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Where's the Donaghey money? Six years after property manager took $566,000, less than $5,000 has been recovered.

WHERE'S THE DONAGHEY MONEY?

Six Years After Property Manager Took $566,000, Less Than $5,000 Has Been Recovered

On August 18 of this year, Judith Grisham Lanehart, 43, a thin woman with long gray hair, was arrested by the Little Rock police for embezzling $33,000 from the Haskins Law Firm.

Although Lanehart didn't normally write checks for the firm, she had earned the trust of office manager Vernice Hatchett and occasionally helped pay bills. That's how Lanehart got her chance last summer to write a $30,329 check on the firm's Worthen trust account to purchase a doublewide mobile home.

"I was absolutely furious," says Hatchett when she discovered the missing check. "I'll never trust anybody again in my life."

Haskins promptly pressed criminal charges, and Lanehart admitted guilt.

"She confessed totally to it," says Little Rock police detective Wilbur Page.

Under Arkansas law, Lanehart's theft is punishable by five to 20 years in prison and up to a $1 million fine. The routine announcement of Lanehart's arrest garnered a tiny three-inch news clip in one of the daily newspaper's police report.

It shouldn't have.

Lanehart's real claim to fame came in 1985 when a Chancery Court decided in a civil suit that Lanehart had withdrawn without authorization $566,912 (including interest) from the 61-year-old George W. Donaghey Foundation.

Those improper withdrawals covered a seven-year period that ended on July 6, 1984, the day Lanehart was fired as foundation property manager. To date, less than $5,000 has been recovered, and no criminal charges were ever filed.

The details of Lanehart's Donaghey involvement -- why it went on so long without being detected, why no criminal charges were ever filed, why the stolen money has never been recovered, why an insurance claim wasn't processed, why the foundation isn't filing non-profit tax forms with the Attorney General's office -- and a host of other questions are still left unanswered today.

The foundation's board of trustee's appears unwilling to address them.

But that isn't all.

An Office Partner And Second Lawsuit

Jennifer Mays, a close personal friend of Lanehart and the wife of prominent black attorney Richard Mays (the youngest attorney and second black to ever receive a state Supreme Court appointment), was also sued by the Donaghey Foundation. The foundation successfully sued Mays for failure to pay what the court agreed was $126,699 in uncollected rent.

The court record shows that Mays and Lanehart shared an office, worked on contracts and projects together and bought a company between them.

Mays disputes she had anything to do with, or was aware of, Lanehart's withdrawals.

"I don't know anything about what she did," Mays said last week. "Mine (case) was just payment for rent."

And her husband Richard Mays says the same.

"It may look like they worked together. But I don't think you can identify any money," Mays says. "I think my wife was naive."

But complicating the picture is Lanehart's earlier relationship with Richard Mays' brother, George Mays.

Lanehart worked for George Mays in the 1970s as a property manager. In 1974, George Mays was convicted and sent to prison for feloniously abusing travel expense monies while president of an Office of Economic Opportunity small-business program. As a government witness, he later admitted participating in a kickback scheme to defraud the federal government.

"She is a very competent lady," George Mays says today about Lanehart. "I haven't seen Judy since the 1970s."

However, a subsequent employer who hired Lanehart as a temporary after she had left the Donaghey Foundation describes her as an exceedingly well-dressed pathological liar with a great capacity to elicit empathy from others.

The Unanswered Questions

Unlike her August police photo, in the 1970s and early 1980s Lanehart's acquaintances describe her as an attractive red-haired woman who drove a Cadillac and wore expensive designer dresses with flashy jewelry to match. Asked by other downtown property managers whose incomes averaged $17,000 how she could afford to live so high, Lanehart would obliquely refer to a "sugar daddy."

What no one realized was her benefactor was ex-Gov. Donaghey and the prestigious foundation he left behind to further education in Little Rock by funding the University of Arkansas at Little Rock.

The story begins in 1976 when the foundation decided to remodel its five-story Waldon Building located on the northeast corner of 7th and Main Street.

The upper-four stories were thinly leased, and a proposed contract with State Building Services to take all 37,000 SF was the fix the foundation needed. To lure its new long-term tenant, a $1.3 million revamping was launched. In 1976, Lanehart was appointed property manager of the foundation's properties which included the Waldon Building, the 14-story Donaghey Building and a couple of parking lots.

Lanehart soon set up a shell contracting company called Twin City Design. In the Donaghey Foundation's lawsuit, the court found Lanehart was billing work through Twin City Design that was never done and instead transferring the money for her personal use.

In the second foundation lawsuit filed in 1985 against Jennifer Mays, the court found Lanehart and Mays each assumed part of a defunct business called Twin City Carpet and Design Inc. around August 1978. At that time, they shared an office together, were characterized as close friends and split routine expenses.

Mays simultaneously operated a business called Interiors Unlimited. The foundation established that Mays had signed a lease clause that obligated her to pay the foundation 6 percent of the firm's gross revenues from 1977-1986. The court agreed the total came to $126,699, including interest.

In Mays unsuccessful defense, she tried to prove she had inadvertently signed a lease under the name Twin City Carpet and Design Inc. that she had always operated solely as Interiors Unlimited, and the percentage income clause referred only to retailers (which she claimed her firm wasn't).

