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RGC Investigation Findings: '$ for Me,' Ghost Employees, Massive Markups

Find out what the city council investigation revealed about the alleged conduct of former Rye Golf Club manager Scott Yandrasevich.

The Rye City Council released its report drawn from the completed investigation into the actions of former Rye Golf Club Manager Scott Yandrasevich Wednesday afternoon. Yandrasevich resigned from his position last month in the midst of the investigation and agreed to vacate the superintendent's house on RGC grounds, where he was living with his family, by today.

The council has submitted their findings to the Westchseter County District Attorney's office, who they expect will conduct their own criminal investigation soon. The city council may pursue civil claims and intends to file a claim with their insurance provider. 

"It is the City's Madoff moment where wrong-doing went unnoticed, and where there wasn't one break in the chain, but several," said Mayor Douglas French. 

Yandrasevich was hired in 2002 as the RGC manager. The report alleges that by 2006, he began using his position at Rye Golf Club to manipulate various financial situations, and create shell companies in order to steal money from the club. RGC is a city-owned property, set up as an enterprise fund that operates on membership dues.  No tax dollars fund the club so the misappropriated money belonged to the RGC members who paid their dues, not to the general tax payer.

Basically, Yandrasevich helped to create and then used RM staffing to inaccurately bill and grossly overcharge RGC so that he could discreetly funnel money to himself, according to the report. In all cases mentioned in the investigation, Yandrasevich regularly (in some cases, in bi-weekly increments) directed RM to increase salaries, although employees did not receive their increased paychecks. He also used Studio Y graphic design business, owned by the same woman as RM, and a company he created himself, Ansco, to over charge the city.

Rye city staff barely questioned Yandrasevich during the six years it is believed he misappropriated funds. The city financial department and city manager’s office all trusted that the bills the former manager supplied were for legitimate work, according to the report.

From April 2007 to Sept. 2012, when the conflicts were brought to light, RM invoiced and was paid by the city $7,413,537. From Jan. 2007 to Oct. 2012 the city paid Studio Y invoices totaling more than $690,000.  From 2010 to 2012, Yandrasevich, working as a consultant from his company Ansco Inc., billed RM and Studio Y a total of $211,000.  

The report explains that the several individuals responsible for reviewing RGC invoices – Angela Runco, RGC accounts payable clerk, The Finance Department’s accounts payable clerk, the Deputy Comptroller of the Finance Department (Joe Fazzino) and the city manager (Scott Pickup)- did not do more than look what was on the face of the invoices and claim forms and approve them.

The investigation included an audit of communications, mostly from Oct. 2009 to Oct. 2012, interviews with 29 witnesses, review of more than 40,000 emails from Yandrasevich and his wife’s email addresses, analysis of financial records and serving subpoenas for records from banks, accounting departments, payrolls, from RM Staffing, Studio Y, Morris Yacht and Beach Club and Oak Hils Park Authority.

The city is still waiting for subpoenaed information from banks to be released in order to figure out the exact sum that Yandrasavich allegeldy took for himself, the council said Wednesday. That will cost the city more in legal bills. The investigation has already cost the city $278,000. Read more on that here.

The 19-page report lists seven key findings, summarized here:

  1. The Rye Golf Club Takes Over Catering and Restaurant Operations

When Restaurant Associates’ contract to run catering and restaurant operations at RGC expired in 2006, Yandrasevich hired new staff to help with the RGC take over of the administration an operation of Whitby Castle restaurant, snack bar and catering facilities. He hired Charles Breed as food and beverage director and Paul Carroll as executive chef and both were initially seasonal city employees. Carroll was eventually paid full time by RGC while working at another club that Yandrasevich managed in the Bronx.

  1. 2.    Studio Y Establishes a Relationship with RGC and RM Staffing is Created

Suzanne Ruggiero-Madeo, owner of Studio Y, a small graphics design firm in Rye, was hired to do work for the restaurant in mid-2006. By April 2007, she started a staffing company called RM Staffing at Yandrasevich’s request and the day after it was incorporated RM started billing RGC. Her invoices lacked basic details and within three months the invoices increased from $3,000 to $29,750.  The details became more vague over the years, at Yandrasevich’s direction, according to Ruggiero-Madeo in the report.

“Ms. Ruggiero-Madeo acknowledged that she did not keep track of what and how many copies Studio Y made for RGC and that many of the ‘printing charges’ (more than $30,000 in two years) were based on nothing more than a guess.”

Studio Y invoices went through the same limited review process as the RM invoices did and were paid based on Yandrasevich’s approval.

 

3. RM Staffing Charges Substantial Markups, But Does Not Perform the Usual Functions of a Staffing Company

RM Staffing billed RGC at hourly rates that ranged from a 10 percent markup to more than double what it had actually paid workers. The built in profit margin grew over time as RM Staffing increased hourly rates it charged RGC for each worker.

