High court blames Mello over accounting mess

Friday, Oct. 24, 1997 | 9:56 a.m.

CARSON CITY -- Although there is no money missing, a legislative audit has found financial irregularities in the Nevada Supreme Court's books and says the court did not follow accounting rules.

Chief Justice Miriam Shearing and Justice Bob Rose blamed Don Mello, former director of the court's administrative office. But Mello called them "hypocrites" and said the court is to blame, not him.

The court fired Mello earlier this year and signed an agreement that he was released from any liability and obligation arising from his employment. But after Mello's departure, Shearing said two uncashed checks totaling $125,000 were discovered in his drawer, made out to the Washoe County court system.

She and the other justices decided to call in the legislative auditors, who found that checks totaling $379,280 were written by Mello's office to lower courts but never sent.

In addition, Mello provided $250,000 to lower courts for computer improvements without any written contract to ensure that the improvements would be made, the audit says.

The audit, released Thursday in Carson City, also said Mello paid $120,900 to two people on the court's task force studying racial and economic bias without ever having a contract with them.

Court officials said the checks were written, then canceled, making it appear the state was doing more than it was to help the local courts. And it deflated the court budget until the corrections were made as much as nine months later.

Shearing told reporters there "was no type of embezzlement," but added that Mello was "massaging the books." Rose said Mello was "playing fast and loose with taxpayers' money."

Rose said it was a "mystery" to the court why Mello would write the checks and not distribute them. In some cases, the local governments never even asked for the money.

Shearing assured the Legislative Audit Committee that the court has changed its practices and tightened procedures.

Mello said he wrote the checks in advance to local governments to get the process moving. He said he was holding them until they submitted a plan for using the money. When the plan never arrived, he canceled the checks.

And it was the justices themselves who objected to having written contracts with the local courts and contractors, Mello said. He said Rose told him to pay the independent contractors on the bias study without a contract or be fired.

Mello said Justice Cliff Young didn't think there had to be formal contracts with local judges. Mello said Young's attitude was to "just trust" the judges to use the money correctly.

Auditors said the court staff has failed to do an inventory of equipment since the new Supreme Court building was opened five years ago. The auditors found that 10 percent of the items could not be located.

"Although the missing items were inexpensive office furnishings with an original cost of about $1,000, the lack of physical inventories increases the risk that assets will be lost or stolen," the auditors reported.

The Supreme Court clerk's office, where documents are filed, collects about $250,000 a year in fees. Auditors found there are improper controls over the money. It said the fees are deposited weekly in the bank. Until then, the money is stored in an unlocked filing cabinet in an area accessible to anyone in the office.

The auditors covered the period from July 1994 to January 1997. Mello and the court signed an agreement in February of this year for Mello to be on paid administrative leave for 90 days and then to receive $11,461 to compensate him for his annual and sick leave.

There's been a periodic battle between Mello and the court since his departure. The court blamed him for hiding proposed pay raises in the $28 million budget for the justices. Mello said the justices knew the money for the pay raises was tucked away in the budget and did not register objections.