GALVESTON

County Judge Mark Henry on Monday called for the county’s purchasing agent and auditor to resign for failing to protect the county from the loss of more than $500,000 to a computer scammer earlier this year.

Neither Henry nor the commissioners court has the power to remove County Auditor Randall Rice or Purchasing Agent Rufus Crowder directly. Henry would ask the groups that do have the power to remove the men to take action, he said.

“If a taxpayer doesn’t pay their taxes for any reason whatsoever, if they lose their job, if they come down with a critical illness, it does not matter, you must pay your taxes,” Henry said. “If not, the consequences are severe, up to and including the loss of your home.”

“I find it unacceptable that homeowners are held to a different standard than county employees, as a result of that I’m calling for the resignation of the county auditor and the county purchasing agent for their involvement in their refusal to take any responsibility for what has happened here,” Henry said.

Both Crowder and Rice on Monday afternoon said they had no intention of resigning from their positions.

Henry’s appeal comes eight months after the county sent $525,282 to a person posing as a county road contractor. The transaction was revealed after the company reached out to commissioners about the payment.

A subsequent investigation of the theft found that the scammer has inserted himself into communications between the county and the contractor, and had submitted a form in the contractor’s name to change the way the county would send its payments to the company — from a physical check to an electronic payment.

Two different reviews of the event, one completed by four county departments and one by an independent investigator hired by the commissioners court, said there was no one single person to blame for the theft.

No one from the departments involved in the transactions called the company directly before changing the banking information in the county’s payment systems, according to the reviews.

No arrests have been made over the theft and, as of Monday, no one in the county had been fired over the incident, officials said.

That the vulnerability existed at all should have some kind of consequence, Henry said.

“It shouldn’t have happened in the first place,” Henry said after the meeting. “Do you think a private business would allow you to lose a half-million dollars?”

The county has tried to recoup some of the lost money. Commissioners earlier this month directed the county’s legal department to explore making claims against the surety bonds held by county officials, including Rice and Crowder. On Monday, commissioners also approved the legal department to pursue a claim on crime fraud insurance held by the county.

It remains to be seen whether Henry’s words will result in any action.

Crowder, who has been the purchasing agent since 2010, said he was blindsided by Henry’s declaration.

“I would invite every member of the public to come to my office so they can hear the facts,” Crowder said. “He keeps saying that nobody wants to take the blame. I don’t understand where he wants to place blame, when there was nothing wrong that we intentionally did.”

The county is only one of many victims of similar scams, Rice said. He said Henry was misguided in seeking to punish people for the theft, rather than to focus on the ways the county has improved its financial protections since the scam was revealed.

“I’m not planning to resign, certainly not because of this,” Rice said. “We’re continuing to do our job.”

Neither man reports directly to the commissioners court. Crowder’s department is overseen by the county’s purchasing board, which is made up of Henry, another county commissioner and three county district court judges.

Rice is supervised by the county’s district court judges.

Two of the district court judges who sit on the purchasing board said they weren’t prepared to heed Henry’s request.

“He’s just like anybody else,” said 56th District Court Judge Lonnie Cox. “He’s like any taxpayer that can bring a complaint to elected officials and ask. He doesn’t have any authority on that.”

Cox also is the county’s administrative judge.

District Court Judge John Ellisor, the chairman of the county purchasing board, said Henry had not brought his proposals to the board officially, even when Crowder was up for reappointment in September. Henry was absent from the meeting, he said.

“Certainly Judge Henry could have been at that meeting, could have argued to have him not reappointed and did not,” Ellisor said. “That’s the only point I’m making.”

John Wayne Ferguson: 409-683-5226; john.ferguson@galvnews.com or on Twitter @johnwferguson.

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(29) comments

Rusty Schroeder

The blame should be placed in Rufus' department, it was one of his employees that changed the process. Rufus, there is a wide line between intentionally and too stupid to know better. The Purchasing Agent and County Auditor were scammed by a person from Nigeria or Dubai. I wonder if the person that changed the billing got a marriage proposal out of the deal? Guaranteed Lonnie Cox isn't doing anything to anyone over this, and I would like to know who the Commissioner is that is on the Purchasing Board. It amazes me that these departments refuse to accept any blame, Crowder's response to the county taxpayer could be summed up in two words. Yes, those two words :) , absolutely pitiful management of others money.

