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Dorchester health center sues insurer to try to recoup embezzled funds

The Harvard Street Neighborhood Health Center is suing its insurance company for refusing to reimburse it for the $763,000 a one-time accountant for the center embezzled between 2003 and 2008.

The Hartford Insurance Co. told the center it won't pay the claim because the center's policies excluded theft of money by employees.

In a suit originally filed last month in Suffolk Superior Court, the health center says Nzeribe McKenzie never stole physical money and that during the period he was diverting funds, he worked as an independent contractor providing human-resources and payroll services for the center, but was not on the health center's payroll. McKenzie used the money to buy two Lamborghinis and a penthouse condo in Cambridge and to lease a wide variety of luxury cars.

Hartford, which is based in Connecticut, had the lawsuit transferred last week to US District Court in Boston.

In its complaint, Harvard Street says it discovered the funds were missing in 2008 when its then CEO hired McKenzie as a full-time assistant and his successor in payroll noticed "significant discrepancies" in the payroll accounts - including $700,000 in payments to two companies McKenzie set up solely to accept transfers of embezzled funds from Harvard Street. An outside auditor eventually found McKenzie had started stealing funds in 2003.

McKenzie pleaded guilty to 18 embezzlement-related counts in January, 2012. He was sentenced to 2 to 3 years in state prison and ordered to repay all the funds to Harvard Street. But McKenzie, released on probation earlier this year, has yet to pay Harvard Street anything.

The health center says that its policies with Hartford defined money as "[c]urrency, coins and bank notes and traveler's checks, register checks and money orders held for sale to the public," but that McKenzie never walked out of the center with his pockets stuff with dollar bills or checks. Instead, the health center said, he had ADP, which processed payroll checks for it, issue checks for deposit in his company's account and transferred funds directly from Harvard Street accounts to his companies' accounts.

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PDF icon Harvard Street complaint330.97 KB


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Comments

but sounds to me like they don't have a leg to stand on. Also sounds like Harvard Street was perfectky set up for such a fraud to occur.

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Technically, the company is styled as "The Hartford", not "Hartford"

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Seems like they'd be on firmer ground if they sued the contractor who provided McKenzie.

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The complaint makes it sound like there essentially was no middleman. The guy incorporated himself but otherwise worked directly with Harvard Street:

...Nzeribe McKenzie, an employee of McKenzie & Co., an independent contractor that provided HR services and payroll processing to the Center.

The complaint also says that the money was siphoned out through "McKenzie Acquisitions" which looks pretty obvious. Seems like Harvard Street should be suing their auditor or CFO for not noticing that sooner. Even worse, they didn't discover the embezzling until McKenzie got promoted from doing HR/payroll to becoming "special assistant" to their CEO, and that's when the new payroll person discovered the problems.

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MacKenzie & Co. (A firm consisting of MacKenzie himself) supplied MacKenzie to the health center, so that's not going to help.

Adam also left out the specific policy exclusions for theft by contract employees (which was clearly MacKenzie's status) or unauthorized transfers by anyone that the health center entrusted with their accounts.

Furthermore, ADP is just doing EFT; so physical checks (or electronic images of same, which still count) were involved. It's definitely money.

The health center is clearly wrong, and The Hartford should not pay them for a loss that was not covered.

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Thanks for the note. Yes, the company for which McKenzie worked was, in fact, his own company. I've changed the post to reflect that.

As for the contract-employee part, yes, you could be right. I was thinking that referred to somebody working as a temp or some such, rather than a full-time employee of another company, which it seems is what Harvard Street is arguing McKenzie was (even if the company was, in fact, just him). That's what we have lawyers for, I guess.

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This sounds like a fight about what the definition of money is.

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