Inside Job

Inside Job

By Francis X. Gilpin

Associate Editor

A middle-aged professional walked into a Lutz supermarket three years ago and headed back out to the parking lot with $84 worth of merchandise.

Shopping is supposed to be a pleasure at Publix. But the grocery chain does expect customers to pay for what they put in their shopping carts. Patrick H. Stewart had not, authorities say.

One of the items on Stewart's shopping list, a book called "The Millionaire's Mind" by best-selling author Thomas J. Stanley, perhaps foreshadowed a more ambitious attempt at larceny a year later.

From July 2003 until last February, Stewart misappropriated nearly $1.8 million from his employer, according to a sworn statement by a U.S. Secret Service agent.

St. Petersburg electronics manufacturer Jabil Circuit Inc., where Stewart worked as a $60,000-a-year corporate controller for a subsidiary, only uncovered the alleged theft when a tipster called a company hotline and reported suspicious behavior.

The $1.76 million that Stewart is accused of stealing might hardly be missed at Jabil, which reported a profit of $232 million for the fiscal year that ended Aug. 31.

Nevertheless, the alleged theft raises questions about Jabil's internal controls. It's not an opportune time for that. Jabil's outside auditor is in the process of deciding for the first time whether internal controls at the publicly traded company are adequate under the federal Sarbanes-Oxley Act of 2002.

Beth A. Walters, a Jabil vice president for communications and investor relations, didn't return telephone calls from the Review.

A controller, with a shoplifting charge on his criminal record, allegedly stealing hundreds of thousands of dollars without detection for more than 18 months suggests that a ringing endorsement of Jabil's internal controls might not be forthcoming from the auditor this year.

First offender

How did Patrick Henry Stewart do it?

Christina Bentham-Fuller, a Secret Service agent assigned to the agency's Tampa office, spells it out in her affidavit.

Stewart, now 41, was born in St. Petersburg and came to work for one of his hometown's most successful business enterprises in 2001. Jabil hired him to be assistant corporate controller with its global services unit.

In August 2002, Stewart was detained at the Publix after he walked out of the store without paying for a variety of goods, according to court records. Besides "The Millionaire's Mind," Stewart's shopping cart held bottled water, diapers, a dog bone, greeting cards and kitty litter.

A Hillsborough County sheriff's deputy was summoned by store security and Stewart was issued a summons to appear in court to face a misdemeanor count of petty theft.

Stewart was allowed to enter a diversion program for first offenders. Court records show he successfully completed the program earlier this year. Hillsborough state prosecutors dropped the shoplifting charge in April.

His attorney has petitioned to have the shoplifting charge expunged, state records show.

Stewart didn't respond to Review telephone messages left at his New Tampa home.

During the summer of 2003, Stewart was promoted to corporate controller for Jabil Global Services. That put him in charge of paying the subsidiary's vendors.

Bentham-Fuller states in her affidavit that Stewart logged onto a company computer in St. Petersburg when he needed a check cut.

His request would be processed in Georgia and Stewart got back a digital image of the check, which he could alter and print out on Jabil-supplied paper.

Once Stewart was found out last winter, Jabil management went back and discovered that he had requested some of those checks go to atypical vendors such as Barney's Motorcycle and Marine, L.L Bean Inc., and the Tampa Bay Performing Arts Center.

During the ongoing Secret Service investigation, Stewart has admitted to creating 120 checks for personal use, some in amounts approaching $50,000. But Stewart claims another 59 checks payable to him were for reimbursement of business expenses, according to Bentham-Fuller's affidavit.

The total value of the unauthorized checks was $1,755,786.11.

'System worked'

John A. Magliano Jr., a forensic accountant in Tampa, says Jabil Global Services clearly lacked an adequate system of checks and balances. "You should never have a person with that kind of authority," he told the Review.

Magliano is often called upon to track how stolen money leaves a corporate treasury. He says he has never worked for Jabil.

"By giving him blanks, they set themselves up," Magliano says of Jabil's check-issuance procedure. "The system of internal control had to rely on his honesty and integrity."

The Secret Service's Bentham-Fuller says Stewart has returned $910,193 in cash to Jabil. Stewart also has turned over gold and silver coins, a kilo bar of gold, a gold-plated National Rifle Association tribute Colt .45-caliber pistol, and numerous tickets to events at the Tampa performing arts center and the St. Pete Times Forum.

David F. Walker, director of the accountancy program at the University of South Florida St. Petersburg, doubts the alleged misappropriation at Jabil is significant enough to merit a mention in the company's regulatory filings.

"Two million dollars in an individual theft is a lot of money, in anybody's mind," says Walker, who used to be an outside auditor for public companies.

Generally, however, an incident deemed reportable to investors must have a financial impact equal to at least 5% of a company's bottom line, according to Walker.

As for Sarbanes-Oxley implications, Walker says Jabil can argue that the hotline tip validates the company's internal system for identifying wrongdoers.

"The company could ask: 'Should we have gotten him before he got away with his first 100 grand?'" says Walker. "You can debate that."

"You might say the system worked here," says Magliano. "But it didn't work fast enough."

Stewart hasn't been charged with a crime.

But federal prosecutors are going after his house in the gated Hunter's Green subdivision in Tampa. The 2,822-square foot house, with four bedrooms and two bathrooms, is the subject of civil forfeiture proceedings.

Steve Cole, a spokesman for U.S. Attorney Paul I. Perez in Tampa, declined comment.