BL Special Report

BL Special Report: Business owner spends years recovering from embezzlement

After a slow, limited response from San Benito County, Bill Lee received $200,000 in restitution from a former employee. Now he’s suing a past customer to recoup another $743,000.

While local government officials have lauded San Benito County’s potential for economic development, with its proximity to Silicon Valley, Pinnacles National Park and its rural setting, a former business owner experienced a frustrating lack of county agency support over a period of several years. 

For five years, San Benito County resident William Lee pushed law enforcement and elected officials to launch an investigation into the embezzlement of funds at his former company, San Benito Shutter, Inc, a crime that ultimately cost him his business.

Though he sold his company, Lee is still fighting to recoup what he lost due to the embezzlement. 

So far his efforts have resulted in being awarded $250,000 in relief settlements from a civil and criminal case against the company’s former accountant Mary Miguelgorry in 2019. On Sept. 30, he received the last payment of $100,000, closing that part of the case. 

Miguelgorry pleaded no contest to embezzlement of $50,000 in San Benito County Superior Court in October 2019. She accepted a plea that included restitution, a misdemeanor conviction and 90 days in jail.  

After that, Lee focused on John Linnenman, a Florida resident whose company Shutter and Blind allegedly received $743,000 of product from Miguelgorry. Lee said that while Linnenman faces a civil suit in San Benito County, the attorneys are working to transfer it to Florida.

Lee said realistically it’s a waiting game, as Linnenman, 80, has been hard to contact, even for court officials. He said that since Linnenman never answers his door, a court processor tried pretending his car broke down in front of his house to get him to come out and serve him the court papers. 

It didn’t work. He is equipped with many surveillance cameras around his house, Lee said. 

Because Lee suspects Linnenman is as good at hiding his assets as he is at hiding himself, and because of protections under Florida law, he won’t be able to immediately collect any award if he wins the lawsuit. 

“For me, it looks like waiting for the guy to die to collect,” Lee said, adding that Florida courts would not take any assets from Linnenman while he is alive. However, Lee would have a priority claim to Linneman’s assets when he dies.

While Lee spent years pressing local law enforcement agencies to investigate, he told BenitoLink he was frustrated that a lack of county resources prevented him from recovering $743,000 worth of product in the embezzlement case. He said that case continues a long trend in which local authorities opt not to pursue white-collar crimes. 

Giving away the store 

According to Hollister Police Department records, the embezzlement was first reported in February 2015. In the months that followed, Lee and his wife Michele provided HPD with company financial records identifying $545,000 in altered payments. 

It wasn’t until January 2017 that police interviewed Miguelgorry at her residence, where she admitted to taking payroll and petty cash from the company. While she did not disclose the amount she stole, she returned $30,000 to the Lee family as restitution soon after she was confronted about the missing money. HPD followed up with Miguelgorry three days after the initial interview, but she declined to answer more questions. The case was forwarded to San Benito County District Attorney Candice Hooper in February 2017. 

Lee, who is now the executive director of Martha’s Kitchen, a nonprofit organization that provides food to those in need, said he discovered the embezzlement in February 2015 as he was preparing to sell San Benito Shutter. Though the company was profitable, Lee said it was growing too fast. 

Bill Lee with documents pertaining to the embezzlement case. Photo courtesy of Bill Lee.
Bill Lee with documents pertaining to the embezzlement case. Photo courtesy of Bill Lee.

“I was getting leveraged further and further in loans and I was really concerned that I was going to grow the business beyond the ability to borrow in its financial capability,” he said. 

Lee got over $10 million in loans as he was preparing to expand his company. Those plans came crashing down when he realized that although accounting reports showed big profits, the bank statements did not. To resolve his accumulated debt, he opted to sell the company.

In the process of preparing to sell San Benito Shutter, Lee had an accountant audit the company’s finances. The morning of the audit, Miguelgorry, who at the time was the controller of the accounting department, called in sick. Lee said that Miguelgorry confessed later that day that she had been stealing from them.

“We began to dig through our books,” Lee said. “Yes, we find that she stole in payroll, but worse, we find that this customer has gotten three-quarters of a million dollars for free.” 

