Guardians employee confessed fraud a month before her name appeared on Trent shelter contract

Despite the confession, the employee was kept on staff and was even listed as the “financial representative” of record on the $6.5 million Trent contract, raising questions about the Guardians’ internal processes and the city’s financial controls.

Despite the confession, the employee was kept on staff and was even listed as the “financial representative” of record on the $6.5 million Trent contract, raising questions about the Guardians’ internal processes and the city’s financial controls.

The former Guardians Foundation employee accused of wire fraud wrote and delivered a confession letter to the Guardians office on August 11, 2022. The handwritten letter, which was read by RANGE Media in person, describes how money was moved from the Guardians to a personal account among other personal details.

Despite that admission, the confessor, Mary Ellen Smith (who also goes by Ellen Smith), was still listed as the Guardian’s “Financial Representative” on the $6.5 million dollar Spokane city contract to operate the new Trent shelter. That contract was signed by Guardians’ CEO Mike Shaw on September 13 — over a month after the confession was signed.

According to the Guardians, Smith’s last day with the organization was September 23, 2022 and she has not had access to the bank accounts since mid to late May.

These revelations raise serious concerns about the financial controls employed by the organization, the financial oversight conducted by the city and the city’s contracting process. City officials are concerned that the timeline undermines the organization’s contracts with the city for both the Cannon and Trent shelters. If the timelines described by the Guardians are correct, city leaders said the city should begin searching for a new shelter operator.

RANGE cannot confirm the details of the transactions or whether or not public money was stolen. We can confirm that the person fired was Smith and that RANGE has read a confession note with personal details written in cursive on yellow paper, signed “Ellen Smith” and dated August 11, 2022. RANGE has spoken with people with knowledge of her handwriting and other personal details from the letter who confirmed that the cursive handwriting and other personal details describe Smith.

[We have debated whether or not to maintain the anonymity of Smith because she is a private citizen and innocent until proven guilty. RANGE has called Smith three times and texted three times. She did not respond to a request to confirm that she wrote the letter. Ultimately, we decided that, because this story relies on and refers extensively to public records bearing her name, it didn’t make sense to not name someone so clearly visible in publicly available documents.]

A brief timeline of the fraud allegations. (Illustration by Valerie Osier)


According to Guardians staff who were present as RANGE read the letter, and helped provide additional context as it was read, the letter was delivered to the front desk of the Guardians’ office the day it was signed. The letter describes family emergencies and other personal struggles as a motivation for taking the money.

In the letter, Smith said she expected to be caught after the hiring of Lisa Arellano full-time in April. According to Arellano, she was responsible for all accounting duties for the Guardians almost immediately after her full-time start date on April 4, 2022. Despite that, Smith’s name remained on the Trent Shelter contract and invoices to the city into September.

According to Arellano, the organization has identified $118,000 in money stolen from the organization since January 2020. Shaw said that the only person who had access to the organization’s finances when the fraud was committed was Smith. He also said that there’s no suspicion of other fraudulent activity in the organization at this time.

Smith accepts responsibility for much of the other financial chaos that has engulfed the organization in the letter. For example, Smith admitted that she had been doing a poor job of keeping up on critical tasks including the late filing of 990 tax forms — required reporting documents for all 501(c)3 nonprofits. RANGE reviewed three belated years of Guardians 990s, which were submitted between April and September this year.

The Internal Revenue Service has not publicly indicated that they have approved the tax documents, and according to the IRS website, the Guardians’ nonprofit status was automatically revoked this July.

Now that the status has been revoked, merely filing the late tax documents is not enough to have the organization’s non-profit status reinstated. Guardians will have to go through a detailed reinstatement process, pay the associated fees, and wait for the IRS to sign off.

In the confession, Smith accepts full responsibility for the fraud and repeatedly apologizes to Shaw and the organization. RANGE was not allowed to take pictures of the letter, but in it Smith says she can’t justify any of her actions including the theft, the cover-up and running from the consequences. Smith  says it was a betrayal of everyone at Guardians, especially Shaw.

