New Storey comptroller not involved in embezzlement

By Karen Woodmansee

Appeal Staff Writer

Hugh Gallagher III, Storey County's new comptroller, had found out how important it is to beware of the company you keep, even if it's the head of the company you work for.

Gallagher was sued, along with Lodging and Gaming Services Inc. owner Steven Urie, by the U.S. Department of Labor in an October 2004 action that alleged that from 2001-04, Urie failed to forward deductions from company employees' paychecks as well as company matching funds to the company's 401k plan. Urie also was alleged to have failed to forward deducted loan payments.

Along with Urie and the company, Gallagher, who was listed as a trustee on the plan, was sued by the federal government in an attempt to recoup the workers' money.

Labor Department spokesman Deanne Amaden said Urie was the target of the suit, not Gallagher. She said Gallagher was named because his name was listed as a trustee.

"The main guy we were concerned about was Steven Urie," she said.

Urie pleaded guilty to a charge of embezzlement and converting $100,000 for his own uses on August 15, 2006, Amaden said. He will be sentenced on Feb. 22 in U.S. District Court in Reno.

Gallagher was never charged, and Amaden said he cooperated fully with the Labor Department.

She said an insurance company refunded the plan the money lost in the crime.

Gallagher said he didn't know anything about Urie's activities until he was asked to become a trustee and look at the books right before Lodging and Gaming Services Inc. declared bankruptcy in December 2003.

Gallagher said he was a consultant for LGS and had nothing to do with the accounting other than setting up the system.

"I went out on the road and taught other people what the gaming industry was all about," he said.

He said he became tangled up in the lawsuit because funds were invested with Morgan Stanley, whose officers wanted another plan administrator.

"I signed the plan document not knowing the fund was in bad shape," he said. "I had no access to that. It was pretty upsetting to me when this thing happened."

The lawsuit filed in U.S. District Court in Reno specified that it was Urie that was in charge of, and had access to, the 401k plan deductions, and for several years failed to move $237,295 into the plan.

That included $160,188 in unpaid employee contributions, $21,713 in loan repayments and $23,506 in employer contributions. The suit also asked that Urie and Lodging and Gaming Services pay $31,887 in interest.

"I had no idea about this until right before he declared bankruptcy and he asked if I could take a look at the books, and I was flabbergasted," Gallagher said, adding that he resigned from the company as soon as he realized Urie was not going to take care of the debt owed the 401k plan.

Gallagher said he located the insurance policy that reimbursed the plan, and that he believed all the workers had their savings restored except for those who had loan payments that were never made.

However, Amaden said all accounts had been repaid.

Gallagher said he has not seen Urie since the bankruptcy proceedings.

As part of a 2007 consent decree, Gallagher agreed to cooperate with a third-party trustee to manage the 401k and the restoration of the funds, to pay all of his own legal costs, not act as fiduciary for a private retirement plan until Oct. 29, 2008, and take a continuing education class at his own expense.

As comptroller, Gallagher would not be involved in 401k plans, as Storey County workers are covered by Public Employee Retirement System that is administered by the state.

"The matter has been completely resolved," Amaden said.

• Contact reporter Karen Woodmansee at kwoodmansee@nevadaappeal.com or 881-7351.