Feds allege ex-executive embezzled children’s services non-profit for personal spending

Apr 10, 2021 3 Min Read
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Alleging embezzlement of over $200,000, federal prosecutors have filed charges against John Lynch, a former executive of the historically Catholic Michigan non-profit Holy Cross Children’s Services .

“In 2017, Holy Cross Services’ management discovered  financial irregularities indicative of possible embezzlement activity,” the nonprofit organization said in a statement. The organization initiated an audit performed by an outside accounting firm and notified its insurance carriers, and reported the matter to law enforcement, including the FBI.

The investigation was prompted when an employee noticed apparent personal expenses in Lynch’s use of the Holy Cross credit card. Lynch was fired in April 2017.

Holy Cross reached an “amicable resolution” with its insurance carriers and has “worked closely with the FBI” regarding the case.

“We want to assure all our donors, stakeholders, clients and partners, that Holy Cross fully cooperated throughout the investigation, and that the organization has implemented best practices and safeguards to prevent this from ever happening again,” the nonprofit said.

The charity’s former CEO and chief financial officer, 56-year-old Lynch, is accused of stealing more than $240,000 from the charity and allegedly spent it on shopping sprees, vacations, expensive dinners, personal credit card and mortgage debt, and relatives who kicked back money to him, The Detroit News reports.

If convicted, he faces federal charges of mail and wire fraud, crimes both punishable by up to 20 years in prison. He is also accused of stealing money from an organization that receives federal funds, a felony punishable by up to 10 years in prison.

Holy Cross Children's Services is based in Clinton, Mich. It was founded as Boysville of Michigan in 1948 by the Catholic bishops of Michigan. In 2019, Boysville of Michigan became Holy Cross Services and is not under the auspices of any diocese, the organization said.

Holy Cross Children's Services serves abused and neglected children, youth and young adults with substance abuse and mental health problems, as well as homeless children and adults. Its statewide work includes financial support, welfare and behavioral health care for children and their families in need. It also operates Samaritan Center, which provides community resources and health care on Detroit’s East Side.

Lynch had a salary of $200,000 per year.

Prosecutors accused him of using stolen money to pay for car repairs, a new roof, and mortgage and credit card payments. He used the charity’s money to pay his own consultant company and to pay for security services, secretly controlled through a relative.

Over $39,000 in 14 checks were paid to a relative of Lynch in 2014-2015. Prosecutors allege he described the money as “profit sharing” and suggested to the relative they split the cash. The relative transferred some $21,000 of that money back to Lynch.

He allegedly spent his employer’s credit card on about $36,500 in unauthorized charges.

Prosecutors allege he tried to cover up the embezzlement by submitting bogus invoices. He allegedly controlled the companies he paid.

Lynch was released on a $10,000 unsecured bond.

He had begun working at the charity in March 2012. Later that year he filed for bankruptcy in U.S. District Court, claiming he was over $10 million in debt. This included credit card debt, student loan debt for his children, business loans, and a debt related to a bankruptcy proceeding for a collision company, the Detroit Free Press reports. At the time, he claimed $400,000 in assets and $18,000 in monthly expenses, with an income of only $16,500.

Holly Fournier, associate communications director for the Detroit archdiocese, told CNA that although all Michigan dioceses once had a role in supporting the nonprofit, it has been 20 to 25 years since the Detroit archdiocese had any direct involvement.

“In more recent years, the Archbishop has had the ability to appoint someone to the 20- to 30-person Board of Directors,” Fournier said. “That‘s not uncommon among independent organizations that choose to operate within the principles of Catholic teaching — like private schools run by religious orders, for example. We don’t currently have anyone active on the board, as the last individual to be appointed has been serving in unrelated ministry out of the country for several years.”

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