Former King Farm Employee Awaits Sentencing for Embezzlement Scheme

By Andrea Escher

On October 16, 2017 the King Farm community was shocked when NBC Washington aired a story
reporting the King Farm Citizens Assembly was under investigation for over $100,000 in missing funds,
and that a former employee of the Assembly was a person of interest. Neighbors began posting
questions on social media demanding answers and sending e-mails to the Board wanting to know the
real story behind the news report.

Residents attended the Assembly’s October 18, 2017 Board of Trustees meeting hoping to hear from the
Board regarding the issue, but unfortunately, the Board advised residents they were forced to remain
silent as the investigation was still on-going and no arrest had been made. The Board disputed the NBC
Washington report that the Assembly was under investigation but confirmed an employee with the
management staff was terminated on August 11 and was currently being investigated by police for a
theft scheme. Residents still wanted more specific answers to their questions, however, the Board
stated that providing greater detail could negatively impact the on-going criminal investigation. The
Board, directed by both the community’s legal counsel, police and State’s Attorney’s Office, did not
provide any comment or update for a period of several months, a decision that elicited much
conversation by residents as to if it was the best course of action.

Mrs. Melvina “Liz” Shipe, the former Administrative Assistant in the King Farm management office, was
charged with Theft Scheme $100,000 Plus on February 9, 2018. The King Farm Citizens Assembly
provided an e-mailed statement to the community with additional information regarding Shipe’s arrest,
as well as information pertaining to how the community was proceeding with the insurance claim for
reimbursement of the missing funds. A copy of the State’s “Proffer of Proof” was also e-mailed to the
community following Shipe’s initial court appearance on February 16, where she pled guilty to the
charge. She will be sentenced on April 17, 2018 by Judge David Boynton. The charge of Theft Scheme
$100,000 Plus carries an up to 20 year sentence, however sentencing guidelines for a case of this nature
dictate probation to two years of confinement.

Now that the case has for all intent and purpose been closed, the Chronicle reached out to the
investigating parties who now feel comfortable with the public disclosure of facts regarding this case.
Some of the information in this article may seem repetitive to those who read the “Proffer of Proof,” but
the facts and information surrounding this case will continue to remain unchanged.

Melvina Shipe, known by King Farm residents as Liz, was hired by the former General Manager, Monica
Casper, in 2008 as the Administrative Assistant in the on-site management office at the Saddle Ridge
Community Center. Casper had previously supervised Shipe at her former place of employment, Leisure
World in Silver Spring. Shipe was hired as an employee of the then community management company,
Legum and Norman. She was responsible for the general administrative tasks within the office, but most
residents interacted with her when it came to pool or parking passes, general community questions and
rental of the Saddle Ridge Community Center. She was also tasked with placing orders for office
supplies, as well as coordinating the courier delivery of correspondence to the community’s financial
management firm. This correspondence would include the weekly delivery of invoices and bills to be
paid, and various checks submitted to the on-site office by residents who purchased pool fobs, rented
the Saddle Ridge Community Center, purchased HOA Re-Sale Documents to sell their home, as well as
the payments submitted by advertisers of the King Farm Chronicle or sponsorship payments for various
social events and activities.
In 2012, the King Farm Citizens Assembly ended their management contract with Legum and Norman.
Zalco Realty of Silver Spring was hired to oversee the financial management of the community. During
this time, all on-site office staff, to include Shipe, were then made employees of the King Farm Citizens
Assembly.

The protocol for the receipt of check payments received in the on-site office required Shipe to
photocopy all checks received, notify the appropriate personnel that a payment had been taken, such as
the Editor of the King Farm Chronicle, or attach a copy of the security deposit and payment for a Saddle
Ridge room rental with the contract on file. The payments were then to be sent via courier to the
financial management company for depositing by their accounts receivables department into the proper
King Farm accounts. While Shipe did make copies of the checks and notified personnel that payment had
been received, it was later discovered that the checks had not been couriered to the financial
management firm, but rather were deposited directly by Shipe into her personal bank account.

In early August 2017 King Farm’s General Manager, Jennifer Gilmore, began working on the
community’s annual budget for FY 2018. According to Gilmore while comparing prior year budgets and
income reports, she noticed significant discrepancies and decreases in the income accounts for 2017,
specifically regarding the accounts referencing HOA Resale Documents, Community Center Rentals,
Social Event Income and King Farm Chronicle Newsletter Income. Gilmore contacted Zalco’s accounting
department to determine if the discrepancies were a result of these income funds being deposited by
Zalco into the wrong accounts.

Also during this time, a King Farm resident approached Gilmore regarding an issue he had from
previously renting the Saddle Ridge Community Center. Gilmore discovered there was no rental contract
on file for the use of room. She asked the resident to provide copies of his deposited payments, which
he provided. Gilmore says she immediately noticed the endorsement on the back of the check was void
of the Zalco stamp reflecting the King Farm account number and was instead endorsed with a hand
signature and a personal bank account number. Gilmore provided a copy of the check to Zalco, who
confirmed that the check had not been received nor endorsed by their office.