Ron Shelby

And not the Treasurer? The Treasurer is supposed to be the final "check" in the process. They made the transfer of funds. Otherwise, why do we even have a Treasurer?

Rusty Schroeder

Elected official Ron, only the voters can fire him. You know that, we both worked for the County. I dealt with Vernon and Bruce on a daily basis, Rufus was an assistant in the Parks Dept. then. This happened in his Dept., then went to the auditor.

Miceal O'Laochdha

Parks Dept. you say? Good grief, is that the background required to become a Senior Purchasing Agent, responsible to handle millions of $ of taxpayer money, in this County! Well no need to fire Rufus then, just send him back to the Parks Dept to pick up litter in the parks for the rest of his "career".

Don Schlessinger

Have to disagree, Mr. Henry is ex military and knows blame starts at the top. Usually in a case like this the commander also goes. So in my opinion there should be two people leaving. We know that it won't happen, but maybe he won't run for re- election.

Rusty Schroeder

The County Judge and Commissioners approved the work and the payment in Commissioners court. From there it goes down the line for the payment, which are the 3 departments mentioned. None are controlled by Commissioners Court, so by your scenario Lonnie Cox should resign and not seek re-election. He did run for County Judge, he didn't win if you remember. And your right on Lonnie or any of the Dept. Heads in question leaving, not happening.

Carol Dean

Don, you are SO correct in your statement in regards to Mark Henry. IMHO, Henry is simply on another one of his "Witch Hunts" looking for a "Scape Goat". We, yes We, paid for an investigation that did NOT turn up any evidence to support of a guilty individual.
Mark Henry is the presiding individual representing Galveston County and we all know that he will NOT accept responsibility for any action that would make him appear to be "less then the purity of the white driven snow.".

Donna Simmons

I wish Mr. Henry had been so concerned about tax payer's money when he spent over a million dollars trying to fire another county official.

Ron Shelby

Cox went after Henry. Not the other way around.

Rusty Schroeder

Looks like he needed to fire more than just Bonnie doesn't it. Lonnie Cox keeps coming up, he shares the blame again. Gotta see both sides evenly Donna if you are going to stand on one, otherwise that side comes crashing to the ground. aka Teeter Totter.

Carol Dean

Of course Mark Henry keeps trying to use Judge Cox as part of his "Scape Goat". There are too many "Ghosts in Mark's closet" that he wants all attention directed away from himself. BTW, It was Mar's choice to "hire outside the system" in regards to his expensive legal fees.

Miceal O'Laochdha

I saw this gentleman Rufus interviewed on TV news last night and I was so offended by his belligerent "up yours taxpayer, I ain't going nowhere" attitude as to become nearly apoplectic. As far as I am concerned this man was a party (whether by action, ignorance, or omission) to a conspiracy to defraud the taxpayers of $500k and, at minimum he is glaringly guilty of malfeasance and failure to exercise fiduciary responsibility. And he aggressively tells his bosses (the taxpayers) he sure ain't resigning? I cannot understand why is he even being given the option to resign! No one in the REAL world could ever get away with no accountability for something like this. Terminate him for cause this morning; and pursue potential criminal charges into the bargain. And sweep out anyone else that can be tied to this indefensible screw up right along with him.

Carol Dean

Your statements here would indicate that Mark Henry and Commissioners would be responsible for this incident. Isn't it THEIR "job" to insure that ALL of the governing departments run efficiently?

PD Hyatt

No shock that Cox will not do anything as its seems he against what is right and seems to love to uphold the wrong. Judge Cox in the real world which you know nothing about people actually lose their jobs for being duped. People should be fired, but we know that you all who work for the government do not follow rules like we do. You all have no standards yet you all demand that we have high standards. If you judge this way from the bench you do NOT distribute justice equally. How pathetic....

Carol Dean

Judge Cox has no responsibility for the actions of employees. Commissioners and Henry should maintain better contact with what is going on in EVERY department.

Rusty Schroeder

You are so wrong on every one of your comments. You apparently don't know how County Government works, and your hatred for anything Republican is not becoming. Learn the facts.

Gary Miller

All bureaucracies have rules to protect bureaucrats employed by taxpayers money.The surprise shouldn't be that no one will be guilty of loosing $500,000 of taxpayers money, it should be a surprise that only $500,000 was lost. The bureaucrats involved will blame and change the rules then claim all is OK now.

