On Wednesday morning, Hatchett was arrested on a Hawkins County grand jury sealed indictment warrant on one count of theft over $250,000, one count of theft over $60,000, and one count of official misconduct.
The top count is a Class A felony punishable by 15-25 years in prison.
Third Judicial District Attorney General Dan Armstrong said Hatchett acquired the funds by a combination of unauthorized overtime payments and a scam similar to check kiting, except with water department cash deposits.
According to a Tennessee Comptroller’s report released Wednesday, Hatchett diverted cash collections totaling at least $338,929 by withholding cash collections from deposits he was entrusted to deliver to the bank.
How did the allegations come to light?
Hatchett, 49, 109 Sycamore St., Rogersville, was suspended from his position as city water superintendent shortly after informing the water commission he had lost $69,444 in cash receipts that he was supposed to have deposited in the bank the week of July 10, 2017.
Hatchett informed water commissioners in July of last year that $69,444 in cash was missing from a bank bag that was in his vehicle. He told commissioners he intended to deposit the funds in the bank, but got sidetracked by a major leak and other ongoing projects.
Hatchett reportedly told Rogersville Water Commission Chairman Ed Pace the bank bag was in his vehicle for days, although he didn’t know exactly how long.
Hatchett told Pace that when a staff member realized the deposits weren’t reflected in the bank account, Hatchett checked the bag in his vehicle and found that all the cash had been removed and only check receipts were left.
Shortly after the Tennessee Bureau of Investigation began looking into Hatchett’s claims he was fired in August.
What are the allegations against Hatchett?
“The investigation began as a result of him reporting money missing from his truck,” Armstrong said. “What he was telling us didn’t add up, so we asked the Comptroller to come in and look at, not only that, but everything else. It was discovered that a pattern of theft had taken place over that period of time.”
Armstrong added: “The best way I can describe it is, you’ve heard of check kiting. He was cash kiting. For instance, if he collected $5,000 that was to be deposited, he wouldn’t deposit within the time he was supposed to. Maybe the next week if he got $4,000, he would deposit the $4,000. That finally caught up to him to the tune of $69,000.”
As for the theft over $250,000 charge, Armstrong said, “Some of that involves the cash kiting. Some of that the Comptroller found that he was paid in addition to his salary.”
How did Hatchett allegedly do it?
The indictment alleges that the theft over $250,000 occurred between June 2, 2016 and June 28, 2017.
According to a Comptroller’s report, Hatchett failed to deposit within 20 days or more water department cash collections totaling at least $338,929, effectively depriving the department of the use of those funds.
Using his authority as water department superintendent, Hatchett assigned to himself the responsibility of delivering the daily cash collections to the water department’s bank. An analysis of bank records and water department records revealed that Hatchett was not promptly delivering cash to the bank.
The timing of collections and Hatchett’s deposits were consistent with a “lapping” scheme, which involved Hachett diverting daily cash collections for his personal benefit, and then concealing that misappropriation by depositing in its place water department cash collections received on a subsequent day.
The theft over $60,000 charge accounts for the original $69,444 that was reported missing and was alleged to have occurred between Jan. 1, 2016 and Dec. 31, 2017.
On May 22, 2017, a water department official revoked Hatchett’s responsibility for making the water department’s deposits.
Because this removed Hatchett’s access to future collections, he was no longer able to conceal the thefts. Water department records indicated Hatchett had failed to deposit cash collections from 16 separate deposits.
Alleged illegal overtime payments
Armstrong said part of the stolen funds were allegedly acquired by Hatchett authorizing himself overtime payments that he hadn’t earned.
Hatchett’s base salary was $75,000. Overall, he was paid an additional $63,975 in overtime in 2015, $83,878 in overtime in 2016, and $45,782 in overtime in 2017 prior to being fired in August.
Hatchett improperly ordered the water department payroll clerk to add 3,000 hours of comp time to his leave balance for calendar year 2017.
City policies prohibited exempt employees, including the water department superintendent, from earning or receiving comp time.
By adding 3,000 hours of comp time to his normal 40-hour work week, Hatchett projected that he would work 97 hours per week — almost 14 hours every day during a seven-day week, or almost 19.5 hours every day during a five-day week. Investigators discovered Hatchett also had outside employment with at least one other entity during this time.
Water department records showed that Hatchett first began to pay himself for comp time in 2015, when he directed the water department payroll clerk to pay him for an extra 1,818 hours he purportedly worked during that year. For calendar year 2016, Hatchett ordered 2,000 hours of comp time to be added to his leave balance, although payroll records indicated that Hatchett eventually claimed and was paid for 2,320 hours of comp time that year.
Hatchett still under investigation on separate fraud allegations
Armstrong said Hatchett remains under investigation in a separate case in which he is accused of falsifying drinking water testing studies he was paid to conduct at various Hawkins County schools.
Hatchett is accused of taking money to conduct those water tests and then fabricating the results rather than performing the actual test.
“I have asked the state attorney general to look at those issues,” Armstrong said. “My memory is that this took place over a time period of more than 12 months, but I don’t have (the report) in front of me so I can’t say exactly.”
Where did the money go?
Multiple sources in law enforcement confirmed for the Times News that Hatchett apparently had a gambling problem and spent a great deal of time at the casino in Cherokee, N.C.
Players at that casino keep their “bank” on a credit card, as opposed to carrying around cash, chips or coins, and investigators reportedly acquired those records and determined that Hatchett had gambled away a vast amount of money, much more than he could have earned legally during that time period.
As of Wednesday, Hatchett was being held in the Hawkins County Jail on $250,000 bond. He is scheduled to appear in Hawkins County Criminal Court on June 8 for arraignment.