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Former Little Rock district administrator pleads guilty, used school credit cards for $230,000 in personal shopping

by Bill Bowden | February 10, 2022 at 7:12 a.m.
The Richard Sheppard Arnold Federal Courthouse in Little Rock is shown in this Jan. 16, 2021, file photo. (Arkansas Democrat-Gazette/Dale Ellis)

A former Little Rock School District administrator pleaded guilty to mail fraud on Wednesday for spending over $230,000 of school district funds on personal online shopping.

Karen James, 48, of Little Rock was director of early childhood education and elementary literacy for the school district from 2010 until January 2019, when she resigned from her $108,827-a-year job.

James entered her guilty plea before U.S. District Judge Kristine Baker, according to a news release from the U.S. attorney's office for the Eastern District of Arkansas.

James will be sentenced at a later date.

"The investigation has revealed $230,635.86 of fraudulent purchases," according to the release. "James' plea agreement requires her to pay that amount in restitution back to the Little Rock School District."

The single count of mail fraud to which James pleaded guilty concerned using a school district credit card to buy designer eyeglasses and having them shipped through the U.S. Postal Service to Little Rock on March 13, 2018, according to a charging document filed Wednesday in federal court.

But the court filings revealed many other unauthorized purchases from August 2014 until August 2018:

• $4,068 at Wayfair on bath rugs, a recliner and other home goods.

• 83 unauthorized purchases through PayPal totaling more than $27,000 for a variety of items, including women's clothing, home goods, knitting and needlepoint materials, and video subscriptions.

• 2,462 items on Amazon, spending over $199,200 on items such as clothing, makeup, housewares, knitting materials, pet products and gift cards.

James managed procurement for the school district's early childhood education programs, according to the charging document. As part of her job, James was issued two credit cards to make purchases for the early childhood programs throughout the district. The credit card accounts were administered by US Bank and funded by two separate grants -- a state grant and a federal grant.

Each credit card had a $1,000 transaction limit and a $5,000 monthly credit limit, according to a charging document.

When the credit cards were issued to James, she was required to read and sign the "LRSD Employee Agreement Form For the Usage of Visa Pro-card," according to the court document.

"The first enumerated paragraph of the agreement states 'I understand the card is for LRSD approved purchases only and I agree not to charge personal purchases,'" according to the charging information.

James was issued a handbook that explicitly stated "[t]he card is NOT for personal use," adding that "personal, cash or cash type purchases" is a violation of the card's use agreement and "could result in termination of employment and/or criminal prosecution permitted by law," according to the charging document.

The handbook prohibited the purchase of gift cards and any items for which the school district has a contract, such as computers, printers and classroom calculators.

"James was required to read and sign several agreements that stated the cards could not be used for personal purchases or for the purchase of gift cards," according to the news release. "LRSD also prohibited shipping items purchased with an LRSD credit card to one's home residence. The district required James to document each credit card purchase by logging each transaction and providing a receipt or other confirmation of the purchase."

In August 2018, the school district discovered that James was submitting fabricated receipts and false transaction logs, according to the release. The receipts and logs were altered to reflect authorized purchases, but the Little Rock district obtained the original receipts from vendors, which showed her actual purchases were for personal use. Many purchases were shipped to her home residence in violation of district policy.

According to the plea agreement, James waived indictment and pleaded guilty to the information charging her.

"The penalty for the charge set forth in Count 1 is not more than 20 years' imprisonment, a fine of not more than $250,000, not more than 3 years' supervised release, and a $100 special assessment," according to the plea agreement, which was filed in federal court Wednesday afternoon.

An addendum to the plea agreement was filed under seal.

James remains free pending sentencing.

Pamela Smith, a spokeswoman for the Little Rock school system, said the district changed its ordering process with Amazon after learning of James' unauthorized purchases.

"No material changes were required to our policies or internal controls, as our own internal monitoring is what resulted in the discovery of the inappropriate use of the credit card," Smith said in an email. "We did change the ordering process with Amazon. All district accounts must use a LRSD email address and shipping is only to a LRSD school or department."

The U.S. Secret Service conducted the investigation, according to the news release. Assistant U.S. Attorney Amanda Jegley is prosecuting the case.

James' attorney, Erin Cassinelli, couldn't be reached for comment Wednesday afternoon.


Print Headline: Ex-Little Rock schools administrator: Committed fraud

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