I-Team: New details emerge in purchasing scheme

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An FBI investigation into a possible multi-million dollar purchasing fraud within the Las Vegas Valley Water District has opened new questions about how widespread the operation may have been.

The I-Team first revealed the existence of the FBI probe two weeks ago. Water district officials confirmed an internal review found more than $4 million worth of suspicious purchases traced back to a single employee.

Now, the I-Team has learned what that former employee told the FBI.

Her name is JJ McCain. She was a popular, hard-working employee at the district. Both the FBI and the water district suspect she had outside help exploiting a weakness in the district’s financial practices. She allegedly found a way to hide her purchases of office supplies which were then allegedly shipped out of state and presumably re-sold.

The fraudulent purchases began in 2012 under the regime of former Southern Nevada Water Authority General Manager Pat Mulroy and continued until December 2015.

In the early stages, an estimated $40,000 per month was spent on printer cartridges and toner ink. By the end, it was $40,000 per week.

Records obtained by the I-Team show that on December 2, 2015 – the day the scheme was first discovered – accounts linked to former purchasing agent JJ McCain authorized a flurry of ink purchases, all different kinds and colors – three large batches costing just under $4,000 apiece.

On December 3, 2015 – the same day the district confronted McCain – she still used her computer to order several pages of ink cartridges worth thousands more.

A lid was kept on the whole thing until April 28, when the district notified its employees that an I-Team report would air that night. Multiple sources told the I-Team McCain admitted to the district what she had done, but also allegedly offered to pay back $30,000 if she could keep her job.

In January, FBI agents interviewed McCain at the sprawling home she and her husband purchased last year. Sources say she told FBI agents she was enticed into the scheme by someone inside Staples – the company that sold more than $4.3 million worth of suspicious ink to the water district.

“I am disappointed I didn’t know about this until April when I got a phone call from the media,” said Las Vegas City Councilman Bob Coffin, who also sits on the Board of Directors for the Southern Nevada Water Authority (SNWA). SNWA is an umbrella entity that includes the Las Vegas Valley Water District.

Coffin is the only public official who has spoken publicly about the scandal. He appeared on KNPR’s “State of Nevada” this week, but was unavailable to speak with the I-Team.

District officials notified at least a few elected officials about the scandal in December 2015, notably some members of the Clark County Commission which doubles as the board of the water district. The Southern Nevada Water Authority board was not told.

The district acknowledges its former employee “concealed the fraudulent purchases and circumvented internal controls,” spreading out the purchases by relying on accounts belonging to former employees and defunct departments.

External auditors never noticed millions of dollars were spent on products that were delivered in hundreds of packages directly to McCain’s office, re-labeled and shipped to an obscure business in New Jersey.

Internal records from Staples, however, show that the company was well aware of unusual sales activity. Compared with all other office supplies purchased by the district, the $1.5 million spent on ink in 2015 alone certainly stood out.

Coffin is asking the same questions the FBI and the water district are asking: Was this part of a larger operation?

“There is a possibility that other people are involved, other companies maybe,” he said. “The retailer that was selling the toner to this individual, to us, can they explain that they didn’t know what was going on? I wonder about that. That employee, I understand, is gone from Staples.”

The I-Team contacted Staples to find out if any employees had been terminated in connection with this. The company declined to comment.

FBI agents re-interviewed McCain, but no charges have been filed, nor is it clear any will be filed. The water district hopes to recover up to 70 percent of what was lost through its insurance policies and is not ruling out civil action to go after the rest.

The I-Team has tried via phone, email and social media to speak with the people in New Jersey who were on the receiving end of the ink cartridges. So far, the I-Team has not received a response.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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