Wake up and smell the coffee

If the Sonics—recently bought by Starbucks founder Howard Schultz—had a defense this porous, opponents could all be guaranteed uncontested layups. Simply by signing a supervisor's name to a consulting agreement, Starbucks alleges, newly hired company manager Rosemary Heinen was on her way to ripping off a mind-boggling $450,000 a month from the coffee giant.

According to interviews and new details emerging from volumes of documents submitted to King County Superior Court in a civil action filed against Heinen and her husband Gerald last fall, embarrassed Starbucks brass were stunned to learn what may have occurred under their noses:

• Heinen, hired in November 1999 as a manager in the business systems division with authority to approve invoice payments up to $5,000, allegedly drew up and submitted phony outside consulting service invoices from a "shell corporation" averaging over $100,000 a week. She approved invoices herself, then picked up payment checks in person, yet roused little suspicion.

• After she allegedly submitted phony billings for five months under the name of RAD Consulting Services Inc., Heinen, unable to assure her boss the company was for real, was told not to employ RAD in the future. However, the matter was not investigated further and Heinen allegedly continued to surreptitiously bill RAD services to other accounts for three more months. Altogether, Starbucks now claims, she "approved well over 100 invoices from RAD, totaling almost $4 million."

• Whenever supervisors questioned her about employees named on RAD invoices, Heinen told them they rarely came into Starbucks' offices or would say, one boss recalls, "that I had just missed them, either in the office or on the phone." Starbucks now claims that "Jackie Wang, May Sui Ng, Mary Rockey, Sandi Cooper, and Doug Leary" among others, are fictitious RAD workers, each paid $100 an hour for sometimes "working" 50- to 60-hour weeks.

• RAD invoices were randomly billed to dormant company projects or for an assortment of coffee warehouse, distribution, and development programs (including one job for $533,805) for which, officials now say, no services whatsoever were performed.

• Since Starbucks' officials failed to check up on RAD, officials didn't know the firm was not licensed in the state nor listed in the yellow pages, has no offices, and uses a mail drop address not far from the Heinen's Eastside home. A call to RAD's number goes to a cell phone voice mail box registered to Rosemary Heinen.

Apparently, Starbucks never bothered to call. So over eight months, the company readily dished out staggering sums for work not done.

In the last month of Heinen's employment, last September, "The Truth Comes Out," as Starbucks describes their epiphany in court records. By then, Rosemary Heinen had allegedly taken the company for $3,730,255 in invoiced payments. She was fired and sued.

Apparently unknown to Starbucks, the Heinens had a history of money troubles. They declared personal bankruptcy in 1997, showing $680,000 in liabilities and just under $400,000 in assets. Snohomish authorities are investigating Rosemary in connection with money missing from a business where she worked prior to Starbucks. A bank is also suing the Heinens for writing $200,000 in bad checks.

As Starbucks now attempts to recover its losses by seizing the Heinens' bizarre collection of property—which includes several yachts, homes, and an ever-growing inventory of cars currently pegged at 32 (worth more than $1 million)—the King County prosecutor is weighing criminal charges. Starbucks is reviewing the breakdowns in its internal financial controls.

But any internal changes Starbucks might be making remain private. "Since that investigation is still ongoing," says Cheri Libby, Starbucks' public relations manager, "I cannot discuss the details, including anything relating to Starbucks' internal procedures."

In court statements, however, Starbucks officials indicate that few were wary of any problems with their contract and invoice system.

Though he doesn't indicate how it happened, Michael Keneipp, a Starbucks vice president who had been in charge of vendor agreements, says he recently reviewed the contract with RAD that is signed with his name and "can affirmatively state that this is not my signature."

Dennis Harris, an accounts-payable worker who handled some of Heinen's invoices, suggests some red flags should have been raised. "Heinen delivered [invoices] to me directly by hand. . . . Most checks are [then] mailed directly to vendors. However . . . Heinen regularly requested that all RAD checks be held for her to personally pick up by hand."

Jonathan Engle, Heinen's supervisor, says that though he had questions about RAD expense billings last July, he directed Heinen to stop using the firm "primarily because we were going to tighten our budget."

Heinen, through her attorneys, is not admitting to the thefts but contends she suffers from an obsessive-compulsive disorder that caused her to shop without dropping. Her $300,000 Newport Hills home was made nearly impassable by newly bought goods, including three Steinway pianos, eight bicycles, and five digital satellite systems. Most boggling was Heinen's collection of automobiles, found at the home and three separate storage facilities. Fifteen of the 32 vehicles were bought during the time Heinen worked for Starbucks, the company claims. They include a 2001 Porche Turbo and 2001 Chevrolet Corvette (one of three Corvettes). Also among the collection are an Aston Martin DB7, Dodge Viper, BMW Roadster, and 1936 Mercedes Replica. The Heinens also own three boats, including a 47-foot Bayliner valued at $310,000.

Starbucks, in an earlier statement, said Rosemary Heinen's claim of the disorder, true or not, is no defense in a civil action that seeks repayment. If she took it, she owes it.