Knowing that Shipe was responsible for ensuring the check payments were sent to Zalco, and
recognizing the handwriting endorsement as Shipe’s, Gilmore says she searched Shipe’s desk and found
a letter addressed to her from Shipe where she apologized for taking money. Gilmore immediately
contacted the police around 7:00 p.m. on August 10. Officers from the Rockville City Police Department
(RCPD) spoke with Gilmore, reviewed some of the evidence discovered, and after writing the initial
report, referred the case to their Criminal Investigations Unit.

On August 11, 2017, Shipe reported to work as normal but was immediately terminated by Gilmore. In
the presence of both Gilmore, and Zalco President Arthur Dubin, Shipe admitted to taking checks made
payable to King Farm and depositing them into her personal checking account at TD Bank. When
confronted that records were showing an excess of $100,000 missing over a period of several years,
Shipe stated that she did not think she “took that much,” and adamantly denied taking any checks prior
to 2017.

Shipe willingly provided her 2017 bank account statements to Gilmore and Dubin. She was then
instructed to provide additional years statements to include 2015 and 2016. She then denied having
taken any payments prior to 2015. At no time during the investigation was it revealed that Shipe had a
separate bank account under the name of King Farm. All funds deposited were done so into a joint
checking account under the name Melvina Shipe and her husband.

Sergeant Bill Nieberding of the RCPD Criminal Investigations Unit tells the Chronicle his unit received the
initial report on August 11, 2017. The detective assigned to the case spoke with Gilmore the following
week and advised her to audit all the community accounts and review prior invoices, check requests,
vendor registries and credit accounts to determine if any additional fraudulent activity had occurred.
The investigating detective issued subpoenas for Shipe’s financial records from TD Bank.

Gilmore was advised by police to have no further communication with Shipe and asked her not to
disclose or discuss the details of the case pending their investigation. At that time Gilmore had only
advised her supervisor, King Farm Citizens Assembly President Gail Sherman, and Chairman of the Board
of Trustees, Mel Willis, as well as John McCabe, the community’s legal counsel, of the situation.

It took Gilmore several weeks to work with Zalco and audit the community financial records, storage
files, invoices and vendor accounts. In mid-September Gilmore discovered an Office Depot credit
account that she was not aware had been opened in the name of the King Farm Citizens Assembly. She
contacted Office Depot and learned from May 2011 to October 2015 $53,256.00 in purchases had been
made by Shipe and delivered to her home address. The statements provided by Office Depot unveiled
that Shipe had purchased $20,000 in gift cards to Shell Gas, Dunkin Donuts, movie theaters, restaurants,
and Visa Gift cards in various denominations. In addition, she purchased flat screen televisions,
computers, cell phones, iPad tablets, cleaning supplies, and furniture.

Gilmore obtained the Office Depot invoices, paid by Zalco, which were forged by Shipe to reflect
Gilmore’s signature. Office Depot advised the King Farm account was later closed due to suspected
fraudulent activity in 2015, but never notified King Farm of the issue.

Gilmore discovered similar types of items were ordered and delivered to Shipe’s home through another
office supply vendor between November 2015 and May 2017 totaling $16,450.

The focus on the police investigation was then broadened from 2015 to as far back as 2011. Police also
identified a second bank account history for Shipe at Wells Fargo Bank dating back to 2011. The financial
statements for this account were also subpoenaed.

Sergeant Nieberding says given the scope of information needed to properly investigate this case, it took
several weeks to conduct interviews and obtain all the subpoenaed bank statements, as well as for King
Farm staff to complete an in-house review of their records. Nieberding says there was no evidence to
indicate anyone, other than Shipe, were involved in the theft scheme.

The Rockville City Police Department completed their investigation and turned the case over to the
Montgomery County State’s Attorney’s Economic Crimes Unit on September 25, 2017. The case was
assigned to Chief Investigator David Newcomer.

On October 16, 2017, while Gilmore and Newcomer were meeting to discuss the case, a reporter and
camera crew from NBC Washington arrived at the Saddle Ridge Community Center seeking information
off a tip they received concerning over $100,000 of stolen community funds by a former employee.
Gilmore referred all media inquiries to the Montgomery County State’s Attorney’s Office.
Ramon Korionoff, a spokesman for the Montgomery County state’s attorney’s office, told the media his
office could not comment on the specifics of the case, and the state’s attorney’s office would decide on
possible charges after investigating leads and talking to witnesses.

The story hit the airwaves on October 16 and King Farm became the topic of conversation not just in the
community, but locally and nationally.

While residents were angry that the Board and management remained silent, they were unaware of
Newcomer’s on-going dialogue with Shipe and her attorney. Shipe, who had been cooperating with the
investigation, began providing additional information on the theft scheme. Investigators were
concerned that if her identity and details of the crime were leaked, Shipe would no longer be willing to
cooperate which could affect the plea deal the state was planning to present to her.