The Lee family found records going back to 2011 when Miguelgorry allowed the Florida customer, Shutter and Blind Inc., to pay about a month after receiving its order. After a year, Lee said Miguelgorry started to bury the remaining balance owed by the Florida company through methods such as applying a payment to different invoices and creating false codes and transactions.

‘You betrayed me’

“We took the matter immediately to Hollister police and reported it,” Lee said, adding that he asked HPD to subpoena bank records because it was likely Miguelgorry got something in return. 

Lee said HPD did not act upon his claim.

“Two years went by and Hollister PD did not lift a finger on the case,” he said. “They didn’t drive to her house, knock on her door, try to interview her. They didn’t try to subpoena bank records. Absolutely nothing.”

After learning the FBI doesn’t look into cases involving less than $1 million, Lee said he spoke to former supervisor Jerry Muenzer and Hollister Mayor Ignacio Velazquez in an effort to push HPD or the San Benito County Sheriff’s Office to take action. 

“Muenzer’s comment to me was, ‘Well, it’s a good thing the business is doing well enough to absorb that kind of loss,’” Lee said. “Great. So that went nowhere. Ignacio completely ignored it.” 

Muenzer told BenitoLink that while he knew Lee, a supporter of his when he ran for supervisor, he did not recollect being approached for help or having a conversation with him about the embezzlement. 

“If he reached out to me and I was not responsive to it, I certainly want to apologize to him for that,” Muenzer said.

Velazquez said Lee approached him and asked him to contact the police department to document everything and to provide anything that would move the case to the district attorney’s office. He said when he received an email from Lee regarding the case, he forwarded it to then-police chief David Westrick, now the county’s public information officer.

“I can’t tell the police what to do,” Velazquez told BenitoLink. “That’s not how it works.”

Uncertain about what to do next, Lee attended a Hollister City Council meeting because housing and job creation were at the center of conversation. 

“I’m sitting here going, you had 100 jobs with my company here in town,” Lee said as he streamed the council meeting prior to attending. “Some of them were six-figure jobs. They’re good paying jobs for this community, and you betrayed me.”

Losing the company

At a September 2017 council meeting, Lee took the podium during public comment and said that though he had spoken to Westrick and then-city manager Bill Avera, there was no investigation in the two-plus years since he reported the losses.

“We’ve had to bite and scream to get what little action has happened on this case,” Lee told the council. “If you want jobs here, you can’t chase away the ones you have.”

Bill Lee in front of the San Benito County Superior Court. Photo by Noe Magaña.
Bill Lee in front of the San Benito County Superior Court. Photo by Noe Magaña.

A day after the meeting, William said then-councilman Jim Gillio reached out offering to help. Gillio and Avera then pressed Westrick to take action. 

“Lo and behold, Hollister PD sent somebody to go knock on her door and she gave a partial admission to Hollister PD at that front door interview,” Lee said.

Gillio declined to comment on the case. Westrick was contacted for a comment prior to his retirement from the department but did not respond. 

Lee said HPD forwarded the case to the district attorney’s office, but didn’t try to obtain any bank records. Deputy District Attorney Ellen Campos sent it back requesting HPD finish the investigation, which included obtaining bank records. Campos did not respond to BenitoLink’s request for comment.

“Hollister PD never lifted another finger on it,” Lee said. 

Campos, on the other hand, took on the case in 2017 with Miguelgorry’s initial admission and the company records Lee provided. When requesting documents from Miguelgorry’s bank account, Campos hit a major roadblock, as the bank didn’t provide all the records she had sought, Lee said.

Unable to obtain more documents, Campos was set to accept a plea in the case at a July 2019 hearing for reimbursement of $30,000 and a misdemeanor count of embezzlement. San Benito Superior Court Judge Steven Sanders, however, gave the district attorney more time to gather bank records after Lee explained that he discovered Miguelgorry had stolen $30,000 from the payroll account and believed she had taken more, along with giving away $750,000 in product. Lee said he had the bank statement, yet he needed check images from Miguelgorry’s bank account dating back to 2011 to prove whether the Florida company paid her on the side.  

