on her long tenure at JCCEO to receive broad discretionary powers from its board,” Vance said. “She and her daughter exploited that authority to steal nearly a half million dollars from the agency. As a result, training programs lagged, Head Start buses were not replaced, and classroom computers were running on obsolete, unsupported operating systems,” she said. “Prison is deserved for this type of abuse of trust and misuse of federal funds.”
“Today’s sentence should send the message that regardless of who you are or the position that you hold, you cannot abuse the public trust and steal federal funds,” Schwein said. “The public can expect that the FBI will continue to aggressively investigate public corruption at all levels.”
According to court records, Cunningham used JCCEO funds in 2009 and 2010 to make monthly mortgage payments on at least three residential properties she owned, and at least five residential properties her daughter owned, in Jefferson and Shelby counties. Cunningham also used JCCEO funds to pay property taxes on one of those properties, a house in Chelsea that she bought in 2007 with a mortgage loan of more than $1 million.
Cunningham also paid $293,413 in JCCEO funds to companies her daughter owned, and to other contractors, for claimed repairs or renovations to the women’s properties. Caulfield created the invoices for repair services that never were performed, and she disguised her ownership in many of the companies, according to the government’s sentencing memorandum. The checks were drawn from the JCCEO operating account and allocated to the agency’s Housing Revitalization Program.
Caulfield crafted the invoices for amounts less than $5,000 to prevent the need for a second signature by a member of the JCCEO board. As executive director, her mother had check-signing authority up to $5,000.
The FBI discovered the fraud at JCCEO while investigating allegations of a mortgage fraud scheme. That investigation led to federal prosecutors’ charges against Cunningham and Caulfield, as well as to charges against a real estate investor and a mortgage broker of conspiracy to defraud federally insured financial institutions. Cunningham and Caulfield bought most of the properties that later became part of their scheme to defraud JCCEO from the investor, Robert Paul Hollman.
Hollman pleaded guilty in September and is scheduled for sentencing April 2.
The government’s sentencing memorandum argues that Cunningham and Caulfield have “improperly characterized themselves as victims in the real estate transactions with Hollman.” Cunningham has a history of buying real estate and, on all the purchases from Hollman, the loan applications and mortgage documents show Cunningham and her daughter signed and willingly entered the contracts, the memo states.
It also challenges a claim in Cunningham’s own sentencing memorandum that, during meetings she had with JCCEO Board Chairman T.L. Lewis, it was suggested she use the agency’s Housing Revitalization Program funds to pay her personal mortgages.
Lewis told investigating agents that Cunningham and Caulfield never were authorized to use JCCEO money to pay personal mortgages.
“Cunningham’s statement that she had approval from the chairman of the board is a completely self-serving statement that is unsupported by the evidence,” the government memorandum states. “These attempts by Cunningham to legitimize her actions and mitigate the need for a custodial sentence by pointing the finger at Dr. Lewis are contrary to the facts and evidence and furthermore are contrary to her acceptance of responsibility,” it states.
The FBI investigated the case. Assistant U.S. Attorney Robin Beardsley Mark is prosecuting the case.
