ALOCA, Tenn. — It is anticipated that the Jury Foreman Bob Sullivan’s Blount County Grand Jury will be receiving a Bill of Indictment in August from Blount County District Attorney Ryan Desmond. The charges are rumored to concern the theft of multimillion dollars from the City of Alcoa over the last several years. The method appears to be related to computer crimes and falsification of government records associated with the city’s purchasing and account payable databases. Tennessee truth is following the story. Stay tuned.
While the community awaits the true bill on the new case it is time to reflect back on the major employee theft problem of the past. The fraud case of 2014 to be precise.
Winters stealS half a million dollars from ALCOA CITY SCHOOLS.
It wasn’t a hidden addiction, an overwhelming medical crisis, or an unexpected financial tragedy that drove Kathy Winters to steal nearly half a million dollars from East Tennessee school organizations.
According to federal prosecutors, it was simple, old-fashioned greed.
Winters, a 58-year-old Harriman resident who earned a comfortable $50,000 annual salary and owned a nice home, was sentenced to 40 months in federal prison by U.S. District Judge Pamela Reeves. The sentencing capped off a shocking six-year embezzlement scheme that drained $428,076.94 from three separate educational entities—including federal funds specifically earmarked for special education students in Alcoa.
“She stole more in one given year on average than what most people make in a year,” Assistant U.S. Attorney Brooklyn Sawyers stated during the sentencing hearing. “This points to greed.”
A Six-Year Web of Forgery
From July 2007 to May 2013, Winters used her trusted position as a federal projects administrative assistant for the Alcoa City School District to systematically siphon public funds. Because she also simultaneously served as the treasurer for two professional development organizations—the Tennessee Attendance Supervisors Steering Committee (TASSC) and the East Tennessee Attendance Supervisors Association (ETASA)—she was uniquely positioned to manipulate the books.
Winters executed an elaborate paper trail to divert the money directly into her own pocket:
- The Invoice Scheme: She generated fictitious invoices demanding payment from Alcoa City Schools to either TASSC or ETASA. After forging her supervisor’s signature, she forwarded them to the city for payment.
- The Paper Trail: Once Alcoa issued the checks, Winters endorsed them and either deposited them directly into her personal bank account or funneled them through the TASSC/ETASA accounts before pulling the cash out via checks to herself or ATM withdrawals.
- Credit & Travel Fraud: On top of the fake invoices, Winters used school district credit cards for unauthorized personal purchases—even using the stolen money to pay her home mortgage—and falsified travel reimbursement claims by forging administrative approvals.
The Paperwork That Caught a Thief
The house of cards began to collapse in the fall of 2012. An investigative audit by the Tennessee Comptroller of the Treasury flagpointed irregularities in the TASSC bank account, uncovering $82,636.79 in missing funds.
As the Comptroller’s Office and the Tennessee Bureau of Investigation (TBI) widened their probe into Winters’ other roles, the true scope of the damage emerged. Investigators discovered she had defrauded ETASA of $1,236.36, and dealt a staggering $344,203.79 blow to the Alcoa City School District.
Confronted by authorities during a voluntary interview in April 2013, Winters confessed to the multi-year fraud. She officially pleaded guilty to a federal charge of theft of government funds in May 2014.
“Shame on You”
At her sentencing, the emotional and financial fallout on the local community took center stage. John Owings, a civil attorney representing Alcoa, addressed the court to highlight the intangible damage Winters left behind.
“The damage done by Mrs. Winters has created an air of suspicion that has been difficult to overcome,” Owings said, before turning directly to the defendant. “Shame on you, Kathy Winters. Shame on you.”
United States District Court for the Eastern District of Tennessee (Knoxville division).
The case was presided over by the late U.S. District Judge Pamela L. Reeves. Judge Reeves ordered Winters to serve over three years in prison, followed by three years of federal probation, and mandated full restitution of the $428,076.94.
While Alcoa school officials confirmed they have since overhauled their internal accounting practices to mandate “multiple sets of eyes” on all purchase orders and credit card usage, the legal battle didn’t end at the prison gates. The Alcoa Board of Education later filed a civil lawsuit against Winters seeking more than $5 million in damages—demanding triple the restitution alongside civil penalties for the 419 separate false claims she submitted during her six years of deception.
The upcoming case’s years of uncheck theft and the staggering amount anticipated will shock the community even more than the twelve-year-old Winters case.