The former executive director of the nonprofit Morgan Hill Downtown Association “systematically” defrauded the organization by embezzling more than $29,000 during at least a two-year period, according to authorities.
Jorge Briones, 48, who was the MHDA executive director from 2007 to 2011, was arrested at his home in Morgan Hill on suspicion of felony embezzlement and grand theft Thursday, Morgan Hill police Sgt. Troy Hoefling said.
The investigation conducted by Morgan Hill police into the alleged rip-off scheme lasted more than a year, Hoefling said. The Santa Clara District Attorney’s office issued a $50,000 warrant for his arrest last week.
Briones is out of custody on $50,000 bail, but did not answer numerous phone calls before press time. He is currently the owner and operator of the 9Lives night club in downtown Gilroy, which he opened in January 2011.
Briones is accused of writing checks to himself from the MHDA’s account, and trying to cover up his actions by claiming the checks were written to vendors who supplied goods and services to the MHDA, and for other work-related expenses, according to authorities.
“The Morgan Hill Downtown Association trusted him with money that was supposed to be spent on ways to promote a positive image of downtown Morgan Hill, and instead he betrayed their trust by embezzling money,” Deputy District Attorney Judy Lee said.
In May 2011 the MHDA’s board of directors voted to terminate Briones’ position. The association’s directors said at the time that Briones’ dismissal was part of an effort to cut costs at a time when a key source of the MHDA’s funding – the city’s redevelopment agency – was expected to be cut by the state. Gov. Jerry Brown eliminated all RDAs statewide as of Feb. 1, 2012.
The MHDA is a nonprofit organization that promotes downtown Morgan Hill for economic development and tourism purposes. It hosts several events and series of events annually, including the Downtown Wine Stroll and the summer time Thursday street dance concert series on Third Street.
The association’s budget in 2011 was about $110,000, with about $71,000 of its revenue coming from a contract with the former RDA to assist with economic development efforts.
As part of their investigation into Briones, Morgan Hill police combed through piles of canceled checks and reviewed the MHDA’s in-house computer accounting system.
Officers found that Briones regularly wrote and cashed checks to himself from the MHDA, but would enter the checks into the association’s “Quickbooks” system as having been paid to someone else. He claimed the falsified recipients of the checks had done some kind of business with the MHDA.
MHDA president Brad Jones said the association’s board discovered some possible “impropriety” while Briones was the executive director, and the board turned over their investigation to the police. Jones said he hasn’t heard anything about the investigation or a possible arrest since the police started looking into it.
“There was ongoing concern, when we started going through the books, that something was wrong,” Jones said.
The investigation found that between June 2009 and May 2011, Briones had written “at least 50 checks” to himself without submitting receipts or other documentation to justify the reimbursements, police reports said.
For example, in October 2010 Briones wrote a check from the MHDA to himself for $3,329, which he claimed was a reimbursement for the purchase of candy for the downtown “Safe Trick or Treat” event, police said. MHDA board members, who discovered financial discrepancies in the account in early 2011, were unable to find a paper trail supporting the claim that Briones spent that much on candy.
Also, in March 2011, Briones wrote a check for about $2,921 to himself, but entered the check into the MHDA’s Quickbooks system as having been paid to Pacific Display for supplies for the MHDA, according to police reports.
MHDA treasurer at the time Linda Sanborn was tipped off to the book-keeping oddities when she received an unpaid invoice from Pacific Display for $2,500, even though the Quickbooks program listed the invoice as paid, according to police. Sanborn followed up with the MHDA’s bank, Santa Barbara Bank and Trust, and found that the check that Briones claimed he had written to the vendor was in fact written to and cashed by himself.
Most of the checks Briones wrote to himself without receipts or other documentation were for smaller amounts, from less than $100 to about $400 each, police said.
He even claimed that some of the checks he wrote to himself were paid to the California Department of Alcoholic Beverage Control, though police found that the ABC had never received the payments that Briones listed in the association’s computer, authorities said.
The MHDA had oversight measures in effect while Briones was making the illegal transactions – including requesting approval from the board for expense reimbursements to employees – but they were not strictly enforced because Briones was “personally known and trusted by many of the board members,” according to police reports.
In December 2009, Sanborn found that Briones was writing MHDA checks to repay himself for work-related expenses, police said. He was not following the association’s stated procedure for making such reimbursements, which includes submitting a completed check request form, attaching supporting receipts, and obtaining a signature on each repayment check from a board member.
Briones was paid an annual salary of about $50,000 to be the MHDA’s executive director, according to the police reports.
MHDA vice president Dennis Kennedy said Monday that the board has more vigorously enforced its expense reimbursement policies since discovering Briones’ alleged embezzlement. Kennedy was on the MHDA board, along with a number of downtown business owners, at the time of Briones’ alleged embezzlement.
“As board members, we need to step up our oversight of our staff,” Kennedy said. “To a large extent, it’s our role as board members to make sure we don’t allow things of a questionable nature to happen.”
Briones was hired by the association’s board of directors as event coordinator in 2007, and was promoted to executive director in 2008.
In interviews with police during the year-long investigation, Briones said he would often make work-related purchases for the MHDA with his personal credit card, and then claim the reimbursements he listed in the Quickbooks program.
He told police he did not recall some of the questionable transactions that board members discovered, and he did not know why he would have listed checks written to himself as having been paid to a vendor or service provider, according to police reports.
The $2,921 check he claimed he wrote to himself and cashed in 2011, for example, might have been mistakenly entered into the MHDA’s books by him as being written to Pacific Display, police said. In a follow-up interview with police, he told them he remembered why he wrote himself the check – he personally loaned the MHDA the money because its bank account was low on cash, and then repaid himself plus interest from the MHDA’s account when more revenue came in.
Fearing such a transaction would appear “suspicious” to board members, he entered Pacific Display as the recipient of the check, police said.
The owner of the building where Briones runs 9Lives in Gilroy said he doesn’t know what will become of the club following the charges. The property owner, Gary Walton, who has known Briones for several years, said he was surprised to hear about the charges against Briones.
The MHDA is funded by annual membership dues, revenue from events it sponsored, fundraising efforts and – formerly – the Morgan Hill RDA before that agency was dissolved by state law earlier this year.
Neither the city nor the former RDA are considered victims in the case, Lee said. The only victim is the MHDA.
The Santa Clara County Superior Court will schedule an arraignment hearing for Briones within 30 days of his arrest, Lee said.