“Susanna,” for example, was billed in January 2011 at a rate of $15 per hour,  67% higher than her pay rate $9 per hour. By January 2012, RM Staffing was billing “Susanna” at $18 per hour, exactly double her pay rate of $9 until the end of April, when her pay rate slightly increased to $9.50 per hour.”

Despite the fact that RM’s bill rates increased significantly, it did not perform the functions one should expect from a staffing company, such as recruiting employees or screening candidates, performing background checks or supervisiong and training employees. RGC paid for hiring advertisements, and screened and hired candidates.

Ruggeriro-Madeo said that RM’s main function was to run payroll, which was done through an outside service called Paychex. The Council will continue to analyze the amount that RM Staffing profited from the City of Rye, but the analysis to date reflects that this amount is substantial.

Evidence shows that Yandrasevich was “deeply involved” in the details of RM staffing’s business. Ruggeiro-Madeo confirmed he was responsible for most, if not all material aspects of the relationship between RM and its employees. Yandrasevich instructed Ruggerio-Madeo who to hire, what to pay them and what to charge RGC for them. He directed her on when to raise the rates and told her not to pay workers their increased hourly rates.

For example:

In an email dated May 18, 2010, Ms. Ruggiero-Madeo asked Mr. Yandrasevich to “let me know what to invoice.” (Exhibit 10.) Shortly thereafter, she sent a draft RM Staffing invoice asking “Like this?” (Exhibit 11.) The draft invoice she sent was for approximately $2,700. The final invoice submitted that day was for $18,575.

3.    RM Staffing’s Invoices Include Charges for Individuals Not Paid by RM Staffing

There does not appear to have been any pattern or systematic effort to overbill RGC by overstating the number of overtime hours.

But, invoices do not accurately describe the area of the club in which some workers were deployed.

“The description field on the invoices appears to have been changed, depending on whether funds remained available in the blanket purchase order for each RGC cost center.”

There are also charges for people who did not receive any paycheck from RM staffing. In one instance, from 2008-2012, RM Staffing invoiced RGC and was paid more than $250,000 for employee “Lisa” as identified on invoices. However “lisa” did not work at RGC. Ruggiero-Madeo told investigators Yandrasevich told her to charge RGC for Studio Y “design services” by adding “Lisa” to invoices.

There are more than $100,000 worth of invoices for five employees, for whom there is no evidence of existing. Ruggiero-Madeo told investigators the charges for the ghost employees were for capital projects where Yandrasevcih dealt directly with the contractors who billed RM instead of RGC directly.

For example, in May and April 2009, RM billed more than $50,000 for workers who did not receive paychecks, but only $2,610 was paid to contractors during that period.

“The practice of billing for capital projects by charging for individuals continued through at least May 2012.

A spreadsheet found in the “Deck Project” file in Mr. Yandrasevich’s desk at RGC reflected that a profit was to be generated from the deck project, on both labor and materials, and that this profit would go to Mr. Yandrasevich as ‘my $.’”

 

5. RM Staffing Expands to Morris Yacht & Beach Club and Oak Hills, Using Staff Paid for by the City of Rye

Yandrasevich started to identify himself as the Business Development Consultant with RM Staffing in 2010. He also identified Carroll, Andrew Richter (director of Sales) Megan Hayes (senior Sales Associate and Ben Coyne (executive Chef) as part of the RM team at that time. He proposed he and his “RM team” to operate food and beverage services at Morris Yacht & Beach Club and Oak Hills where he ran the financial part of the operation and used RGC equipment.

Morris took up about 40-50 percent of Carroll and Hayes’ time, but they were still billed by RM as full time RGC workers.

 6. As Money Flows In, Significant Amounts Are Funneled to Mr. Yandrasevich and His Wife

From 2007 to 2011 there were multiple sizable cash withdrawals from Rm Staffing’s account.

In 2010, Yandrasevich formed a company, Anso Inc. for which he used RM’s accounting firm. Ansco billed and was paid $211,000 by RM and Studio Y for unspecified “consulting” work between 2010 and 2012.

Anna Yandrasevich, the former manager’s wife, worked at RM as “office manager” and “bookkeeper” and made $57,500 over three years, 2007-2009. In 2009 she began receiving a regular salary, bi weekly paychecks climbed from $1,000 to $4,200 by May, 2012. It dropped to $2,885 in June 2012, after Yandrasevich was publicly questioned about RM staffing and an initial FOIL request was made.

From November 2009 to September 2012, RM Staffing paid Ms. Yandrasevich a salary totaling nearly $175,000. Ms. Yandrasevich also received other payments from RM Staffing, including several checks and wire transfers in excess of $70,000.

