ICTworks

In September of 2005, organizations and activists from around the world working on mobile technology in activism met together in Toronto. They drafted a Declaration of Intent to increase activists’ ability to organize constituencies and MobileActive was born.

Under the leadership of Katrin Verclas, who previously was the executive director of NTEN, MobileActive grew to become a global network of practitioners using mobile phones for social impact, advising activists and NGOs on how to minimize security risks on their mobile devices.

2010 was a tipping point for Mobile Active. That year mainstream organizations finally grasped the power of mobile phones and Mobile Active became a central clearinghouse for the global ICT4D community. Shortly thereafter, Fast Company proclaimed Katrin one of the Most Influential Women in Technology 2011.

A Federal Indictment for Fraud

According to a federal indictment, 2010 was a tipping point for Katrin too. The Attorney for the District of Maryland and the Inspector General for the U.S. Department of State allege that Katrin, as director of MobileActive Corp, participated in a scheme to defraud the U.S. Department of State of $1.231 million.

In receiving an Internet Freedom grant from the State Department in 2010, she is accused of:

• Representing that MobileActive was a 501(c)(3) organization, when it was a for-profit entity, in Federal grant documents and to the New York Department of Labor.
• Taking $610,000 from the State Department to hire software developers, but only paying them $91,888, and keeping $518,112 for Mobile Active.
• Transferring $432,421 from Mobile Active bank accounts to her personal bank accounts.
• Filing false quarterly reports to the State Department about MobileActive’s work, including the activity above.

Let’s be very clear: Katrin is innocent until proven guilty. Yet regardless of the final outcome, this is a stunning blow for a leader in technology for development. She was arrested on March 29th and she faces up to 10 years imprisonment.

A Key Lesson to Learn

This is an important reminder that ICT4D is not too small a sub-sector, or too important an effort, to escape the scrutiny of an Office of Inspector General.

Yes, OIGs are on the lookout for the next AED, but they are also looking for small frauds too. USAID staff receiving $5,000 bribes are arrested right next to the CEO and Controller of Louis Berger Group.

So I ask myself, have I done anything that could warrant a federal investigation? I firmly believe I’ve never willfully defrauded the US government or any other donor or employer, but until I saw this indictment, I would’ve sworn Katrin would never be accused of it either.

My heart goes out to her. None of us can fully appreciate what she is going through right now. We can only do our best to make sure our own efforts are clear and legal, that our donors and stakeholders agree, and they are satisfied with our transparency.

January 2019 Update: Motion to Dismiss

Katrin Verclas was charged by grand jury indictment with one count of Major Fraud under 18 U.S.C. § 1031 (“Major Fraud Act” or “the Act”). A hearing was held on July 23, 2018 on her Motion to Dismiss the Indictment. She filed a Motion to Dismiss the Indictment, arguing that the Indictment:

• Does not properly allege that she committed Major Fraud in the District of Maryland and venue is therefore improper;
• The Government failed to return its Indictment within the Major Fraud Act’s seven-year statute of limitations;
• The Indictment fails to state an offense.

Because the Indictment does not allege that Verclas committed an essential conduct element of Major Fraud in the District of Maryland, venue is improper, and her Motion to Dismiss is granted in part, and denied, in part. A separate Order shall issue.

Since the Indictment will be dismissed on the basis of improper venue, the Court will not address the sufficiency of the Indictment under Fed. R. Crim. P. 7(c)(1).

January 2021 Update: Guilty on 2 Counts

Katrin Verclas pleaded guilty on January 6, 2021, to federal charges of obstruction of a federal audit and causing a financial institution to fail to file a suspicious activity report (SAR), related to $1.2 million State Department grant to Mobile Active.

As part of the guilty plea, Verclas admitted that she intentionally ignored the State Department’s repeated requests to provide documents and information, including a final financial report and inventory report, among other things, because she did not have the requisite reports, documents, and other items.

In addition, Verclas admitted that she failed to disclose to the bank that many MobileActive business account transactions were for Verclas’ own personal gain rather than legitimate business purposes. Verclas knew that, had the bank been aware of the true nature of these transactions, it would have been required to file a SAR, and her deception willfully caused the bank to fail to file a SAR.

If her plea deal is accepted by the Court, she will be sentenced to 364 days in federal prison  for each count (so just under two years) and must ensure that MobileActive pays $500,000 to the United States government.