Chuck DiFalco

I don't agree with Mr. Henry very often, but I agree with him on this issue. It's not a matter of intent. It's a matter of negligence. I was until recently an elected official on a board overseeing millions of dollars in taxpayer money and payments. We often asked questions of our consultants, including the accountant, but we didn't physically perform the transactions or call the contractors. I would have made a motion and voted to fire our accountant for paying the wrong people $500k. Mr. Henry's scenario is unfortunately more complex.

Carol Dean

However, the Accountant works for Mark Henry and the Commissioners in the normal "Chain of Command". Mark knows that or at least I hope he remembers his military training.

John E Sr. Macrini

Mr. Rice has some very impressive qualifications. Unfortunately, all of this expertise did not work. Most notably his resume of qualifications and skills include:
Information Management and Technology Assurance
Business Intelligence
Cloud Computing
Fraud Prevention, Detection, & Response Computer Fraud
Cybersecurity
Information Management
IT & Integrated Audits
IT Risk Management and Internal Controls
Service Organizations Controls


Paul Randall Rice
Phone: (409)770-5301
Fax:
rricecpa@comcast.net

Biography

Organizations

County Auditor
Galveston County
Galveston, TX
Credentials Held

Certified Information Technology Professional (CITP) Credential, Chartered Global Management Accountant (CGMA) Designation
CPA Licenses Held
Texas Since 06/02/1976
Education

Areas of Expertise

Accounting and Financial Reporting
Accounting Compliance and Reporting (IFRS)
Accounting Compliance and Reporting (Private Companies)
Accounting Compliance and Reporting (US)
Financial Instruments
Integrated Reporting
Internal Control over Financial Reporting
SEC Regulatory Compliance and Reporting
Sustainability
XBRL
Assurance (audit and attest for non-public entities specifically)
Performing an Attest Engagement (planning, fieldwork, reporting, QC)
Performing an Audit (planning, fieldwork, reporting, QC)
Compilation and Review
Performing a Review (planning, performance, reporting, QC)
Employee Benefit Plans
401(k) Defined Contribution Plans
403(b) Defined Contribution Plans
Auditor Independence (DOL, AICPA, SEC)
Defined Benefit Plans
EBP Fraud
EBP Internal Controls (including Service Organization Control (SOC) 1 reports)
EBP Plan Investments and Fair Value
Employee Stock Ownership Plans (ESOPs)
ERISA Plan Financial Statement Audits (including Limited Scope Audits)
ERISA, DOL and IRS Regulations for EBPs (including Plan Design and IRS Qualification Rules and Test)
Form 11-k Plan (SEC) Filers
Form 5500 Reporting
Health and Welfare Plans
Multiemployer plans
Parties-in-Interest/Prohibited Transactions
Payroll Audits (Related to Multiemployer Plans)
Forensic and Valuation Services
Bankruptcy & Reorganization
Business Economic Damages
Electronic Data Analysis
Employee Stock Ownership Plans (ESOPs)
Engagement Planning & Preparation and Information Gathering & Preservation
Expert Witness Testimony
Fair Value for Financial Reporting
Family Law & Divorce
Financial Instruments
Financial Statement Misrepresentation
Fraud Prevention, Detection, & Response
Gift & Estate Income Tax, FLPs & LLPs
Individual Damages
Intellectual Property Valuation & Infringement
M&A Due Diligence & Stakeholder Dispute Resolution
Practice Management
Report Preparation
Valuation Methods, Approaches, and Analysis
Governmental
Accounting Compliance and Reporting under GASB
Auditor Involvement with Municipal Securities Filings
Circular A-133 Audit Considerations
Compliance Audits
Government Auditing Standards
Governmental Financial Statement Audit Considerations
HUD Audits (for-profits)
Internal Control over Compliance
Internal Control over Financial Reporting
Special-Purpose Framework Considerations
Information Management and Technology Assurance
Business Intelligence
Cloud Computing
Computer Fraud
Cybersecurity
Information Management
IT & Integrated Audits
IT Risk Management and Internal Controls
Service Organizations Controls

John E Sr. Macrini

Mr. Crowder equally has some very impressive qualifications in previously working for the Parks Department.
In an interview with KPRC TV Robert Arnold, Judge Mark Henry said someone created bogus email accounts to convince a county employee they were communicating with the company and vice versa. The thief then sent a change of payment form to the county treasurer's office to have the money sent electronically instead of by check. Henry said the contractor had always been paid by check. What happened is something known as a “man-in-the-middle attack.”

