Jul 3, 2008

Foundation worker nabbed on fraud suspicion

Former Lucile Packard employee allegedly embezzled $350,000

By Shelby Martin / Bay Area News Group

A former employee of Lucile Packard Foundation for Children's Health has been arrested on suspicion of embezzling more than $350,000 over an eight-year period.

As an accounting manager and payroll/benefit administrator, 68-year-old Marilyn Machalowski wired money from the Foundation's account into her own bank account and her 401K, the Santa Clara County District Attorney Office alleges.

Machalowski, who worked for the foundation from 1999 to 2007, also wrote company checks to her daughter, and deposited the checks into their joint account, the DA's office said.

Wednesday, the Santa Clara County District Attorney's Office charged Machalowski with one count of grand theft.

The maximum sentence for grand theft is three years, but the district attorney's office filed an "excessive takings clause," which applies to thefts of more than $200,000 and adds an additional two years to the maximum sentence.

"It's especially sad that she took money that was meant to help kids," said Deputy District Attorney Erin West. "But we'll prosecute this like any other grand theft. It's a lot of money, no matter who she took it from."

West said Machalowski "must make restitution" if she is convicted.

According to Machalowski's lawyer, Guerin Provini, Machalowski knew of the embezzlement investigation and had an arrangement to self-surrender as soon as a warrant was issued for her arrest.

But he said she was arrested by police at the San Francisco International Airport, as she was returning from a visit to a sister who has cancer.

According to Provini, Machalowski experienced "a number of things that would have caused stress" during the time of the alleged embezzlement, including the death of her husband and her own health problems. Machalowski is currently out on bail.

David Alexander, president and CEO of the Packard Foundation, said he learned of the alleged embezzlement after Machalowski resigned from her position.

"The first time we had someone other than she balance our books, it was pretty clear something was going on," he said. The forensic accounting firm Deloitte FAS conducted a comprehensive audit of the foundation's financials.

Alexander said that like many large organizations, the foundation has insurance against malfeasance on the part of its employees. He added that the foundation's losses have been recovered, and stressed that the money stolen was from the organization's endowment and not from donations.

Machalowski's arraignment is scheduled for 9 a.m. on Aug. 7.