A three-year-old embezzlement case involving more than $300,000 and a former Bay Springs City Clerk is finally moving through the judicial system. The final sentencing has not yet been adjudicated, and on another note City of Bay Springs leaders are not pleased with the lack of communication provided them by the State and Federal Government while the investigation was ongoing.
Randy James, 56, the former clerk, pleaded guilty in Hattiesburg last Wednesday, in front of Senior U.S. District Judge Keith Starrett, to money laundering and making false statements on a federal tax return.
“This loss is massive for a town the size of Bay Springs – over 10 percent of their annual budget. Our small towns cannot afford to lose a single penny right now,” said State Auditor Shad White. “My office will work to hold fraudsters like Randy James, who knowingly steal your money, accountable with zero tolerance for this kind of theft.”
In April 2017, the City of Bay Springs learned a sizeable amount of money was missing or had been misappropriated, with assistance from Magnolia State Bank suspicions on transactions, which eventually led to the exiting of James from his position with the city. Later in May of the same year, Bay Springs Mayor J.E. Smith and the Bay Springs Board of Alderman called a special meeting to discuss the situation. Following the closed-door meeting, it was confirmed that James had been placed on administrative leave without pay indefinitely, as a result of an ongoing investigation that was being handled by the State Auditor’s Office.
The case then began a long journey that finally seems to be culminating.
“One of the highest priorities of this office is bringing to justice corrupt officials who betray our public trust. I commend local bank employees who spotted this criminal activity, as well as our federal, state, and local law enforcement partners and prosecutors who were diligent in catching this crook and holding him accountable. We will continue to do all that we can to root out criminality and corruption in all forms of government,” said U.S. Attorney Mike Hurst.
According to prosecutors following last Wednesday’s hearing, during 2017 and 2018, while James was employed by the city, he had control over certain financial aspects of the city. During this time, James embezzled just over $300,000 from the City of Bay Springs between August 2017 and April 2018 by creating fraudulent invoices from fictitious companies for the costs of false services that were never approved or incurred by the city. James diverted city funds by obtaining checks from the City of Bay Springs, cashing the checks at a local bank, and wiring those funds in increments between $1,950 to $50,000 overseas to international scammers in the hope of winning money in a lottery scheme. James also made false statements on his personal 2018 Federal Income Tax Return by under-reporting gross receipts by $193,331.00.
On February 13, 2019, the State Auditor’s Office issued a demand to James to pay $325,561.84 as a result of the investigation, which also included interest on the embezzlement amount and investigative fees. In the plea agreement last Wednesday with the U.S. Attorney’s Office, James agreed to pay a total of $420,562 in restitution. Broken down, the State Auditor’s Office will collect $265,561.84 of that restitution on behalf of the City of Bay Springs. An amount of $95,000 is to be paid to the Internal Revenue Service, and $60,000 is to be paid to RLI Surety, a surety bond company that covered the City of Bay Springs at the time of the embezzlement.
“Today’s guilty plea sends a clear message that public officials, whether elected or appointed, hold positions of trust in the eyes of the public. This trust is broken when these officials commit crimes,” said Demetrius Hardeman, Assistant Special Agent in Charge, IRS CI Atlanta Field Office. “No public official gets a free pass to ignore the tax laws, and IRS-CI works diligently, in concert with state and local partners, to ensure everyone pays their fair share.”
James is expected to be sentenced by Judge Starrett on January 12, 2021, at 10:30 a.m. in Hattiesburg. He faces up to 10 years in federal prison, a $250,000 fine, and up to three years of supervised release for money laundering. James also faces up to three years in prison, a $250,000 fine, and one year of supervised release for making a false statement on a Federal Income Tax Return.
Bay Springs City officials only learned just before the plea agreement was scheduled that James would be in the Hattiesburg courtroom last Wednesday. Only one Board of Aldermen member, Bob Cook of Ward 5, was able to attend the arraignment and change of plea hearing on such short notice. According to Cook, Mayor Smith, Ward 4 Alderman Ron Keyes, and Ward 3 Alderman Jimmy Knotts in interviews over the past days, the city seems to have been left in the dark about the entire investigation since it began.
“They (State investigators and Federal investigators) have not talked to us one time,” Knotts explained.
Keyes described the investigation as a communication breakdown, where he believes city officials should have been in the loop from the beginning.
“I am absolutely not pleased with the communication during this investigation. There are a lot of unanswered questions, and they could’ve been letting us know something during all this time,” he said. “We didn’t even know he (James) was going to be at a hearing. If I’d have known, I would have planned to be at the hearing.”
Cook says he hopes the city through the plea agreement sentence will get the money back it lost, but claims in his opinion, it is doubtful it will all be recouped.
“I just want to see him in jail; I do want to see that,” he said. “With this pleaing and stuff, I don’t know if there’s a guarantee we will get all that money back. I do know that we have learned from this, and have already been adjusting our policies.”