'Fox' may have worn sheepdog's clothes

State Department of Revenue supervisor accused of looting more than $5 million from funds that she was sworn to protect

Sue Lindsay, Rocky Mountain News

Published May 1, 2007 at midnight

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A Colorado Department of Revenue supervisor has been accused of stealing more than $5 million of taxpayers' money from funds she was supposed to protect.

Prosecutors say Michelle Cawthra, who has worked for the department since 1998, funneled the money to high-end entertainment and clothing companies run by her boyfriend and another man.

The 30-year-old woman managed to avoid detection during the past year, according to court records, by forging signatures and changing the passwords of supervisors who had left the state months before.

"She was put in charge of helping to clean it up, and she ended up cleaning it out," Prosecutor Joe Morales said Monday, speaking of the fund Cawthra was assigned to oversee.

"She was both the fox and the sheepdog in the henhouse. . . . It is amazing."

Cawthra and Andre Holliday, 41, were arrested Saturday for investigation of theft and computer crime. They were being held at the Denver City Jail on Monday night, with bail set at $10 million each.

Cawthra's boyfriend, Hysear Don Randell, 40, remains at large.

As of Monday afternoon, investigators had found $5.3 million of fraudulent transfers dating back to April 2006, Morales said, but they expect that amount to increase.

The money allegedly was diverted from a fund set up to collect revenue from individuals and small businesses who pay estimated taxes on a quarterly basis.

Claims on the money, when combined with interest, could cost the state $8.3 million, Morales said.

Cawthra worked for the department since 1998 and was put on administrative leave April 19. Her annual salary was $64,812.

The department's executive director, Roxy Huber, declined to comment, other than to issue a statement saying the department alerted authorities as soon as the allegations were made and is cooperating with the ongoing investigation.

"This is a serious situation, and I have instructed everyone in state government to continue cooperating fully with the investigation," Gov. Bill Ritter said in a statement.

The investigation began April 18, when another employee noticed that a $21,019 tax refund check for 2005 was going to Holliday, a man she knew to be a close friend of Cawthra's boyfriend, an arrest affidavit says.

When officials checked, they discovered that Cawthra had authorized three other tax-refund checks - from 2002, 2003 and 2004 - for Clothing by Andre.

Holliday opened the business in Cherry Creek North in 2005. His Web site says he caters to sports figures, including Avalanche player Joe Sakic and Detroit Pistons player Chauncey Billups.

Randell is described as a "multimillionaire entrepreneur" on the Web site for his company, Tru Dat Entertainment.

Tru Dat is an independent hip-hop label and claims to be a sponsor of the boxing match between Oscar De La Hoya and Floyd Mayweather in Las Vegas this weekend.

The four checks to Holliday's business totaled nearly $90,000, although no claims for refunds had been filed and the company's tax return showed no overpayment of taxes.

Although the large dollar amount of the checks required approval by two other revenue employees, Cawthra is accused of getting around that by using the names of two former employees. The payments were "approved" by the two employees in April, although they left the department in January and March, court records allege.

Further investigation indicated that someone had changed the two employees' passwords to keep them active in the department's computer system, the affidavit says.

The investigation of the $90,000 of refunds led to the discovery Friday of what investigators allege was a much larger scheme.

Cawthra is accused of making 18 fraudulent payments to accounts controlled by Randell or Holliday. The deposits ranged from $87,623 to $679,331. Investigators found an e-mail from Cawthra requesting that these accounts not be reported to the IRS, the affidavit said.

"When this first started, (Department of Revenue officials) just didn't know the magnitude of it," Morales said.

Morales said investigators found luggage, phony passports and birth certificates in Randell's Range Rover, indicating he may have been prepared to flee.

lindsays@RockyMountainNews.com or 303-954-5181

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