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Headwaters suit tells its tale |Mail Tribune / Bob Pennell Headwaters board members Roger Butterfield and Jo Anne Eggers discuss the future of their organization, which is rebuilding after its executive director was indicted on a theft charge. The environmental group has filed a civil lawsuit in hopes of getting back $159,345 it said was stolen. Environmental group says its former leader used a secret bank account to steal more than $150,000 By Paul Fattig ASHLAND � An $80 check written Nov. 24, 1999, went to Victoria�s Secret. Another check for $575 on Feb. 8, 1999, was written to Gold & Gems jewelry store in Ashland. And a check for $19.80 on Oct. 17, 1999, was made out to News & Smokes in Medford. Not exactly the type of checks one would expect to find in the papers of an environmental watchdog group. But they were written on a Bank of America account for Headwaters Inc. Coalition Project. They are part of a thick stack of canceled checks that Headwaters has submitted as evidence that its former executive director stole $159,345 from the nonprofit group. Headwaters filed a civil lawsuit Monday in Jackson County Court to get the money back. "It wasn�t so much a matter of taking money from Headwaters as diverting it from us," said Medford resident Roger Butterfield, a Headwaters board member for four years. "The money Headwaters had was accounted for," he explained. "The money that was taken was diverted before it ever got to Headwaters." The lawsuit alleges that Medford resident Richard "Rick" Lee Gwynallen, 44, siphoned the money into a bank account that he had opened secretly. All of the canceled checks were written on the account and signed by Gwynallen during an 18-month period ending in mid-April 2000, the lawsuit claims. The lawsuit further charges that Gwynallen, a grant writer for the group, took grant checks received at the Headwaters mailbox and deposited them into the hidden account. Bigamy alleged In an added twist, the lawsuit lists as co-defendants Gwynallen and two women to whom he allegedly was married simultaneously. His Medford wife, Maraji Gwynallen, with whom he shared a house in the Griffin Creek area, received and converted $5,205 of Headwaters funds, the lawsuit states. His second wife, Allysen Kauppiner, with whom he shared an apartment on East Main Street in Ashland, received and converted $42,442 of those funds, the lawsuit charges. Rick Gwynallen was arrested by Ashland police early in July on charges he embezzled the funds from the environmental group. He has since been indicted by a Jackson County grand jury on a single count of aggravated theft, a Class B felony. Maximum penalty is 10 years in prison and a $200,000 fine. However, sentencing guidelines and lack of prior convictions likely would reduce that penalty if he is found guilty, legal experts say. He pleaded not guilty to the charge Nov. 22. A pre-trial hearing has been set for Dec. 18. Neither wife faces criminal charges. They are listed as co-defendants in the civil lawsuit because they appeared to have benefited from a portion of the misappropriated funds, according to Headwaters. It is unknown whether either one was aware of the other. Bigamy charges have not been filed against Rick Gwynallen. Authorities in Clark County, Nev., where Gwynallen married his second wife while apparently still married to his first, have declined to take criminal action, according to Ashland police. Neither Gwynallen nor his wives could be reached for comment. Both households are vacant. His attorney, Jeni Fineberg, did not return telephone calls. Gwynallen told the Mail Tribune shortly after his arrest that he was innocent of any criminal intent. Feelings of betrayal Headwaters officials have been reluctant to talk about specifics in the case, although one board member quipped, "I can absolutely guarantee that Headwaters never, ever had a need for anything from Victoria�s Secret." Many staffers and volunteers said they felt betrayed when they learned of the allegations. Others said they fear the case will unfairly cast a shadow over the environmental work done by Headwaters over the past quarter century. Yet the incident may ultimately improve the environment at Headwaters, said Applegate resident Chant Thomas. He joined Headwaters as a volunteer in the 1970s and has been on its board since 1984. "It is a hideous chapter in the Headwaters story," he said. "But we will have better oversight because of it. We�ve already had a mandatory reassessment. We will come out of this with more of an activist edge. We will be focused in a more concentrated way." Beginning as a grass-roots organization focusing on the Deer Creek watershed in Selma during the