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News5 Investigates: Charges filed against ex-water administrator - KOAA.com | Continuous News | Colorado Springs and Pueblo

News5 Investigates: Charges filed against ex-water administrator accused of embezzling $1 million

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Terry Malcom Terry Malcom

March 2015 update:

Terry Malcom, 66, was formally charged Monday with felony theft and embezzling public property.

He remains in the El Paso County Jail on $1 million bond and has his first court appearance on April 8 at 8:30 a.m.

Malcom is accused of stealing more than $800,000 in funds from the Cascade Metro District and another $200,000 from the Arabian Acres Water District over the past decade.

Court documents pertaining to this matter have been sealed and the DA's Office has not released any further information beyond confirming Malcom was arrested on charges pertaining to theft from the Cascade Metropolitan District. 

Messages left on Malcom's home phone for comment have not been returned.

An attorney for the Cascade Metro District answered our questions regarding the arrest via email. You can read their response here

Previous news article from September 2014:

Nearly a year later, no charges have been filed against Terry Malcom, the former water administrator for the Arabian Acres and Cascade water districts.

Combined, both water boards say Malcom embezzled more than $1 million and ultimately got away with it.

Not a cent has been paid back and we're told it will be years before the Arabian Acres water district can get out of the "red".

"We have nine wells here and we never know from day to day how well it will produce water," former Arabian Acres Property Owners Association President Jim Nash said. "With the rains we have had, we are doing much better with our water and there's an adequate supply for now."

Still, there are more unanswered questions with the embezzlement investigation into Malcom. Part of the funds missing were supposed to be used to develop two new wells.

"We haven't gotten much information from the district attorney," Nash said. "There's no arrest and residents out here are waiting."

Last year, the water board raised fees for every homeowner, hoping to balance the budget and make up for the lost funds that may never be recovered.

"We are struggling with a water system that needs to be replaced," resident David Johnson said.

We're told this project is on the radar, but with an estimated cost of more than $1 million, there's no money in the budget.

Less than 5-percent of the money allegedly stolen by Malcom has been paid back through water fees.

Story Update:

For the first time, the attorney for the Arabian Acres Metropolitan District is speaking on-camera about why it took so long to discover approximately $206,000 in missing funds.

Terry Malcom, the former water administrator is being investigated for embezzling those funds. To this date, not a dime has been collected.

"The water district is looking strongly into raising our rates out here as a way of beginning to fix the problem," Arabian Acres Property Owners Association President Jim Nash said. "We're are scrambling right now to pay the bills that we have."

The district is missing a $100,000 loan that was supposed to go toward building new wells along with $106,000 in general funds.

To balance the budget, the water board approved a new supplemental operations fee of $100 per month. A drought fee was removed and water usage rates are staying the same. However, residents will see a 5-percent increase in their monthly service fees.

"We're projecting we should be in the black in 2018," Peter Italiano with Special District Management Services, Inc. said Thursday.

Meanwhile, the water board's attorney is working with the 4th Judicial District Attorney's Office to track down the cash allegedly stolen by the district's water administrator who has since been fired.

Criminal charges have not yet been filed, and attorney Joan Fritsche admits the investigation into Terry Malcom has hit a road block.

"The accounting trail is difficult to follow," Fritsche said. "This was a very smart individual. He did this over a period of years."

News 5 Investigates uncovered more than $800,000 in missing funds from the Cascade Metro District where Malcom had been the director prior to making his way to Arabian Acres. A forensic audit in June 2013 shows money had been stolen from Arabian Acres dating back to January 2012. The embezzlement could have been caught that year, but we learned the audit was not done.

"When a local government has less than $500,000 of revenue or expenditures, it's not required to do an audit," Fritsche said. "They can file an audit exemption with the state and that's what the district has done."

We are still working to uncover who filled out the audit exemption for 2012 and years prior but were unable to get answers from the Board's president, Charles Hallam.

The new fee schedule for Arabian Acres takes effect Dec. 1.

Original story:

A former water administrator is under investigation for allegedly stealing more than $1 million in funds over the course of a decade.

News 5 has confirmed the 4th Judicial District Attorney's Office has launched a criminal investigation into Terry Malcom, who was once associated with both the Arabian Acres Metropolitan District and the Cascade Metropolitan District.

Malcom, was fired over the summer following an accounting audit conducted by the Arabian Acres Metro District.

The water district serves residents in both Florissant and Divide.

"We are going up a creek without a paddle," Jim Nash, President of the Arabian Acres Property Owners Association said. " People are very concerned about what's going on here."

A recent audit revealed a $100,000 loan obtained to build new wells is missing. That's in addition to approximately $106,000 in general funds that are unaccounted for. Malcom, who was trusted with the money, is now accused of stealing it.

"This subdivision may very well go without water in 30 days," Nash explained.

The town has a little more than 500 people who receive water through a total of nine wells and one water tank. The subdivision also had water trucked in through a third party company which has stopped supplying water because of a $45,000 debt that has not been paid.

Nash adds missing money from a grant that was supposed to go toward building another well has stalled the project.

The Arabian Acres POA says they have not heard from Malcom since his departure.

"We really don't know what he's doing for a living at this time," Marty Cook, Vice President for the Arabian Acres POA said.

Phone numbers for Malcom are disconnected and repeated messages to his last known email address have gone unanswered. While Malcom has managed to slide off the radar, he has left a paper trail behind.

Missing funds allegedly stolen by Terry Malcom:

Cascade Metro District: $825,000

Arabian Acres Metro District: $206,000

Total unaccounted funds: $1,031,000

"Give us our damn money back," Nash said.

Despite the plea, the water district is no closer to balancing its budget, leaving neighbors like David Johnson wondering not if, but when their water supply will dry up.

"The main thing we are doing right now is taking one bath, sharing water, and using bath water to flush the toilets," Johnson said.

There's about 12,000 gallons of water in the town's tank right now. Nine wells currently pump water, but they desperately need more.

"The money is gone," Nash said. "There's nothing much we can do and are just scrambling right now to pay the bills we have."

Nash and the rest of the folks in Florissant are hoping the District Attorney's investigation will lead to Malcom's arrest and recovery of the missing money.

The DA's Office cannot comment on any active investigation.

The water board deferred all comments pertaining to Terry Malcom to their attorney, Joan Fritsche.

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