Payments to Ethiopia soared before local adoption agency collapsed

By Brian Caldwell

CAMBRIDGE — Money going to an orphanage in Ethiopia allegedly soared in the year before an international adoption agency in Cambridge went bankrupt last summer.

The collapse of Imagine Adoption in July stunned more than 400 families hoping to adopt children and triggered a criminal fraud investigation.

Seven months later, with two Waterloo Regional Police investigators and an RCMP officer still working on it full-time, police are saying little about the case publicly.

But a court document used to obtain key financial records outlines the initial evidence and allegations against the non-profit agency’s top two officials — executive director Susan Hayhow and her husband, Rick, the former chief financial officer.

The document, called an information to obtain a search warrant, details allegedly suspicious actions that have not been proved in court and that have not been challenged by either Rick or Susan Hayhow. The Hayhows were not available for comment on allegations contained in the application.

Among the allegations in the search warrant application are that:

Payments to a transition home in Ethiopia — where the Christian agency kept orphaned children in the last stages of the lengthy adoption process — had climbed to $70,000 a month by May 2009.

A year earlier, according to meeting minutes of Imagine’s board of directors, the annual cost at the same transition home was $25,000 — or just over $2,000 a month.

The agency’s accountant did not know it had a corporate bank account in Ethiopia. He asked for financial records after learning of its existence, but never received cancelled cheques to account for payments.

The accountant was concerned about $30,000 to $40,000 a month in agency credit card expenses. He asked for statements, but never received them.

Questionable items charged to the cards included trips to Disney World, New York City and Deerhurst Resort in Muskoka. Others were for jewelry and a horse.

The accountant flagged numerous agency cheques as suspicious, including a $10,000 payment to Rick Hayhow that was not part of payroll. Landscaping and a $13,500 wrought-iron fence at the couple’s Cambridge house were also paid for with agency cheques.

Susan Hayhow gave herself a $30,000 raise the same month financial problems came to a head in June 2009, when board members seized control of the agency, cancelled its credit cards and stopped paying the Hayhows.

When asked to justify the raise at a meeting, Hayhow said she knew that a smaller, related agency — one of three operating under the Imagine Adoption name — would soon be shutting down and she would lose part of her pay.

The couple earned a combined income of $320,000 a year — $180,000 for Susan and $140,000 for Rick — by paying themselves separate amounts from two of the agencies. They both also drove leased luxury vehicles.

Alan Brown, the board member who went to police, was shocked by their salaries. He was also unaware of the arrangement allowing them to draw two pay cheques each for what was effectively one organization.

Susan Hayhow and her new boyfriend, Andrew Morrow, tried to restructure the failing agency using funds placed in trust for adoptive families. Their plan was denied by the provincial government.

Rick and Susan Hayhow separated about four months before the bankruptcy. Rick Hayhow resigned and was given severance pay of $140,000 — a year’s salary — without approval by the board.

Money moved among the three related agencies — Kids Link, St. Anne’s and Global Reach — without any supporting documentation.

Staff worried the waiting list for adoptions was too long and urged Susan Hayhow to stop taking on new clients.

Police detailed the evidence and allegations to get an order from a justice of the peace in late August for bankruptcy trustee BDO Dunwoody to turn over extensive financial documents.

“I believe that cheques and credit card statements will show expenses of a personal nature, payroll records will show that Susan and Rick Hayhow overpaid themselves and bank records will show excessive funds were transferred to Ethiopia,” Const. Yvonne Heltke of Waterloo Regional Police wrote in an affidavit supporting the application.

Ethiopia expenses worried board member

Much of the evidence Heltke relied on came from Brown, a Cambridge businessperson and friend of the couple who was asked to become a volunteer board member just over a year before the agency went broke.

“They had skyrocketed,” Brown said of the Ethiopia expenses in a recent interview. “We had difficulty determining why it would cost that much money to run that size of a facility.”

Imagine began to unravel after it came to light that Susan Hayhow was having an affair with Morrow, an agency board member and employee of Global Reach whose wife, Teresa, also worked for the organization.

Brown started looking into its finances after finding out how much the Hayhows were paying themselves to run the four-year-old agency, which had offices on King Street in the Preston area of Cambridge.

By the time he went to police, Brown had turned up more than $300,000 in suspect expenses starting in January 2007. Records before that time couldn’t be found.

“When you see the (credit card) statements, they were living the life of the rich and famous,” he said. “How many families do you know that go to New York for five days and drop $13,000?”

Brown said credit card statements suggested they were routinely used for personal expenses, including shopping at high-end clothing stores, restaurants, and spas, and extensive cosmetic dental work.

“I’m sure Paris Hilton’s credit card statement looks like that,” he said. “The expenses we saw, there’s no way you could justify them.”

Susan Hayhow was with Morrow in Ethiopia when the bankruptcy was announced, jeopardizing the hopes of hundreds of families across Canada who had paid up to $15,000 to adopt children from overseas.

Susan Taves, the bankruptcy trustee for BDO, said Susan Hayhow offered early in the process to repay any expenses that weren’t legitimate.

Taves followed up and formally asked her for about $200,000.

“There was no money being offered at that point in time,” Taves said. “We got a fairly lengthy reply from her lawyer, but no funds.”

Susan Hayhow and Morrow have since sold their fully-renovated, stone home in Cambridge. A real estate listing for $475,000 described it as “done to the nines.”

Taves said Susan Hayhow told her in an email this month that she is travelling, doesn’t have a home address and can’t be easily reached. All future contact was directed to her lawyer.

Olaf Heinzel, a spokesperson for regional police, said investigators have heard she might be in Ethiopia, but haven’t been able to confirm it.

Rick Hayhow, who owned the large stone house with his wife before they separated, also couldn’t be reached for comment.

Following months of turmoil and uncertainty, the core adoption agency was salvaged with a new board of directors and a stripped-down staff.

Adoptions have since resumed after a majority of clients voted to pay an extra $4,000 each to put it back on solid financial footing.