State Auditor Mike Foley called for a shakeup at Wyuka Cemetery on Tuesday, as he released a special investigation showing a history of mismanagement and potential criminal wrongdoing at the state-chartered cemetery.

Foley and the governor called for the resignation of Mike Tefft, chairman of the trustees that oversee the cemetery and funeral home, and Jim Gordon, its longtime attorney.

The investigation report outlines dozens of problems — from an embezzlement of at least $42,000 to more minor violations of the state’s open meeting laws.

“This is not a report about one wayward employee caught with his hand in the till,” Foley said during a news conference.

“This is a report of repeated acts of unethical conduct and mismanagement by several senior officials of the cemetery over a period of years that has taken Wyuka well down the road toward insolvency,” he said.

More than 55,000 people — including more than 5,000 veterans — are buried at the 200-acre public cemetery in the heart of Lincoln.

The charitable corporation has been losing money for more than 10 years. Losses have ranged from $49,590 in 1997 to $433,001 in 2002, according to Foley’s report.

Tefft said he would have no comment on the report until he had a chance to read it.

Gordon, who has represented the Wyuka trustees for at least two decades, said he serves at the board’s will.

“I don’t intend to resign until they ask me to,” he said in a phone interview.

Among Foley’s findings:

* Embezzlement: Accountant Todd TerMaat allegedly embezzled from the cemetery for at least three years. The loss is at least $42,000. The State Patrol is investigating; Foley called for TerMaat’s arrest, and said Wyuka should not have allowed one person sole control over the financial records.

* A purchase claimed as a donation: Before he was hired by Wyuka, cemetery president Marty Miller bought a private mausoleum, which he claimed as a donation and a deduction on his tax returns. Former CEO Michael Hutchinson signed the letter indicating this was a donation.

Cemetery officials may have issued letters to others improperly advising a purchase from Wyuka was tax-deductible. Miller repaid the money plus interest to the IRS and state Department of Revenue a month ago, Foley said.

* Trading land: Former executive Hutchinson traded six cemetery spaces for a residential lot in Arkansas. Then he sold the Arkansas land and kept the proceeds, about $9,000. He repaid the money plus interest this week, Foley said.

* Criminal histories: Wyuka did not ask for prior felony convictions on employment applications. Accountant TerMaat had two felonies for theft. Former CEO Hutchinson had completed a pretrial diversion program on a theft charge. His personnel folder was missing from the Wyuka files.

* Misuse of perpetual funds: For several years, the board used money from the cemetery’s perpetual care fund to cover budget shortfalls, rather than invest the money for the property’s future care “as required by state law.”

The trustees “almost drained the fund,” using about $1.5 million and leaving less than $300,000. Foley says he believes the use of perpetual care money is illegal, and officials violated the state’s official misconduct law.

Foley noted two of the three trustees — Jeff Schumacher and Faye Osborn — were appointed since the board used perpetual funds and were not involved in those decisions. Only Tefft, appointed in 2000, participated in the decisions to spend the funds.

* Paying foundation salaries: The board covered expenses for the private foundation, created to solicit donations, to offset salary costs during a time when the cemetery had financial problems.

The months-long investigation, led by auditor staffer Mary Avery, will continue “until we’ve finally gotten to the bottom of this mess,” Foley said.

The investigation is the third time the cemetery has been under official scrutiny in the past year.

The attorney general’s office, asked by a private citizen to look into Wyuka issues, did not report on its investigation. And a Lincoln police investigation determined the board may have violated state law in spending perpetual care funds, but there were no criminal penalties attached to that law. 

But Foley believes the trustees who agreed to loan the perpetual care funds for regular operations violated state law requiring them to prudently invest the money.

Gordon, the cemetery’s longtime paid attorney, should step down because of his “horrendous legal opinions” over the years, Foley said.

In Journal Star interviews on the perpetual care issue last year, Tefft and Gordon indicated using the money from the fund was the only way the trustees could keep the cemetery afloat.

Gordon said Tuesday he and Foley simply disagree on the interpretation of state law.

At the time trustees were considering the funds, he said he “looked at the law, at the situation and the facts and gave the best advice of which I was capable.”

Foley said he doesn’t know how Wyuka trustees will resolve the cemetery’s financial problems. And people “have every right to be concerned” about whether there will be money to maintain Wyuka after the last plots are sold in the distant future.

A year ago, cemetery officials said Wyuka has grave sites for the next 400 years.

Wyuka’s salespeople and other employees did not do anything wrong, according to Foley’s investigation.

In an interview Tuesday, Gov. Dave Heineman said he agrees Tefft and Gordon should step down because of the long history of “mismanagement and other improprieties at Wyuka.”

He also called for a review of Wyuka’s unusual relationship with the state and a possible change.

The cemetery is a public charitable corporation, not a state agency. The governor appoints the three trustees, but no state official has oversight over the operation, he noted.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.