RANGE is the first news outlet to bring you information on the confession letter, and the first to demonstrate serious concerns with the city’s contracting and financial processes. If you want to support more work like this, consider becoming a member, increasing your support or sending us a tip.


The method Shaw described for the theft of funds bears a low-tech resemblance to the scheme of 1990s cult classic film Office Space. According to Shaw, a review of the financials shows that Smith would submit invoices for, say, $38.00 for personal expenses like gas, but would transfer herself $3,800 instead. Shaw said the first hint of the fraud was detected in February 2022 when the organization began their annual audit.

If the organization conducts annual audits though, it’s unclear how a pattern of theft the organization says traces back to January 2020 was missed or overlooked in previous years.

Shaw believes that the money that was stolen was essentially taken from the foundation, not from any public funds. Shaw said the city money the organization receives is audited by the city every two weeks. If something was wrong with those invoices, then the city should have caught it when they accepted the requests for reimbursement, Shaw said.

If the city was aware of the fraud before September 29, when Shaw says he told the administration and police,, there’s no indication the city did anything to address the issue. In fact, the city was still signing documents with Smith as the financial representative through September, according to the Guardians, months after she was removed from any financial decision-making at the organization.

“The last invoice we submitted had [Smith’s] name on it originally, but then [we] realized it and changed it after it had been submitted for payment,” Arellano explained. “We have had to fix things and send it back in a few times. It’s a learning process.”

It’s unclear what exactly the organization had to fix and how that reflects the city’s understanding of the Guardians internal awareness of the fraud. What’s clear is that Spokane and the organization have years of financial unraveling to do.

In response to previous requests for comment on the investigation, Spokane Police Department public information officer Nick Briggs said: “This is a matter of considerable interest and we will provide updates as appropriate.”


Shaw started the Guardians Foundation in 2011, after returning from active duty in Iraq. Three years later he won Idaho’s Brightest Star Award for service to the veteran and homeless community.

Right now, he said, he’s dying of terminal heart failure.

Over the last few months, Shaw has been in and out of the hospital with complications related to his heart condition. He’s currently getting around with a motorized wheelchair and says his feet hurt so much it feels like they’re in hot coals.

In conversations with RANGE, Shaw defended the handling of the organization’s internal fraud investigation and the delay in reporting it to the city and law enforcement. He repeatedly stated that he makes no money from the Trent shelter and has committed $200,000 of his own money in order to open the shelter. RANGE couldn’t independently verify that number, but the Guardians current bookkeeper, Arellano, backed up Shaw’s claim that he isn’t making money directly from Trent shelter, and that he financially supports the shelter.

Guardians first contracted with the city in 2018 according to city documents reviewed by RANGE. According to the tax documents RANGE was shown, from 2017 to 2018 the organization’s total revenue jumped from about $336,000 to nearly $874,000. 2019 revenues grew again, to approximately $1.05 million. Shaw and Smith got large raises in 2019 — a $38,000 increase for Shaw and $78,000 increase for Smith.

According to Shaw, Smith was the only person with access to the organization’s finances and software like Quickbooks. Shaw explained that the idea was to compartmentalize the finances so that, if there were any irregularities, it would be clear who was responsible.

To some extent, based on the signed confession, conversations with other Guardians employees and Shaw — that compartmentalization worked because it appears to be clear who committed and benefitted from the fraud.

But other non-profit leaders we spoke with said this kind of isolation is not a bookkeeping best practice, and generally organizations have multiple people who cross-check, verify and sign-off on expenses, especially for amounts in the thousands of dollars.

The point is to have several sets of eyes discouraging fraud, not one set of hands you can easily identify after fraud has been found — especially if it takes years to notice.

We asked Mayor Woodward, Administrator Johnnie Perkins and the city communications department if the city has any process for vetting or verifying the financial controls of city contractors like Guardians. They did not respond to those and many more specific questions.