The payment process then moved through the purchasing and auditor's offices.

“That money is gone. They tracked (it), I think, to Dubai and Nigeria and, past that, they don't know,” said Henry.

County Purchasing Agent Rufus Crowder said he is not resigning.

“I think it’s ludicrous,” said Crowder.

Crowder said the county was hit by a sophisticated thief and no one in his office was lax. He said that, when the change of payment hit his office, it was believed it had already been verified by the treasurer’s office.

“Trying to fire somebody over something that wasn't intentional and nobody is directly to blame,” said Crowder.

The county did hire an outside company to investigate what happened. A report issued by Lubbock-based Dawson Forensic Group noted, “A department or individual cannot be held accountable for noncompliance with processes that may not have been properly designed or that did not exist.”

The company’s report also noted “a lack of understanding/training as to recognition of these types of attacks, a lack of vendor information establishment/change validation processes and a lack of understanding as to which office/department had the responsibility for validation of vendor information.”

The company’s report also said a purchasing department employee thought the treasurer’s office had validated the change request, while a treasurer’s office employee believed that was the responsibility of the purchasing office.

“This misunderstanding/lack of understanding contributed to the accomplishment of the attack,” the report says.

So no one was lax, but each department thought that the other had initiated the change request. They all work at the same place with telephones, computers, and a hierarchy of employees, but no one had the initiative or responsibility to check on a change of procedure of a half a million dollar payment. They must be short staffed and need to hire more qualified knowledgeable help.
On the surface, It would appear that this is an inside job with someone knowing the working ( or lack thereof ) of the system and information of the League City Contractor. ..............but in any case, no one is directly to blame.

Rusty Schroeder

In all due respect Mr. Macrini, someone is directly to blame, and lax doesn't even come close to how multiple people were in this transaction. You have to be a friend or hired by the two men you have just glowingly described. Rice was scared to come on camera and defend himself, and Rufus looked smug and arrogant in defending himself while being the head of the department that got duped by a Nigerian con man. You can write a book on your analysis, but the fact is that you are dead wrong. Someone changed the procedure and person to whom payment of over 1/2 Million Dollars went to. That fact is black and white, and that person has a chair and desk in Rufus Crowder's office.

John E Sr. Macrini

Rusty, you a a sharp cookie, but fail to recognize my last facetious comment which echoes Crowder. "“Trying to fire somebody over something that wasn't intentional and nobody is directly to blame,” said Crowder. If I am dead wrong , you are right there with me in your assessment. The "glowing details" are directly from Rice's online qualifications and serve to show that this was probably an inside job from someone in a department who knew the system......

John E Sr. Macrini

Rusty, you a a sharp cookie, but fail to recognize my last comment , which echoes Crowder., as sarcasm "“Trying to fire somebody over something that wasn't intentional and nobody is directly to blame,” said Crowder.
I am no friend to either man and am in total agreement with your assessment, with the exception of me being "dead wrong ".
The "glowing details' would lead most rational persons to question ....How could this happen with all of this expertise....which is exactly what you did.

Rusty Schroeder

Sorry about that, thought you were defending these actions. I just cannot understand how no one is to blame. The protection of the employee that started this snowball turned avalanche rolling is unbelievable. I am to think it is someone in a high position's friend or relative by the way it is being handled.

Jarvis Buckley

How many other county's in Texas has had this happen to them? It
would be interesting to know. If any.

Caleb Crocker

Just had a story break in dfw of Crowley isd for 2m. Same operation but not international.

George Croix

Imagine of every person in the hierarchy of management, not just the immediate supervisor, of every incompetent or crook were fired......

Nobody is very likely to get fired here, not just because of the inertia of public service, being routinely a place where politics beats productivity, but also because so many want blood based on their personal politics and not just the failures of the parties actually involved.

Nothing new about that.
The only thing that would be new is actually HOLDING anyone responsible, not just talking about it, and applying a penalty for it.

Karen Sawyer

Who are on the boards that make the decisions about letting them go? I have scanned the entire county web site and can't seem to find that information, is it a secret?

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