mid-1970s, Headwaters broadened its mission over the years to serve as both a membership group and an umbrella organization for others. It began lobbying for its causes. "We started having a lot of irons in the fire," Thomas said. The budget mushroomed from a few wadded-up dollar bills thrown into a hat to more than $250,000 annually, thanks to its success in obtaining foundation grants. A dozen people worked for Headwaters two years ago. Gwynallen was hired by the Headwaters board as administrative coordinator in January 1990. The board appointed him its temporary executive director on Feb. 26, 1998, and as its executive director early in August of that year. His co-workers describe him as a bright person and an extremely talented grant writer. But foundation grants appeared to be drying up in the past two years. Last fall, Gwynallen announced a fund drive to shore up the group�s finances. Staffers say they chalked it up as part of a normal financial cycle of a nonprofit group. Another lean year, they figured. True believers "In the passion of the pursuit of the work, you don�t question your compatriots," said Richard Hart, staff ecologist for Headwaters until he resigned to become an independent consultant last fall. "You work for a group like Headwaters because you truly believe in what you are doing," added Tom Dimitre, Headwaters projects analyst who was laid off last spring. "Getting paid for the work was just a bonus. You aren�t in it for the money." But that wasn�t universally true. Someone was tapping the till. The civil lawsuit contends that Gwynallen opened the unauthorized account in the name of Headwaters at a local branch of Bank of America on Oct. 28, 1998. He was listed as sole signatory on the account, according to the form he filed with the bank on that date. No board member or other staff member authorized the document. Opening that unauthorized, secret account enabled him to skirt the routine steps the nonprofit group had taken to prevent financial mischief, such as requiring a second signature on transactions, according to Headwaters. In the scenario presented by the lawsuit, grant writer Gwynallen knew which applications had been sent out and which checks to expect. He then intercepted the checks at the mailbox before anyone else knew they had arrived, let alone been applied for, then diverted them to the hidden account, the lawsuit said. He would then tell the board the grant request had been rejected, board members said. Gwynallen also arranged it so that all bank statements from the unauthorized account went back to a box at the bank, board members said. As a result, the only account the Headwaters board knew of was its primary account at the Valley of the Rogue Bank, they added. Bank account frozen The Bank of America account remained unknown to the Headwaters board until June 2000, the lawsuit states. The account since has been placed on hold by the bank�s legal department in Portland. Of the funds cashed by Gwynallen in the hidden account, $11,104 were written to cash, $59,763 were written to him, $34,564 went to pay two personal credit cards, $26,168 went to such merchants as Victoria�s Secret and News & Smokes, and $6,224 went to jewelers, according to Headwaters. In a few cases, a counter check was written on the account. For instance, a house cleaner � the same one hired to clean the Headwaters headquarters � was paid $188 from the account to clean the Ashland apartment Gwynallen shared with his second wife, according to Headwaters. During that 18-month period, only $7,040 in checks could be identified as valid Headwaters business, board members allege. It came to a head in June when the board became aware of the hidden account. The group alleges he initially misappropriated $192,000 but put $33,000 back in the kitty. "We had many discussions about why the grants weren�t coming in," said Dimitre, who had worked for Headwaters for three years. "I didn�t have any reason to believe there was anything wrong. I believed we just weren�t getting the grants." In retrospect, Hart, who began working for Headwaters as a volunteer nine years ago, noted there had been a few subtle signs, such as Gwynallen receiving "froufrou" catalogs at the Headwaters office. "A few of us suspected that things weren�t correct," Hart said. "I would have to say the board was amiss for not minding the store." But he agreed with Thomas that the incident will serve as a valuable lesson. "Not only Headwaters, but many other nonprofits and other kindred NGOs (nongovernment organizations) can learn from this," he said. "We all have to keep on our toes." Reach reporter Paul Fattig at 776-4496 or e-mail him at [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2000 Mail Tribune, Inc.