Suspected embezzlement has emerged as the primary police theory underlying a continuing investigation into the Palo Alto Children's Theatre — with the court-ordered unsealing of search-warrant affidavits Wednesday afternoon.
Police suspect Children's Theatre Director Pat Briggs, the late Assistant Director Michael Litfin and Costume Supervisor Alison Williams of embezzlement, according to affidavits obtained by the Weekly.
The three staff persons were abruptly suspended Jan. 24, along with Program Assistant Richard Curtis, who was not included in the embezzlement suspicions voiced in the affidavits.
The suspicions stem from the theater staff's unusual and informal accounting practices and the absence of receipts or records for more than $43,000 of traveler's checks purchased using city money, a series of affidavits filed by Agent Jason Jenkins state.
Sgt. Michael Yore, the lead investigator in the continuing Children's Theatre probe, also suspects the staff of conducting "unlawful costume sales" from 2001 to 2007, Jenkins wrote.
Police Chief Lynne Johnson has said officers were suspicious because of the traveler's checks and conflicting statements made by theater staff members.
The affidavits stemmed from a months-long investigation of "financial crimes" at the city-owned theater, triggered by a June 18, 2007, burglary that has become a separate, secondary investigation. Some search warrants were for the bank accounts of Briggs, Litfin, Williams and the Friends of the Palo Alto Children's Theatre, a non-profit organization created to support the theater.
On Jan. 24, Judge Douglas Southard of the Santa Clara County Superior Court signed search warrants for the homes of Briggs, Litfin and Williams as well as the storage units of the Friends of the Children's Theatre, Briggs and Litfin. Late that day, a Thursday, Palo Alto police abruptly closed the theater and the three employees and Program Assistant Richard Curtis were placed on administrative leave. The theater's many supporters have been openly critical of the police investigation.
Litfin, who had been undergoing treatment for cancer, died Feb. 1 at Stanford Hospital.
The search warrants and supporting statements were originally sealed by Southard to protect the investigation, but were unsealed Wednesday.
An initial review of the hundreds of pages of documents related to those and other search warrants reveals that:
• The City of Palo Alto often regularly provided cash advances to theater employees related to travel with theater participants to a theater festival in Atlanta and to Southern California or Oregon to watch plays. Briggs, Litfin and Williams would deposit the city money in their personal accounts and use that money to purchase sometimes thousands of dollars of traveler's checks. Briggs told officers that staff would then pay for trip expenses using personal credit cards, later reimbursing themselves with the traveler's checks.
"They identified these traveler's cheques as their own and that they were repayment for personal monies spent on the Children's Theatre trips of leftover monies after repayment," Jenkins wrote.
"This is not only theft, but is also a direct violation of City of Palo Alto policy and not approved by their supervisors or the City of Palo Alto Accounts Payable Department," he stated.
Briggs said all trips are paid for by the non-profit Friends of the Palo Alto Children's Theatre and by parents.
The affidavits do not address whether the theater staff actually returned money to the city, however.
• Briggs told Officer Michael Kan on July 8, 2007, that "long ago" she had called city officials to ask what to do with traveler's checks left over after trips. "The (theater) staff was told that the city didn't want the checks back and gave permission to reimburse themselves for trip-related expenses. However, the city also did not want the surplus returned because then they would have to cut numerous checks to return money to each of the kids," a police report states.
According to one search-warrant affidavit, "Detective Sergeant Yore later interviewed multiple employees in the Accounts Payable, as well as Briggs' current and former supervisors and questioned each person about this claim. Detective Sergeant Yore told me (Jenkins) that everyone he interviewed denied giving Briggs that instruction and advised him that they could not imagine that instruction being given out."
• Briggs told officers that "it was common practice" for her, Litfin, Williams and Curtis to use personal credit cards for official city purchases and then reimburse themselves using traveler's checks. Their system continued even after the city provided business credit cards to use for official purchases.
• Briggs and Litfin used traveler's checks purchased with money from the city to buy gifts at Bazaar del Mundo in San Diego. In 2001, Litfin used $420 of checks; in 2002, Litfin used $500 worth of checks; and in 2003, Briggs used $450 worth of checks. "During Sergeant Yore's interview with Briggs, Briggs agreed that she likes to buy gifts for people and states that she no longer has the gifts she purchased at Bazaar del Mundo," Jenkins wrote in an affidavit.
• Briggs did not report that traveler's checks were missing after the June burglary until she was contacted by San Carlos police, who had found some of the $3,600 in traveler's checks believed to have been stolen in a June 18 early morning burglary.
• The theater occasionally staged additional performances and gave the proceeds directly to the Friends, according to Senior Financial Analyst Nancy Nagel and former city employee Kathy Brouchoud.
"Nagel did not remember the exact number of extra performances but thought it was on the order of two extra performances for every five regularly scheduled performances. Nagel believed that each performance raised approximately $2,500.
"Brouchoud stated if they, meaning Briggs and Litfin, needed extra money for anything they would add performances and give the money to the Friends," Jenkins wrote.
• Jenkins reported that police discovered a check for more than $500 from the Friends of the Palo Alto Children's Theatre to Briggs for garden-party supplies. Money for supplies should not go to Briggs' personal account, he wrote.
• "Briggs and Litfin cannot account for the total amount or whereabouts of the traveler's cheques purchased by them since 2001," Jenkins wrote.
• After purchasing traveler's checks, Briggs and Litfin kept $957.20 in their own accounts, Jenkins wrote.
• Another $937.46 remains unaccounted for from the 2005 trip to Atlanta, Jenkins wrote.
• Although some trips were "all-inclusive," including food, Briggs still applied for a cash advance from the city for expenses such as food, Jenkins wrote.
• The city spends about $12,000 each year for costume supplies, yet when the costumes are sold in an annual sale at the theater, the money goes to the non-profit Friends group.
"Sergeant Yore told me that Briggs and Williams violated (the city's surplus-property policy) by donating costumes they are no longer using to the Friends … without the prescribed city approval or review," Jenkins wrote. The costume sale raises between $3,000 and $6,000 a year, Briggs told Yore.
Police searched Briggs' four storage units, Litfin's two storage units and a unit belonging to the Friends at American Self Storage on East Bayshore Road. They confiscated, among other items, 78 boxes of costumes, according to the warrant receipts.
During a July interview with Official Michael Kan, Litfin said "although this system seems 'screwy,' it allows staff to keep everything above board."
Briggs, Williams and Curtis remain on paid administrative leave pending the resolution of a separate administrative investigation. They have not been formally charged with any crimes, and Police Chief Lynne Johnson told the Weekly Tuesday that there still is no definitive date for completion of the investigation due to its tangled complexity.