Officials Outline Scheme of Embezzlement Suspect

SACRAMENTO —  Louis Fowler, a former state accountant arrested for allegedly embezzling $5.1 million in state funds, was a bodybuilder and “ladies’ man” who liked to come to work in shorts and muscle shirts, former co-workers recalled Tuesday.

In January, 1983, less than five months after he began working for the state Water Resources Control Board, Fowler allegedly diverted the first $4,400 in what authorities said was a simple scheme to siphon off money intended for sewage treatment plants.

“As I look back, it does seem a little surprising that he would be quite so peacock-like in his demeanor,” said Randy Kanouse, a water board employee who knew Fowler casually. “I guess he felt very confident in what was going on.”

Fowler, viewed by co-workers as “pleasant” and “good-looking,” allegedly forged a wide variety of documents and created a fictitious agency known as the Sacramento Community Services District. He then doled out money to the “district” every few months in a pattern that resembled routine contract expenditures, authorities said.

In his largest single transfer, state investigators say, Fowler shifted $1.3 million to the phony agency in October, 1983. After allegedly making a final transfer of $861,800 in March, 1985, Fowler quit his state job, telling one co-worker he was going into the video rental business.

Fowler, 35, was arrested last weekend in Mesa, Ariz., where he had been living under the name of William David Rice. Fowler’s ex-wife, Jill Baume, 26, was arrested in Sacramento. Both had access to the accounts where the money was transferred, Department of Justice investigators said.

Since Fowler allegedly took the money, he has adopted a modest, low-key life style in Mesa, where he operated a video rental store.

A search of Fowler’s home after his arrest uncovered a sock filled with a dozen South African gold krugerrands, some Mexican and Canadian gold coins and $3,500 in cash, police said. Authorities also found mounds of documents, military smoke flares, large firecrackers and unsophisticated plastic explosives.

Investigators are uncertain what has happened to most of the money Fowler is accused of taking.

Allan Schmidt, a spokesman for the Arizona Department of Public Safety, said a cursory reading of the documents found in the house indicated that Fowler had placed more than $5.1 million into a series of dummy corporations. Investigators are now focusing their attention in that direction.

“There is certainly no $5 million cash in the house,” said Schmidt.

Fowler, held on $6.8 million bail, has been charged with 17 felony counts of grand theft and tax evasion. He is fighting extradition to California.

At a Sacramento Municipal Court arraignment Tuesday, Baume pleaded innocent to three charges of filing a false tax return and receiving stolen property.

Deputy Dist. Atty. Ana Bravo asserted that Baume received at least $140,000 in the embezzled funds, including $40,000 in a 1986 divorce settlement and $80,000 from Fowler to open a yogurt shop in Sacramento called Yogurt Obsession.

Baume, who was married to Fowler for about a year and a half, told investigators when she was arrested that her ex-husband provided her with the money, Bravo said. Baume also told investigators that Fowler provided her with about six payments of $3,000 to $4,000 this year and in 1988 when the yogurt shop needed cash, the prosecutor said.

Bravo said it appears that Baume invested in the stock market and authorities are investigating to determine whether she and Fowler made other investments in businesses.

“She knew all along that the money was stolen,” the prosecutor said of Baume.

“We will offer no (plea bargain) deals in this case. We have enough evidence to convict both of them. We don’t need her testimony against him.”

Baume, dressed in a gray sweat shirt and dark slacks, watched Judge Jane Ure closely throughout the hearing but showed no emotion. At one point in the arraignment, her mother, Susan Baume, shouted out from the audience in defense of her daughter, but was told by the judge to sit down.

In divorce papers filed by Fowler and Baume, they declared that they had “no community assets or liabilities.”

Fowler had worked for the state on and off since he was 21--including a 10-month stint at the Department of Justice, which is now spearheading the investigation into his activities.

From 1975 to 1978, Fowler worked as an accounting clerk at the Public Employees Retirement System, according to his personnel records at the water board. From there, he moved to the Department of Justice, where he was an accounting technician in the accounts payable section until early 1979. Between 1980 and 1982, he was employed as an accounting specialist in the Employment Development Department.

Kati Corsaut, a Department of Justice spokeswoman, said investigators would begin reviewing his past jobs to see if there is evidence of embezzlement earlier in his career.

The alleged theft would have gone unnoticed but for a confidential tipster who told the Department of Justice in January that Fowler had taken money from the state.

Vic Bianchini, who was once Fowler’s supervisor at the water board, said he was stunned by the charges. “It blew my mind,” he said.

Bianchini joined others in describing Fowler as a “ladies’ man” who dated many women while working at the water board. He noted that Fowler was a bodybuilder who had a special interest in video equipment. He described Baume as “a quiet, shy” woman.

In Mesa, Fowler was living with Denise J. Petrovich, who owned the home where he was arrested, police said. Petrovich was cooperative with police and, after Fowler’s arrest, voluntarily agreed to open some of her safety deposit boxes for them, police spokesman Schmidt said.

The one-story house with a back yard pool and spa was decorated with expensive furniture and featured an elaborate video system, a tanning bed and a large safe. Behind the house was an 18-foot Bayliner ski boat believed to be Fowler’s.

About a mile away from the house, a video shop Fowler had operated since early 1986 was closed and barren of everything except a stool, four large filled plastic bags and some plastic fixtures.

Paddock reported from Sacramento and Reich reported from Mesa, Ariz. Also contributing to this story were Times staff writers Carl Ingram and Jerry Gillam in Sacramento.