Kansas Man Gets Prison Sentence in Fraud Case Involving Small Credit Union

A former University of Kansas Medical Center administrator was sentenced to two years in federal prison last week for stealing more than $556,000 from an account he controlled at the $31 million KUMC Credit Union.

U.S. District Court Judge Daniel D. Crabtree in Kansas City also ordered Michael Ahlers to pay restitution of $680,681 and serve three years of supervised release following his prison term.

Ahlers pleaded guilty to one count of bank fraud and one count of federal tax evasion in February.

In new court documents, Ahlers attorney said his client was an alcoholic with a gambling addiction, who also owned a financially troubled liquor store while working as an administrative officer at KUMC’s Occupational Therapy Education Department. Prosecutors said Ahlers spent most of the funds on gambling, vacation trips, bars and restaurants.

In June 2007, he was the only KUMC employee who was a signatory on the OT Education Department account at KUMC Credit Union in Shawnee. In November 2012, Ahlers made himself the sole signatory on the account, according to court documents.

The credit union account was opened in the early 1990s to hold funds contributed by the OT Education Department employees to pay for social functions and other incidental expenses.

After Ahlers left the OT Education Department for a new job, a student reported a financial discrepancy, which led to an audit that detected the embezzlement.

From 2009 to 2015, the former KUMC employee withdrew money from the credit union account for his personal use. He took out the funds through cash withdrawals and cashier’s checks made payable to himself, members of his family, a liquor store and another person only identified by initials, according to the indictment.

Prosecutors said in court documents that Ahlers spent more than $208,000 on vacation trips, restaurant dining, bars, golf memberships, sports tickets and related expenses; nearly $90,000 on gambling; $81,000 in cash withdrawals and more than $203,000 on credit card payments. Ahlers also stole approximately $30,000 by submitting fake invoices to the KUMC Research Institute and the KU Endowment Association.

To conceal his fraud, Ahlers generated invoices outside of KUMC’s established financial system so that only he had visibility of the funds that he caused to be deposited into the KUMC Credit Union account, according to federal prosecutors.

As the sole signatory of the credit union account and without the medical center’s knowledge or consent, Ahlers bypassed the medical school’s oversight and processes by which funds are deposited and allocated in state-controlled bank accounts that are reconciled monthly.

In court documents, Ahlers’ attorney Robin D. Fowler said his client suffered from alcoholism and a gambling addiction.

“These problems caused by these addictions almost certainly contributed to the difficulties Mr. Ahlers experienced running a liquor store,” Fowler wrote in court documents. “When the liquor store fell behind on liquor taxes and other bills, Ahlers turned to predatory payday-type lenders, which led to a catastrophic meltdown in his financial situation.”

Prosecutors pointed out, however, that by the time Ahlers sought to qualify for what they called so-called predatory loans in 2011, he already embezzled at least $230,000 and spent much of the predatory loan funds on his personal expenses.