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COPYRIGHT 2006 The Oregonian
Byline: Brent Hunsberger
Oct. 15--In his day job, David Shelofsky hunted bank fraud.
The onetime small-town cop chased bad-check writers and credit-card thieves to recover money stolen from U.S. Bank, ex-colleagues say.
On the side, the West Linn resident developed real estate. He and partners sank more than $20 million into prime commercial and resort properties, mostly in and around Bend, land records show. Earlier this year, they sold land in Redmond to Wal-Mart Stores Inc. for $10 million.
On Friday, federal officials alleged what several co-workers had long suspected: He was actually defrauding the bank by pocketing some of the recovered assets while building a development empire on his modest bank salary.
The U.S. attorney's office said Shelofsky, 38, intends to plead guilty in coming weeks to embezzling money from the bank, according to a filing in U.S. District Court in Portland on Friday. Federal attorneys believe Shelofsky, an investigative recovery manager, took the money between 2002 and 2005.
Federal authorities declined to describe the case against Shelofsky or say whether his alleged embezzlement and property development were connected. They also declined to reveal the amount of his alleged fraud.
But in an Oregon civil rights complaint, a co-worker has accused Shelofsky of "possibly embezzling millions of dollars" from Oregon's largest bank.
An examination of the case by The Oregonian raises deeper questions about U.S. Bank's internal controls and policing of employee theft since its 1997 purchase by First Bank System of Minneapolis.
Former workers say that, following the merger, the bank got rid of a seasoned investigative unit dedicated exclusively to internal fraud. They say bank managers also failed to properly oversee the money and property recovered by Shelofsky and repeatedly ignored red flags raised by co-workers.
"They would rather let an employee retire or quit than investigate and prosecute," said Ron Schanaker, who headed the bank's former internal investigative unit before leaving shortly after the merger. "They definitely had a small bank mentality."
In 1999, the bank discovered a loan fraud scheme that involved at least one senior manager and cost millions, according to a former investigator and depositions in a wrongful termination lawsuit, later settled.
To some who worked with Shelofsky, his plan to plead guilty comes as...
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