Woman pleads not guilty to embezzlement

A Richmond woman charged with swindling hundreds of thousands of dollars from a program for severely disabled children pleaded not guilty yesterday in federal court and faces a three-day jury trial in January.

But allegations raised in a federal indictment this month against Iris F. Allen, who worked as the benefits manager for the state's birth-injury program, are raising a storm of questions as well about operation of the program itself.

"What this woman is charged with doing went undetected for more than three years, and we are still not being told what happened," said Cathy Pell of Manassas.

Her daughter Abby, 5, the youngest of Pell's five children, has cerebral palsy and receives benefits from the program.

Pell said during a phone interview that she broke into tears after an investigator visited her home this summer and showed her two canceled checks from June 2008, one for a $38,500 handicap-equipped van and another purporting to be payment for construction plans for an addition to her home.

"But we've never had a van, and we have never had an addition built," Pell said.

Instead, the money allegedly went to shell corporations created by Allen.

"If the program was providing families with statements each quarter about their accounts, I would have picked up in a second that we never received a van," Pell said.

"Here you have a group of children born with the most severe injuries because of medical mistakes, and now they are being cheated again of the benefits that were promised them."

Board members of the Virginia Birth-related Neurological Injury Compensation Program are mulling over how much financial detail should be revealed to parents. But families in the program said in interviews that the program is balking at the idea because the accounting would show broad disparities in benefits among families.

Allen, 44, of the 5600 block of Lipton Court in South Richmond, left the program in March when program administrators noticed a discrepancy in a van identification number, according to testimony last week.

A federal indictment unsealed Oct. 7 alleges that Allen diverted $819,111.48 in construction and transportation benefits to corporate entities that she created. She faces nearly 300 years in prison if convicted, as well as millions of dollars in fines.

At a hearing last week, prosecutors in the joint federal-state investigation revealed that after her arrest on a state embezzlement charge in July, Allen created still another corporate entity using allegedly bogus dates and a forged signature.

The indictment does not state what Allen may have done with the proceeds of the alleged embezzlement.

At the hearing last week, state police Special Agent C.T. Hagan said he was able to locate only a single online Ameritrade account in Allen's name containing about $4,000.

Allen was hired in December 2004 by the program, which has about $200 million in assets and operates from The Boulders office park. According to the indictment, Allen's illegal diversions allegedly began in October 2006 and extended through January of this year.

The birth-injury program was created in 1987 and was the first program of its kind in the nation. Families whose children received brain-injuries from oxygen loss at birth so severe that the infants will need help in all aspects of life are barred from suing doctors and hospitals involved in the deliveries.

The program instead promises lifetime medical care, although most children in the program are not expected to live beyond early adulthood.

About 140 children have been accepted into the program since its origin; at the end of May, 114 children were listed as active, living claimants.

Contact Bill McKelway at (804) 649-6601 or .