Bank employee pleads guilty to embezzling
Cheryl G. Serfoss admitted Tuesday that she embezzled about $759,000 when she worked at First Interstate Bank in Kalispell.
She will be sentenced on April 29; she faces up to 30 years in prison, a fine of up to $1 million, and up to five years of supervised release.
Serfoss, 42, of Kalispell, was the vault teller at the bank's drive-up facility, where she stole deposit money from 1994 until 2001. She also falsified records to cover up for the thefts until she was fired in 2002.
The case is a significant one, according to U.S. Attorney Bill Mercer.
"Of the bank-fraud cases we've had in recent years, this is certainly the largest loss associated with an insider," he said.
Serfoss admitted in U.S. District Court in Missoula that her thefts eventually caught up to her when the system she used to cover up the embezzlement began to fail. She was investigated by the FBI and the IRS.
According to information from Mercer, the scam went like this:
Serfoss was responsible for conducting cash counts and reconciliations. The bank maintains a holding account, called a teller exchange, or TX, which is used when tellers provide money to the bank's vaults or when money is transferred between vaults within the First Interstate Bank system.
Two journal entries record the cash transfers. One shows a debit from the teller's TX balance. The other shows a credit to the vault's TX balance.
The journal entries are supposed to be run though the bank's "proof" department and are posted to the bank's books, usually on the same business day.
When Serfoss received money from a teller, she would keep some of it. Then she'd run the first record of the teller's portion through the proof and save the record of the vault's portion until she received enough money from later deposits to cover the vault's shortfall.
She also made false entries to the bank's books, creating the illusion that money was being transferred from the drive-up branch to the main vault, reducing the book balance of cash at the drive-up branch to hide the missing money.
Serfoss began falling behind in her false entries in the bank's books when large cash depositors began making their deposits at the main branch rather than at the drive-up. Without that infusion of cash, the balance in the TX account started taking more than a day to clear and deposits to the main branch were delayed.
"Ultimately, Serfoss ran out of cash" to cover the discrepancies in a timely manner, according to Mercer.
In June 2002, the bank conducted a review of the drive-up branch's TX transactions which revealed they were taking too long to clear. Even with more large depositors taking their cash to the main branch, the drive-up's TX account was still curiously high.
In August 2002, the bank conducted a cash count at the branch. It revealed that some of the TX tickets had never been run through the proof and that several hundred thousand dollars' worth of teller tickets were not accounted for.
Mercer said he doesn't know if customers at the bank were aware of problems with their deposits.
Serfoss was prosecuted by assistant U.S. Attorney Kris McLean. She will be sentenced by Chief U.S. District Judge Donald Molloy, who will consider the nature of the crime and Serfoss's background when he imposes a penalty.