In April 2010, Mr. Yandrasevich used an RM Staffing check in the amount of $6,891.01 to pay off a personal debt.

Yandrasevich arranged for RGC lifeguards hired through American Pool Management to live at an apartment owned by his friend. RM paid the rent, but Ansco invoiced American Pool for the same apartment, charging almost $3,000 more for the monthly rent. In 2010 and 2011 American Pool paid Ansco a total of $40,310 and in 2012 they paid RM $23,750.

Yandrasevich also bought his mother a house and two boats in North Carolina during the years he and his wife received these payments.

 

7. Opportunities to Prevent or Shut Down the Scheme Are Missed

It does not appear any former or current employee at city hall ever questioned Yandrasevich or RGC regarding  the RM invoices. They all relied on Yandrasevich to confirm that the invoices should be paid.  Runco said she asked him about items at times but was told they were proper and then passed the invoices on.

The city’s independent auditors from O’Connor Davies Munns and Dobbins LLP audited RGC in 2009. The auditors stated they had not identified any fraud or illegal acts, but did identify a number of issues with respect to RGC and its use of staffing companies to provide labor. They noted that the staffing services were not subject to a competitive bidding process and there were no written contracts. Very little follow up was conducted other than one meeting with Pickup, then-city comptroller Jean Gribbins and Yandrasvich, where they discussed for him to provide at least three rate sheets for staffing companies before processing a purchase order for a vendor like RM.

During the 2010 audit, the auditor asked Yandrasevich to provide an update on the RGC issues, to which he provided a written response that did not address that there was no written contract between RGC and RM Staffing.

In 2010, former city manager Frank Culross expressed a concern to the city’s outside auditors regarding a potential conflict of interest with Anna Yandrasevich and RM, but no one appeared to have substantiated the concern.

In Septemebr 2012, at the heated RGC Commission meeting when Pickup said there were no problems with Yandrasevich’s relationship with RM he was only aware of Yandrasevich’s recently admitted consulting, for which he claimed he had made less than $1,000, according to the council report. Pickup told investigators he said it was “all above board” because he was trying to “calm everyone down.” 

---

*Editor's Note:

This article has been changed slightly from its original version to reflect that Charles Breed never worked at any club other than RGC. 

No one listed here has been found guilty by a court of law. All information in this article was provided by either the Rye City Council at their Feb. 27 meeting, or the Summary Report of the City Council's Investigation into the Rye Golf Club.

Rye10580 February 28, 2013 at 11:24 AM
let's not forget that the City Council had to pressured into investigating this matter....they were content to let it continue for another 6 years. And then our city manager.....the guy we pay to run the city.....defends Yandrasevich last September and LIES to the members of RGC saying that Yandrasevich's relationship had been vetted by the city. Ans then the council sees fit to put Pickup...the guy who covered for Yandrasevich, signed his invoices and failed to spot the blatant fraud....in charge of the investigation? It's amateur hour at city hall. Where is the liability for Pickup in this matter? Track all the dollars carefully....we might find some in pockets other than Yandrasevich's.
HEALtheHARBOR.com February 28, 2013 at 02:52 PM
I think we need to take a look at the only two that were trying to defend Mr. Pickup for his lack of oversight and his many attempts to protect Mr. Yandrasevich. 1.) Mayor Doug French who was accused with stealing tax money from Rye. http://rye.dailyvoice.com/news/records-implicate-mayor-french-tax-fraud 2.) Deputy Mayor Jovanovich who was accused of sexual harassment and violating securities laws. http://www.kroplaw.com/win_hill.html http://articles.orlandosentinel.com/1992-03-13/business/9203130427_1_preferred-stock-suit-jovanovich Need we say more?
NY Firefighter March 03, 2013 at 06:05 PM
"At the center of the scrutiny is City Manager Scott Pickup, who suggested during a September 2012 Rye Golf Club Commission meeting that the relationship between RM Staffing and Mr. Yandrasevich had been vetted by the city attorney and found to be above board. Pickup told investigators that his comments were made in an effort “to calm everyone down.” Pickup told investigators he knew the city attorney had not reviewed the staffing contract when he made that remark." So Pickup LIED to the public to "calm everyone down"? A city official LIED to the public. The public should NEVER be LIED to. Will anything be done about this unethical conduct?
tedc March 03, 2013 at 07:20 PM
New - Rye Golf Scandal – The Numbers Guy: Mirror, mirror on the wall, which incurious city paymaster topped them all? “SUGAR DADDY.” http://www.lausdeo10580.com/lausdeo10580/2013/03/investigators-city-manager-pickup-approved-70-of-74-million-that-went-to-rm-staffing.html

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