Former Jazzercise executive sentenced to prison after pleading guilty to embezzlement, forgery

The former finance director of the Jazzercise Inc. fitness chain was sentenced Tuesday to more than seven years in prison after being accused of embezzling upwards of $1 million from the Carlsbad-based company and its owners, possibly to feed a gambling habit.

Sherri O. Potts, the company’s corporate director of finance for nearly nine years, was arrested in Carlsbad in October on 50 theft-related charges, including forgery, fraudulent appropriation and grand theft by an employee.

She pleaded guilty in March to one count of grand theft, three counts of forgery and one count of failing to report the stolen money on her tax returns. She also admitted that she stole more than $500,000.

San Diego County Superior Court Judge Michael Washington sentenced the 60-year-old Fallbrook resident to seven years and eight months in prison.

Deputy Dist. Atty. Anna Winn said Potts could be eligible for release after two years.

“Most people would agree that someone who steals $1 million should be locked up for longer than two years, but this is the practical effect of the new laws that California voters have passed,” said Winn, referring to recent changes that grant early release to nonviolent offenders.

A tearful Potts apologized in court to the company’s owners, said her attorney Joel Bailey.

According to court documents, authorities suspected much of the stolen money was siphoned from petty cash funds, an average of $10,000 a month, for a few years. The company uncovered the embezzlement in 2014, after Potts was let go.

Winn said Potts routinely arranged for an average of $12,000 a month to be delivered into the company’s petty cash fund. The company’s actual petty cash needs were really around only $2,000 a month.

According to prosecutors, Carlsbad police investigators found that, from 2007 to 2013, Potts deposited more than $900,000 in cash and nonpayroll checks into her accounts.

The investigation also revealed that 48 forged checks — more than $150,000 worth — had been written from the personal accounts of Jazzercize owners Jack and Judi Sheppard Missett. The money was used to pay for Pott’s personal expenses, including credit card payments.

The suspected thefts were uncovered after Potts was fired from Jazzercise, which has franchises in 32 countries.

After she was let go, Potts contacted a former coworker to return $9,000 of petty cash she had in her possession. Because that was more company cash than she should have had, the company brought in outside auditors.

According to court documents, police investigators learned that for many years Potts regularly gambled at Pala Casino in northern San Diego County, favoring slot machines in particular. From 2008 to 2013, police said, she gambled more than $900,000 a year in slots — and some years, more than $1 million. Casino records also show that she lost an average of $200,000 a year for most of those years.

Winn said that after the theft was discovered, Potts cashed out her retirement account and turned over $250,000 to Jazzercise.

teri.figueroa@sduniontribune.com

Twitter: @TeriFigueroaUT