Although the foundation never accused Mays directly of improperly taking money, the chancellor ruled Mays and Lanehart were working closely together and their actions harmed the Donaghey Foundation.

But Richard Mays says the foundation had given so much control to Lanehart that when they came back in, they just looked anywhere to lay the blame.

"They thought my wife had some money," says Mays. "Everybody looked like a criminal when they first got into this thing."

That view changed after they got into the lawsuit, he says. Regardless, the foundation continued to press its case to collect the unpaid rent.

Mays, too, wonders why no criminal charges were ever pressed against Lanehart.

"I have no appreciation for that at all," he says.

One-Seventh Of The Total Donation

To grasp the magnitude of Lanehart's theft and the shock it must have caused the seven-member trustee board, one must realize the improperly taken funds amounted to nearly a seventh of the $3.5 million the foundation had donated to its sole beneficiary UALR by September 1984. Currently, revenue from the foundation properties are generating approximately $200,000 annually to UALR.

The 1984 board members were: banker George Worthen, attorney Philip S. Anderson, ex-Savers CEO W.P. Gulley Jr., Dr. Alfred Kahn Jr., ex-owner of M.M. Cohn's Dan Philips, Bart Roach Jr., and the late Dave Grundfest Jr.

Current foundation president Worthen was packing boxes in his office at One National Bank recently when questioned about the foundation. Worthen became agitated when asked to address rumors that have rushed in to fill the gaps the foundation has left by its hushed silence. Among them: Lanehart's involvement with the board and her relationship with Jennifer Mays.

"This whole matter seems to me to be a private matter," Worthen said. "I don't accept the whole premise of the rumors."

Obviously angered by the questions, Worthen said, "At this point in time, I'm not going to show you a thing."

Later, asked how a half a million dollars could vanish, Worthen said, "We were not able to ascertain where it went. That's always been one of the mysteries."

But without pressing criminal charges it's often impossible to get the leverage needed to force a confession, says a local insurance executive who sells employee-theft insurance. Worthen wouldn't explain why criminal charges have never been filed.

Pressing Charges To Find The Money

With the exception of banks, which always seek criminal prosecution, probably just one in 50 embezzlements is civilly prosecuted, says the insurance executive. Even fewer -- maybe just one in a 100 -- ends up in criminal court. Usually it's either not worth the trouble for the amount of money involved or corporations don't want the bad publicity.

"I've been in this business 11 years, and I've just seen three prosecuted," the insurance executive says.

But compared to those three criminal cases, the amount taken from the Donaghey Foundation makes it "too much money" to pass up, he added.

The board of trustees has a fiduciary responsibility to its sole beneficiary, UALR, to pursue every legal means to recover the money. Has it?

William P. Gulley, foundation president when the unauthorized withdrawals were uncovered, declined to return numerous phone calls for comment last week. Foundation attorneys -- Robert and Steve Shults -- and its accountant also were tight-lipped.

Little Rock police detective Page, who heard about the Donaghey affair, went to ask the board about the details and also got the cold shoulder.

"I couldn't get anybody to talk about it," says Page. "I was told they didn't want the bad publicity."

Lanehart herself also didn't want to talk last week. She was called numerous times and she promised to set a time to meet and discuss the case, but never followed through.

"Many Years Ago...."

In the main entrance way to the Waldon Building where the guard sits behind his desk checking each passerby, there is a striking mural on the wall, an unexpected vision from an earlier, less cynical time.

Painted in a primitive social-realism style, the mural's vignettes show Gov. Donaghey surrounded by financiers wheeling and dealing, a contractor planning, a carpenter building and a dreamy-eyed farm boy. It is a portrait of an ideal state in the making.

An inscription in the light-brown marble wall to the right describes Donaghey's vision. It begins:

"Many years ago, an Arkansas farm boy had a dream...the boy in a long, honorable life amassed wealth and became governor of his state. The dream came true (when he) created the George W. Donaghey Foundation on July 1, 1929."

PHOTO : WHERE THE TROUBLE STARTED: When the Donaghey Foundation decided in 1976 to spend $1.3 million to remodel its five-story Waldon Building, property manager Judith Grisham Lanehart set up a shell corporation to transfer unauthorized funds for her personal use. Eventually, $566,000 (including interest) vanished. No criminal charges were ever filed.

PHOTO : WHAT DOES W.P. GULLEY KNOW?: Bill Gulley was president of the Donaghey Foundation board of trustees in 1984 when the unauthorized transfers were first discovered in an annual audit.

PHOTO : HOW DID SHE AVOID PROSECUTION?: This August, Judith Grisham Lanehart admitted to Little Rock police that she embezzled $33,000 from the Haskins Law Firm. Six years ago a court judgment found she had improperly transferred $566,000 from the Donaghey Foundation into accounts she controlled, yet no criminal charges were ever filed. Why?
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Title Annotation:Judith Grisham Lanehart; George W. Donaghey Foundation
Author:Walker, Wythe, Jr.
Publication:Arkansas Business
Date:Dec 10, 1990
Words:1874
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