By Tommy Witherspoon

Tribune-Herald staff writer

One of the first things that former Waco City Council member Toni Herbert noticed when she was asked to join the Downtown Waco Inc. board of directors was that there were no annual audits of the agency’s finances.

More surprising, Herbert testified Tuesday, was that the board asked her to succeed Margaret Mills as executive director in August 2006 without telling her about “a body of activity that was troubling, certain irregularities” that they knew about before Mills resigned abruptly after 18 years running the downtown development agency.

Special prosecutors from the state attorney general’s office began unraveling the maze of questionable transactions that signaled the downfall of Mills’ reign as the savior of a downtown Waco that once was pronounced “brain-dead.”

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» Downtown Waco Inc. scandal, Margaret Mills theft trial

Mills, 67, went from civic miracle worker to what Assistant Attorney General David S. Glickler called a legacy as a “thief, a liar and an amazing con artist.”

Mills pleaded guilty to reduced charges of stealing at least $95,000 from Downtown Waco Inc. from at least December 2004 to July 2006. Glickler has said she is alleged to have stolen as much as $500,000. It is unclear how much evidence of her thefts he will present at her punishment trial this week to help the jury of seven men and five women decide her fate.

Mills is seeking probation but could face up to 10 years in prison and up to a $10,000 fine, plus any restitution that 54th State District Judge Matt Johnson might order her to pay.

Glickler told jurors in opening statements Tuesday that his office agreed to abandon more than half the allegations against Mills and drop the charges from a first-degree felony to a third-degree felony because of Mills’ “past works” and her willingness to plead guilty.

Shakespearean tragedy

Rick Bostwick, who represents Mills with attorney Pat Beard, compared Mills’ situation to a Greek or Shakespearean tragedy.

“It’s a story of a person who did good things,” Bostwick said. “In some cases, great things, heroic things. But in all tragedies in the classical sense, there is always a flaw. It’s a story of the human condition.”

Herbert, current executive director of the Business Resource Center, said she grew to admire Mills back when Herbert worked for the city of Waco in several capacities, including economic development coordinator. She said they worked together closely for 20 years, describing Mills as her “very closest friend from my work life.”

She said she was not surprised by Mills’ retirement in late July 2006, but was caught off-guard by the timing. Mills told her that the Downtown Waco Inc. executive committee asked that Herbert take over as interim executive director.

Herbert explained to the jury that Downtown Waco Inc. was funded through contracts with the city of Waco that brought in around $200,000 a year, grants, members’ dues and fundraising events.

Unpaid contractors

Mills, who is not sitting with her attorneys at the counsel table like most criminal defendants but is seated just inside the counsel rail, busily scribbled notes throughout most of Herbert’s testimony and frequently leaned forward to pass them to Bostwick.

Herbert said the first “red flag” she noticed about the agency’s financial problems came up when contractors started calling her because they had not been paid. She said she called Mills to ask about the problem. Mills told her that they had been paid and that she was looking at the wrong records.

The second problem to surface was the appearance that a number of members had not paid their dues, Herbert said. That led to the discovery that a $3,000 check from the Waco school district for membership dues was deposited into Mills’ personal bank account in late July 2006, after some board members knew of other irregularities and had forced Mills’ resignation.

Herbert said she treaded slowly at first, not knowing what to believe or what to do with the revelations she thought she was uncovering.

“It was so far afield from anything we would have expected,” she said. “We all knew Margaret very well. We didn’t know what to do. It was Margaret’s reputation at stake and none of us really wanted to believe it at that point.”

She said she took the preliminary information to Downtown Waco board secretary Pat Millar on Aug. 30, 2006.

“I didn’t get the response I expected,” she said. “I expected shock and for him to say that there is bound to be a logical explanation. But he said, ‘I know this sounds bad, but don’t worry about it. You are not in this by yourself.’ ”

Baffled, she met later with Millar and board president Scott Felton. They were aware of certain irregularities, she said, and asked her to try to figure out the damage.

In coming months, she said, she investigated Downtown Waco Inc. records and assembled a notebook of what she termed “questioned check activity.” Those checks totaling $410,575 included checks with only one signature when two were required by board policy, checks with a second signature that didn’t appear authentic and checks to entities, such as clothing retailers, that seemed suspicious.

On Sept. 26, 2006, Mills, who had admitted taking “liberties” with agency accounts, made partial restitution by sending a check from her husband’s law firm for $70,000, the amount Downtown Waco officials determined was necessary to pay the bills through the end of the month.

$10,000 check

Most of the checks that ended up in Mills’ personal bank accounts ranged from $700 to about $3,000. However, Herbert said one $10,000 check written to Mills on a Downtown Waco account stood out, she said. Not only was it the largest suspicious check she uncovered, but she learned that it was written very close to the wedding date of Mills’ son, she said.

At least two paragraphs in the indictment allege that Mills deposited checks totaling $2,600 into the personal account of her son, Richard Coke Mills III.

Prosecution testimony resumes at 9:30 today.

twitherspoon@wacotrib.com

757-5737