According to Shaw, Smith remained employed at Guardians for months after the fraud was discovered, and more than a month after her confession was signed. He said that was because the organization needed to gather additional information from her.

“If she just picked up her bags and left on the 11th, I’d be screwed in a whole bunch of areas,” Shaw said. He said that financial information that Smith had exclusive access to was more important to the health of his organization than the Trent Shelter itself. Shaw explained that, in his mind, keeping Smith around to help fix her mistakes was the lesser of two bad options.

Arellano corroborated Shaw’s description of the finances, and all manners of the organization’s business, being in disarray. “There was issues with the 990s,” Arellano said. “[Shaw] didn’t know that we’d been revoked. We didn’t have that letter yet because [Smith] messed up us getting our mail. She messed up everything she could mess up.”

Shaw’s personal health has also clearly been a factor. It’s even cited as a cause for the delay in reporting their 990s on the forms. From all indications, Shaw’s health problems are affecting the organization, and, according to Arellano, these revelations are further eroding Shaw’s health.

“Since I’ve been there and since he’s known all the different things [regarding the fraud], it’s made him go in the hospital and almost die at one point.” Arellano said. “And that was really, really traumatic for me because — here I am, I know this information, and he literally almost dies that weekend … So that was really freaking awesome.”

Shaw said that through the whole ordeal his focus was on opening the shelter and getting people a place to stay. “I can’t say I can justify my actions,” Shaw said. “All I know is I did the best job I could based on the information I had and on what I needed to get done.”

“I’m getting tired of people picking on me like I’m trying to do something fucked up or hide or run,” Shaw said. “What I’ve been trying to do is serve 250 homeless people.”

Two key pages of the contract the city signed with Guardians. (For the full contract go here)


It appears that the details of the Trent shelter contract, which included Smith as the financial representative, were an afterthought to Shaw.

He told RANGE he has operated shelters for periods of time without signed contracts before, because the needs of unhoused people took precedence over whatever risk he might be taking on personally or the Guardians might be taking on as an organization by doing so.

“I have no idea when I’m gonna get a contract back to sign,” he said. “In the past I’ve operated like three months as the operator without a contract signed.”

While Shaw may have been comfortable operating without a contract at times, it’s unclear who at the city would allow such a thing to happen. Among many other requirements of contracts like these, is proof of insurance provided by the grantee (the Guardians in this case) with the city listed as an additional insured party. This arrangement ensures that if there’s a lawsuit or some other claim made, the city is also covered by the contractor’s insurance.  

While it appears the city did not know about Smith’s confession when their name appeared on the Trent shelter contract — it was not disclosed by Guardians at the time — it’s unclear why a basic contractor vetting process didn’t uncover the Guardians’ loss of nonprofit status in July or, if the loss was discovered, why the city continued moving forward with the contracting process.

Moreover, Smith appearing on the contract for the Trent shelter is more than a formality. The “Grantee’s Financial Representative” on contracts like this is the person who would track expenses and send invoices to the city for reimbursement to Guardians.

According to non-profit executives who have contracted with the City of Spokane in the past, the grantee’s financial representative “would have a lot of responsibility for the financial relationship with the funder.” In this case, the City of Spokane. The representative’s power in financial matters, in the eyes of the contract and therefore the city, is second only to an organization’s executive director.

That relationship isn’t easily transferable, either. Technically, if any of the signatories leaves the position for any reason, you would need to re-sign the contract, according to multiple interviews with executives with knowledge of this process. And, they said, that process doesn’t always happen, but it’s supposed to.

Although Smith had been sidelined from the organization once she confessed to the theft and had no access to the organization’s money after May, it’s unclear why Shaw would have left the name on the contract. Why not, say, amend it to Lisa Arellano, who had taken over financial duties from Smith in April?

Shaw said he doesn’t remember details regarding the timeline.

