Lax Accounting Blamed in $425,000 Embezzlement : Theft: Audit shows that a UC Santa Cruz employee ordered and cashed phony honorarium checks.

A number of fundamental accounting lapses allowed a UC Santa Cruz administrative assistant to embezzle more than $425,000 over four years by ordering and endorsing phony speaking honorariums, according to an audit presented Thursday to University of California regents.

Mary Nicholls, 53, an employee of the campus’ student services office, pleaded no contest in February and was convicted on 13 counts of grand theft, said Santa Cruz County Assistant Dist. Atty. Gary Brayton. She will be sentenced March 28 and faces up to 10 years in prison.

Brayton said Nicholls was able to bilk the university because of “extraordinarily sloppy accounting and auditing procedures” at the Santa Cruz campus. During the time she was stealing funds, Nicholls was responsible for authorizing the checks, collecting them and reconciling them on university ledgers, campus officials concede.

The audit also noted that Nicholls was in line to be fired some time ago because her job performance was deemed “unacceptable because of errors and omissions,” and her manager twice had her train potential replacements.

“The theft occurred as a result of an individual gaining knowledge of weaknesses in her unit and campus internal controls and misusing her authority to request and obtain payments,” the audit said.

UC spokesman Jim Burns said Nicholls was fired in October and her supervisor was reassigned. Since then, the university has instituted more stringent accounting procedures, including dividing authority for ordering and handling such checks between two people, he said.

Nicholls stole $429,975 between July 20, 1989, and Sept. 20, 1993, by ordering 202 phony checks--199 for phantom guest lecturers and three for fictitious travel advances. At first, she picked up the checks personally from the campus payroll department but later had them sent to her by campus mail, the audit said.

Her actions were not questioned because she was well known and the initial checks were for small amounts, the audit said. The checks were made out to fictitious names, and Nicholls then forged the name of the payee and cashed them at a market near her home or deposited them in her checking account, the audit said.

The checks she deposited had “indecipherable circular signatures,” and it was her bank that first raised questions last September about the number of third-party checks she brought in, said Burns.

Prosecutor Brayton said it is still a mystery as to how Nicholls, who earned between $25,000 and $30,000 a year, spent the embezzled money, except that she gave much of it to relatives, especially her son. Despite taking large amounts of cash, he said Nicholls drove an older model car and lived in an $800-a-month rental.

“There wasn’t any evidence of flashy convertibles and flying off to Tahiti,” he said. “There was no evidence of that kind of extravagance.”