Lee’s theory was that Miguelgorry received a kickback from Linneman in exchange for paying 30 days after receiving the shipment and “once he knew her hands were dirty, at a certain point, he just started not paying his bills and left her to bury it.” 

The embezzlement cost Lee his company, which he sold to an outside investment team. He said San Benito Shutter laid off about 65 employees in 2019 and closed its manufacturing plant and distribution facility. The company has since relocated to Industrial Drive, according to its website. 

“That didn’t have to come to pass,” Lee said. “I could’ve continued to own the business, in retrospect, but I didn’t know at the time I was putting it up for sale what was going on. I was working with the information that was available to me.”

Limited resources

With little action from Hollister police and what little power the district attorney’s office could bring to the case, Lee said it wasn’t the fault of those agencies. Rather, he said it was a lack of resources that kept them from investigating embezzlement cases.

“When you have a paper case, it’s more work,” Lee said. “Most communities have someone that specializes in economic crimes. We don’t have someone here that knows how to handle economic crimes. That’s a serious issue.”

Crimes such as fraud and embezzlement that go unpunished have a big impact on San Benito County, Lee said, beyond the loss of local businesses and jobs.

“Word gets out,” he said. “People hear and learn of bits and pieces when we have dysfunction in our small community. It makes people reluctant to come to the small community and invest here.” 

Financial crime is not new to San Benito County. In 2017, after more than five years of fighting for missing trust fund monies, the Community Foundation for San Benito County was awarded $1.74 million from Hollister financial advisor Mitchell J. Dabo

Lee said other unprosecuted embezzlement cases continue a pattern in the county. 

“I will start another business eventually,” Lee said. “I have been here for 30 years but I’m seriously questioning whether I’m going to do it here or not.”

He added that San Benito County is an attractive community for businesses because it’s a short distance to Monterey County, Silicon Valley and Santa Cruz.

“We’re in a very privileged area,” Lee said.

Lee mentioned that he suffered another economic crime when he owned San Benito Shutter, this time occurring in Riverside. He said one of three full-time detectives responsible for only economic crimes worked the case.

“To some extent, I don’t want to sit here and bash our leaders because part of it, it’s not their fault,” Lee said. “They’re not given enough by the state.”

The district attorney’s staff is also stretched thin, Lee said. The San Benito County Board of Supervisors adopted a $1.7 million salary and benefits budget for the district attorney’s office for the 2020-21 fiscal year. It includes two full-time positions for the investigator position along with an assistant district attorney and four deputy attorneys for a community of approximately 61,000 residents.

“I could be frustrated that Ignacio [Velazquez] didn’t pick up the ball and push the police chief,” Lee said. “And I think that’s a fair frustration to have, but when it comes to the monetary [aspect], they’re working with the money they have.”

According to the county’s recommended and adopted budget for the 2018-19 fiscal year, the Board of Supervisors approved Hooper’s request for an additional welfare fraud investigator transfer to district attorney from the Health and Human Services Agency, but nothing for crimes against local businesses. The district attorney’s office was reviewed by the San Benito County Civil Grand Jury in 2014-15. Composed of resident volunteers, the civil grand jury is a state-required and official body of the court with independent authority charged with investigating local government and its departments. 

Though the civil grand jury reviewed the district attorney’s office structure and budgets and conducted staff interviews, its report does not mention a lack of staff due to budget challenges.

 

BenitoLink is a nonprofit news website that reports on San Benito County. Our team is working around the clock during this time when accurate information is essential. It is expensive to produce local news and community support is what keeps the news flowing. Please consider supporting BenitoLink, San Benito County’s news.

Noe Magaña

Noe Magaña is a BenitoLink reporter. He also experiments with videography and photography. A San Benito High School alumnus with a bachelor's in journalism from San Jose State and a Liberal Arts Associate's Degree from Gavilan College. Noe also attended San Jose City College and was the managing editor for the City College Times, the school's newspaper. He also was a reporter and later a copy editor for San Jose State's Spartan Daily.