“I don’t know where my head was at on August 11th or August 12th. I don’t know where my head was on the 13th or 14th. I do not know where my head was. I do not know. Sitting here in my chair right now, I cannot say I can tell you where my head was,” he told RANGE. “But, it certainly wasn’t in the vein to deceive anyone.”

What Shaw could confirm was that the employee who now invoices the city started working at Guardians three weeks ago. The Guardians also confirmed that Smith’s name appeared on their last invoice to the city, which was later amended to remove her name, as described by Arellano.

It’s unclear to what extent the city required Guardians to redo their invoices and if that process was because Smith’s name was on the documents.

RANGE called Communications Director Brian Coddington and sent a detailed list of questions to Coddington, Mayor Nadine Woodward, City Administrator Johnnie Perkins and Communications Manager Kirstin Davis.

Coddington responded by email this morning: “The fact-finding process is still in progress. The City is actively engaged in both an internal review and criminal investigation. We must allow time for both to play out. We will communicate further once additional information is available.”

In the interest of transparency, we are publishing our full list of unanswered questions at the bottom of this story.

When RANGE contacted Council President Breean Beggs, he asked us more questions than we asked him.

He said that, while the administration “has actually given us quite a bit of information” since Councilmember Stratton raised the issue of potential fraud last Friday, key elements of the timeline still remain unclear. “I would still like to know exactly when, to who at the city, and how much information Mike Shaw provided the administration,” Beggs said in a conversation by phone.

When RANGE laid out the timeline of when the confession came in, and when Shaw signed the contract bearing the accused’s name, that was the first Beggs had heard of it.

He said he would need to verify the facts of what we told him, but in general, that would raise red flags with him.

“If someone puts down as their financial representative a person they know to have stolen from them on a contract with the city,” Beggs said, “that would be a violation of any city policy — and best practices — for them [to continue] to be a contractor with the city.”

“That should bring serious consequences and we should begin looking for a new [shelter] operator.”

  • Were you aware that this person who is on the contract is the person who admitted to the theft?
  • At precisely what day and time did you become aware that Guardians knew unequivocally that a senior employee of theirs had committed fraud?
  • Does it concern you that Shaw knew and put the person’s name on the contract anyway?
  • How would you describe your current relationship with and confidence in this organization?
  • Now that you know, will the administration take any steps to review either the Trent or Cannon shelter contracts or put them back out to RFP?
  • Council President Beggs said he feels that the contract should be terminated immediately and a search for a new shelter operator should begin. Do you agree with that assessment?
  • Is there a stipulation in the city’s contract with the Guardians that dictates their communication with the media?
  • Has the city threatened to revoke the Guardians’ contract for speaking with the media without approval?
  • Did the city consider the revocation of the Guardians’ 501c3 status or being out of compliance with their state business license when deciding to contract with them?
  • What safeguards and financial controls does the city have in place to ensure city funds aren’t used inappropriately?
  • As the accused is the official “grantee’s financial representative” on the Trent shelter contract, that person should be the person submitting invoices to the city for reimbursement. So: Has the accused been the one sending invoices? If not, who has?
  • Was the discrepancy between the representative of record on the contract noted by anyone at the City? If not, how was that discrepancy missed?
  • If it was noticed, what steps were taken to investigate why the person sending invoices was not the financial representative of record?
  • In our interview, Mike Shaw contends that he has operated shelters in the past with no signed contract. Here’s the exact quote: “I have no idea when I’m gonna get a contract back to sign. In the past I’ve operated like three months as the operator without a contract signed.” Can you either confirm or deny this for us?
  • If it’s true, what possible holes in the city’s financial controls and other processes could have allowed this to happen?
  • Can someone tell me what processes you go through for vetting the financial controls and processes for city contractors? We’re trying to understand how an organization receiving millions of dollars of city (and federal) funds would be allowed to only have one person internally looking at the books, with no apparent controls on things like multiple signers on large expenses, etc.


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