LANSING (WWJ/AP) – The chief executive and bookkeeper of a nonprofit agency that coordinates workers compensation insurance have pleaded guilty to roles in a scheme to embezzle $2.6 million over 11 years.

Attorney General Bill Schuette said 67-year-old Jerry Stage of New Hudson and 55-year-old George Bauer of Commerce Township made separate pleas in Wayne County Circuit Court.

Stage pleaded guilty to one count each of embezzlement over $100,000 and conspiracy to embezzle over $100,000, both felonies punishable by up to 20 years in prison. Bauer pleaded guilty to one count of conspiracy to embezzle $50,000 to $100,000, a 15 year felony. Both defendants together must repay $2.6 million per a joint restitution order. Bauer’s sentencing is scheduled June 26, and Stage’s is Sept. 10.

Schuette said Stage, former CEO of the Compensation Advisory Organization of Michigan, embezzled approximately $2.6 million from the company during an 11-year period, conspiring with the organization’s bookkeeper, Bauer, to cover up his tracks.

“No company should have to operate under the fear its top executives are using corporate funds for personal financial gain,” Schuette said in a statement. “There are consequences to breaking the law, and we will continue to aggressively weed out corruption wherever we find it.”

The Compensation Advisory Organization of Michigan gives administrative and customer service support for the Michigan Workers’ Compensation Placement Facility. It collects data from insurers licensed to sell workers’ compensation insurance in Michigan and isn’t a state agency.

Stage was employed as CEO of the organization from 1993 until his retirement in July 2012. As CEO, Stage had the authority to issue checks, but company policy required two signatures on any check over $1,000.

To evade that requirement, Stage allegedly wrote checks to himself for $995 over a 14 year period, totaling approximately $1 million. Stage was also issued a company credit card to pay for business-related incidentals that he used for personal expenses, Schuette said.

Following Stage’s 2012 retirement, the organization undertook a review of expenditures to assess the company’s financial health. Upon the discovery of a number of financial reporting irregularities, the company consequently retained Plante Moran to conduct an official audit. Plante Moran discovered Stage had allegedly embezzled approximately $2.6 million.

“Stage paid Bauer to help him cut checks to himself, paying Bauer for his silence,” Schuette said.

Stage also allegedly submitted false or inflated expense reports for events including: week-long family vacations at Disney World, tuition, wedding expenses, pet care and family dinners. Allegedly using this scheme, Stage embezzled approximately $1.4 million. This conduct was not discovered during annual audits because as CEO, Stage did not have to submit documentation of his expenses, as other employees were required to do. The false expense reports were submitted to allegedly cover the amount of funds Stage was siphoning from the company.

The rest of the embezzled funds allegedly came from Stage inflating his own pay raises and bonuses, totaling to approximately $200,000.

TM and © Copyright 2013 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2013 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

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