During the investigation, it was determined that that from September 20, 2011 to August 4, 2017 a total
of 825 checks, made payable to King Farm, were deposited by Shipe into her personal bank account
totaling $291,276.26. In addition, a total of $69,706.92 in personal purchases were made by Shipe using
King Farm credit accounts from May 17, 2011 to May 19, 2017. The Montgomery County State’s
Attorney’s Office disclosed that from May 2011 to August 2017, Shipe had embezzled a total of
$360,983.18, and filed one count of Theft Scheme $100,000 Plus against her on February 9, 2018.
Assistant State’s Attorney Bereket Tesfu presented the case on February 16, 2018 in circuit court to
Judge Boynton where Shipe pled guilty to the charge.

At no time did Shipe have access to the monthly homeowner assessment fees. All assessment fees are
either automatically deducted from residents checking accounts, or payments are mailed to an off-site
lock box under the control and access of Zalco Realty.

Gilmore filed a claim with the community’s insurance agent for reimbursement based on the existing
Employee/Dishonesty Crime Coverage obtained by King Farm. According to the Assembly’s insurance
agent Robin Manougian, the coverage, a layered-format Fidelity, was purchased in 2001 and covers a
$50,000 primary reimbursement, and secondary coverage through Traveler’s for any additional loss.
King Farm has received the $50,000 reimbursement off the primary policy and is currently waiting for
Travelers to finish their investigation and issue payment for the remaining $310,983.18. Gilmore says
she is optimistic that the community will be made whole from this loss.

It is unknown at this time if the insurance carriers will file claims against TD Bank and Wells Fargo for the
negligent acts of their bank employees, who allowed Shipe to deposit fraudulent checks into her
personal account.

What residents want to know is how this could have happened, and how did it go unnoticed for so long?
Many have speculated that the community financials must not have been regularly audited and have
insinuated that members of the Board of Trustees, Management and Budget and Finance Committee
were negligent in their duties by not catching that such a significant sum of money was missing.

The King Farm Citizens Assembly’s financials have been audited annually by an independent firm since
1999. The Assembly contracted the services of Goldklang, Cavanaugh and Associates from 1999 to 2006.
From 2007 to 2012, DeLeon & Stang provided the auditing services, and most recently from 2012 to
2016 Malvin Riggins & Company provided the auditing services. Part of the contracted services requires
a written report of the audit be provided to the Assembly Board of Trustees for review and approval. At
no time did any of these three firms detect or report fraudulent activity to management or the Board of
Trustees.

While the auditing firms look over all aspects of the King Farm financials, their primary focus centers on
the community expenses and accounts payables. Since the revenue stream for King Farm fluctuates
annually, for example, it is hard to project how many residents will reserve the community center for
private parties each year or how many ads the Chronicle will sell each edition, the budgeted income is
estimated on past trends. It can only be surmised that if the revenue accounts were trending low
because of the on-going theft, the auditing firms did not detect a change in pattern or a decrease.

The King Farm President and Board of Trustees receive monthly copies of the financial statements, to
include expense and income reports, from the financial management firm. Over the 70 months the
theft occurred, two different individuals were elected and served as President of the Assembly, six
different board elections were held, and a total of twelve homeowners were elected and served on the
board between 2011 and 2016. At no time did either President or any Board member suspect the
fraudulent activity. At no time did the varying 12 homeowners who served on the Budget and Finance
Committee during the 70 months suspect or raise a question about deficiencies in the accounting.

With so many sets of eyes reviewing the financial reports, it is hard for residents to comprehend how
the theft went unnoticed. But the fact remains, nothing appeared out of the ordinary.

As King Farm begins to move past this incident, residents want to know has been done to prevent theft
again in the future. While nothing is 100% fool-proof, steps have been taken to change the course of
doing business in the future. In March the President and Treasurer of the Board interviewed six auditing
firms. The Board approved the proposal and entered into a contract with the Goldklang Group for
auditing services effective immediately.

The Goldklang Group is currently reviewing King Farm’s financial operations and will be presenting their
recommendations on how to safeguard any income funding received by the Assembly. This may include
that all fees be paid electronically for any income generated.

Over the course of the last several months the community’s reputation has been the subject of much
negative chatter, with accusations and insinuations, finger pointing and blame towards many
individuals, but there is ultimately one person responsible for this crime.

On April 17 members of the Board, management and former King Farm President Gail Sherman will
stand before Judge Boynton speaking on how Shipe’s crimes have affected the community. The fate of
Shipe will rest solely in the hands of the Judge. And while the case will officially be closed and Shipe will
face whatever punishment is given, this event has no doubt changed the history of King Farm forever.

Despite all that has happened, it is important to remember King Farm remains a diverse community
comprised of many faces, ages, and stories, it’s what makes this neighborhood special, and the reason
why so many have chosen to call it home.