Former Utah Educational Savings Plan director Dale C. Hatch "attempted misappropriation" of $203,400, in addition to misappropri-

ating $85,500, according to a report released Friday by the state auditor's office.

State auditor Auston Johnson said it appears Hatch did not take any money out of investor accounts. But the administrative fees Hatch is accused of diverting were funds that would have eventually ended up in investor accounts as income, Johnson added.

"He's just grabbing the money — that's just horrible," Johnson said. "It's a shame that these kinds of things happen."

Hatch was fired in July for "questionable transactions" when several employees noticed "strange" activity on his behalf. Johnson said there is no evidence to suggest anyone else was involved in diverting funds.

On July 6, Hatch "confessed" misappropriation and theft of funds to state Higher Education Assistance Authority officials, the officials said. He was dismissed from his position at that time.

Hatch's attorney, Peter Stirba, said he couldn't comment on the report and that it's now up to the district attorney's office to investigate. Any possible criminal charges would come from that office.

The first allegation listed in the auditor's report states that in May 2002, Hatch opened 25 UESP accounts in his name on behalf of a client, who was hiring Hatch to set up accounts valued at $1,410 each for 19 grandchildren.

The report cites a June 2002 letter from Hatch to the client that reads, "If you will allow me to keep my name on the accounts of the grandchildren until January . . . I will be able to take the state tax deduction." That deduction was reportedly worth $26,790, according to UHEAA findings.

The report states that such an arrangement "appears" to be a violation of the state tax code.

It's also alleged that on Oct. 5, 2002, Hatch started a "complex series of transactions" that involved 49 accounts, which resulted in $505,976 being placed in 16 of those accounts.

Over the course of about two years, more than $85,000 was paid out of those accounts and is considered "stolen funds," the report says.

Then on June 29, 2004, Hatch allegedly requested another payment of $203,400 from two of the 16 accounts. This was done while he was under investigation, unknown to him, and he later issued a letter to UESP to stop the request, according to the report.

As a result of the circumstances surrounding Hatch's firing, the UESP computer system is getting overhauled "to restrict access to specific operational and accounting functions" by employees. That fix is expected to be in place by Dec. 31, 2004.

"We have a high rate of confidence that these improvements will be satisfactory," said Mark Spencer, interim director for UHEAA. "No single person has universal access to the system as was the case previously."

When the UESP trust was set up in 1996, it started small and it was "useful" to give the fund director full access. "It turned out to be a bad decision," Spencer said.

The $790 million UESP trust now has more than 48,000 accounts and has been called one of the nation's top 529 college savings plans by the Washington-based mutual fund rating agency Morningstar Inc.

The new UESP director, Lynne Ward, currently the deputy chief of staff to Gov. Olene Walker, will take over part time on Oct. 1 and then full time on Jan. 3, 2005. It is likely a newly elected Utah governor would have named a replacement for Ward.

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E-mail: sspeckman@desnews.com