Foundation claims the bank cashed $480,000 in unendorsed checks from alleged embezzler at Gales Creek Camp nonprofit.

COURTESY PHOTO: GALES CREEK CAMP FOUNDATION - Games are a big part of the Gales Creek Foundation camps. The foundation is suing Bank of America in connection with the theft of camp funds.A local camp that has helped children with diabetes for more than 60 years has sued Bank of America after the camp was allegedly embezzled. The camp blames the bank for cashing nearly $500,000 of unendorsed checks that should have gone to the Portland nonprofit instead of a former employee.

According to a lawsuit pending in federal court, Cheryl Sheppard, the longtime executive director of Gales Creek Camp Foundation for Children with Diabetes, diverted checks during a six-year period before being discovered in July 2016 — ending her tenure there.

Sheppard could not be reached for comment, and camp officials declined to comment, citing the pending lawsuit. Bank of America officials could not be reached for comment, but its response to the lawsuit is due Aug. 10.

Sheppard has not been indicted, and local law enforcement agencies did not respond to requests for comment.

Fraudulent purchases

Since its founding in 1951, Gales Creek Camp has become a major force in Oregon for educating children and families about appropriate care and techniques for dealing with diabetes. While the nonprofit is based in Portland, the camp is located 35 miles away, in the woods northwest of Forest Grove.

Sheppard used her personal accounts with the bank to cash checks made out to the camp worth more than $136,345, according to the nonprofit's lawsuit, which was filed by Steve Larson of the Portland law firm Stoll Berne.

Camp logoSheppard also cashed checks she caused to be made out by Gales Creek to third parties, worth more than $343,092, according to the suit.

According to the lawsuit, "none of the checks described ... were endorsed before Sheppard deposited it into one of her personal accounts. Defendant Bank of America nonetheless honored and made payment to Sheppard on the unendorsed checks."

Sheppard joined the nonprofit staff in September 2005. According to the suit, the pattern of cashing checks in her personal accounts began in April 2010.

Discrepancies in the nonprofit's finances were brought to its attention by the state Department of Justice charitable activities unit, which regulates nonprofits. A DOJ spokeswoman, Ellen Klem, declined to comment other than confirm the department conducted a review and the nonprofit cooperated fully.

The $480,000 reported embezzled represents a significant portion of the nonprofit's finances. According to its most recent filing, the group has $3.7 million in assets, most of it in property. It reported $583,183 in revenue in 2015, and that year Sheppard was paid an $85,000 salary.

Initially, the amount of missing funds was thought to be less. According to the nonprofit's most recent tax filing, submitted in January, "During the year the organization became aware of theft from a former management employee. It was determined the theft was $105,108 in fraudulent purchases during the year ended December 31, 2015. The management employee is no longer employed and the matter has been turned over to our insurance company."

It's unclear how much of the missing funds will be covered by insurance.

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