A woman who admitted stealing more than $227,000 from a local agency that places mentally challenged people in jobs was sentenced Thursday to the Flowood Restitution Center, but will be paying back $27,000.

Cathy Demby, 42, 733 Central Ave., embezzled the funds between 2000 and 2006 from the Warren County Association of Retarded Citizens, according to her guilty pleas. Funded in part by county, state and federal sources, WCARC operates MIDD-West Industries. The organization is also a member agency of the United Way.

Demby was sentenced by Circuit Judge Isadore Patrick to work off an up-front $12,000 restitution order, a $1,500 fine and court costs of $322.50. Patrick also gave her an eight-year suspended prison sentence. Following her release from the restitution center, Demby will be restricted to house arrest, be on probation for three years and must pay the WCARC $250 a month for five years to total $15,000.

MIDD-West director Kearney Waites would not comment on the case, but the prosecutor, County Attorney Ricky Johnson, said the agency had probably spent as much on audits and fees associated with the investigation as they will get back from Demby.

“The association was hopeful that they would recover most of their losses, because they do rely on state and federal funds,” Johnson said. “They’re saddened that they are not going to get that back.”

Whether the WCARC carried any type of employee theft insurance that would reimburse them for the difference between restitution and the amount stolen was not known, he said. In similar previous cases, defendants have been ordered to pay back full amounts, even when it appeared unlikely they would have the means to do so.

Settling on a “realistic” amount for Demby to pay back has been “an issue we’ve been wrestling with for a year and a half,” Johnson said, with repeated, but unsuccessful, attempts to come up with a plan she would agree with. “The judge was imposing a consequence for her behavior, but there was no way to make the victim whole again.”

Johnson said he was not aware of anyone investigating Demby’s assets, and said a civil suit by the WCARC would be difficult to pursue after a criminal case in which a restitution sentence had been given.

Demby was a payroll specialist with about 17 years at the association when the theft was discovered. She was arrested in February 2007 and posted a $5,000 bond. A grand jury indicted her in July 2007.

Johnson prosecuted Demby’s case because it presented a conflict of interest for District Attorney Ricky Smith. Smith, in private practice before being elected in November 2007, had been Demby’s initial attorney. When Smith was elected, her case was transferred to attorney Marshall Sanders, who was subsequently convicted and imprisoned for income tax evasion.

Subsequently, Josie Mayfield Hudson represented Demby.

Demby pleaded guilty July 10 to embezzling $227,578.77 through fraudulent payroll checks, Johnson said. The checks were discovered by a fellow employee, with a subsequent investigation and audit.

“Obviously, it’s just a very sad situation for everybody involved,” he said. “In addition to the lost money, some of the agency’s most vulnerable employees had income tax, FICA and other payroll withholdings affected. “There were innocent victims that paid taxes on money they didn’t get,” Johnson said. Total losses were in the thousands of dollars, a police investigation showed.

Johnson said audits might provide the data for the clients to get their money back from the government.

Sentencing was originally set for Aug. 7, but as that date fell during a Warren County Grand Jury session, it was rescheduled for Aug. 21. That day, Patrick heard testimony from Waites, Johnson said, as well as an apology from Demby to the court and to Waites on behalf of the WCARC. Patrick considered the testimony before coming back with Thursday’s sentence.

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Contact Pamela Hitchins at phitchins@vicksburgpost.com