KATRINA PHELPSPleads guilty to fraud

Former Western Kentucky University professor and ALIVE Center Director Katrina Phelps pleaded guilty Monday to one count of federal program fraud.

A document known as an information was filed Monday in U.S. District Court for the Western District of Kentucky, which charged Phelps with fraud related to the misappropriation of federal funding awarded to the center over a nearly three-year period.

In a plea agreement signed by Phelps the same day, she admitted to intentionally misapplying $27,087.20 from March 2005 through December 2007 by causing 16 checks from a Department of Justice grant received by WKU to be issued to people not entitled to those checks.

According to a release from the U.S. Attorney’s Office in Louisville, Phelps agreed as part of the plea to pay the university full restitution prior to sentencing.

A copy of the plea agreement obtained by the Daily News indicates that Phelps has returned $5,035 to the university thus far.

Dawn Masden of the U.S. Attorney’s Office said a plea agreement signed by Phelps was entered Monday in federal court.

Masden said that in about two weeks, Phelps will be arraigned, at which point the fraud charge will be formally read against her.

“I think it needs to be clear that Phelps is not charged with theft,” Phelps’ attorney, Currie Milliken, said. “Of the grant funds that were in place, she misappropriated some of the proceeds, but it wasn’t a personal theft and there’s a real distinction there.”

Masden said that Phelps will also have to sign a change of plea document registering her guilty plea, with sentencing anticipated to occur no more than three months from that point.

The maximum penalty for federal program fraud is 10 years imprisonment, a $250,000 fine and supervised release of up to three years, though the plea agreement indicates that the U.S. Attorney’s Office will not seek the maximum sentence for Phelps.

Assistant U.S. Attorney Bryan Calhoun is prosecuting the case.

The university’s rules regarding grants were last updated June 27, 2007, according to previous reports.

University General Counsel Deborah Wilkins did say that WKU’s policy regarding grants states that they cannot be used for expenses unrelated to the grant, and cost overruns cannot be shifted from one grant to another.

“WKU is comfortable with the agreement being proposed by the U.S. attorney,” Wilkins said. “We are appreciative of all their work in bringing this matter to a resolution.”

A former psychology professor at WKU, Phelps was the first director of the WKU ALIVE Center for Community Partnerships.

The stated mission of the institution on its Web site is to promote community development across central Kentucky through campus and community partnerships, providing training for and assistance with service-learning and community-based scholarship, providing meeting space free of charge to the campus and community, maintaining a directory of service organizations and support groups in the area as well as a schedule of community events and coordinating volunteer placement.

Phelps was responsible for writing grants for the ALIVE Center and other university programs.

The federal investigation stemmed from a former WKU student who worked in the Kaleidoscope youth arts program and reported concerns about the use of grant funding in two federally funded community outreach programs that provided activities for at-risk youth during out-of-school hours.

The student provided a written statement and a copy of a university payroll stub to the WKU Police Department on July 16, 2007.

The university then conducted an internal audit, in which the auditor reported findings that supported the former student employee’s concerns.

On Oct. 9, 2007, the auditor substantiated the claims of misuse of grant funds, reporting those findings to Wilkins.

Phelps was removed Oct. 25 that year as the ALIVE Center’s contact for grants by the U.S. Department of Justice. She was removed from all ALIVE Center duties Nov. 2, submitted her resignation Nov. 8 and left the university in December 2007.