“Some people just love their jobs,” says Scott Capps. “I was one of those people. I wish I still was.”

Capps had a 23-year career at Vanguard Group, where he rose to be a team leader, earning $65,000 a year, helping him raise his family in middle-class comfort — before he became frustrated, and sabotaged his career.

He spoke over a breakfast muffin at the West Chester Diner, his wife at his side, after dropping their child at school. It was about a month before he was due to report to federal prison in early October. A judge had sentenced him to four years for taking $2.1 million from dormant Vanguard Group accounts before they could be claimed (“escheated," lawyers say) by state governments as unclaimed property.

Capps, 48, of Valley Township in Chester County, blames himself. He wants people to understand his unusual odyssey — how he rose to the point where he thought he had earned the fast-growing company’s support in the form of more staff and better technology, so his department could "help people keep their life’s savings” — and then felt rejected when he was told system updates would cost too much.

Next, like a hacker, he found holes in Vanguard’s financial defenses, which he reported; but that failed to stimulate the software upgrades he believed were needed. He even came to feel that his advocacy was making him a target.

So Capps used the same techniques he warned about, to take money nobody seemed to miss. Over two years, "I stole $2.1 million, because I was [upset], because of what happened to my career,” Capps said. Plus, he wanted the money, which he spent on paying off debts, a house, and a custody fight for his older children.

It almost worked: The money’s owners were dead or had forgotten it. And Vanguard would not have detected the theft on its own, the federal prosecutor said in court. But the coconspirator who laundered the stolen money, Capps’ brother-in-law, confessed to law enforcement, who then told Vanguard. (The brother-in-law, Lance Tobin, pleaded guilty earlier, served a shorter sentence, and is scheduled to be out before Capps reports to prison in early October.)

It started on the tennis court

As a boy, Capps hadn’t expected he would work in an office. “I never finished high school. I thought maybe I’d work on the docks."

But out in Chester County, Capps’ aunt played tennis with a vice president at Vanguard, now the $5 trillion investment group, and the county’s largest for-profit employer. Vanguard needed eager workers in the early 1990s, when the company handled millions of calls, before retail automation transformed financial services.

"They offered me a job!” the gray-haired Capps smiled at the memory. He found his niche in a small Vanguard unit that oversaw dormant accounts, checked in with some investors, and when appropriate notified state officials, who have the right to take the money if it’s abandoned long enough (then give it back, if heirs prove it’s theirs).

“Vanguard would send me to these abandoned-property conferences. The states’ representatives told us we were the best in the industry. I took a lot of pride in that.”

Capps came to head a four-member abandoned-property team at a company started and run by Ivy League grads, who prized business-school credentials.

“After 15 years they wanted me to go to college, too,” Capps said. “But I declined. Not everybody is acclimated to go to school. I wanted to work for other people. What was I going to do in college? I didn’t get where I was because of school."

But he couldn’t stand still. Vanguard was growing rapidly, with its gospel of lower fees for clients. As Vanguard grew, it escheated more — sending the states an average of $5 million a year in the mid-1990s. That tripled to $16 million in 2008, and doubled again to $32 million by 2011 — for a total of $201 million from 1992 to 2012, records show.

A dawning realization

What changed Capps was his slowly dawning view that Vanguard, as well as its many competitors, was not finding all the dormant accounts in its systems and didn’t seem to be trying really hard to improve. Checking the laws and questioning company lawyers, Capps became convinced that “we are all doing this wrong.”

Based on old laws that gave kings buried treasure, escheat is designed to turn unclaimed funds over to the state — not let the company keep it for years.

Capps says professional investors and employer retirement programs, such as 401(k) plans, typically alert heirs when owners die. But no one outside the company seemed to check on the owners of more isolated accounts, such as those held by small nonprofits, and individual retirement accounts (IRAs).

Standard practice, Capps said, was to check with investors after they reach 70½ years old — when investors in dormant accounts must start collecting or risk paying big penalties — plus an additional dormancy period of at least three years in Pennsylvania.

Capps believed that it wasn’t good enough for the company to merely measure dormancy from the last annual report that was mailed out and not returned to Vanguard with an address “Unknown” label. "My idea was, we send out a mass call or mailing that says, ‘Call us.’ Then your account would no longer be inactive. But they didn’t want to do it.

“We had won Department of the Year because we were saving shareholders’ money from being escheated. But we could only go after the bigger fish. I told them we could double that if we grew from four people to seven. Vanguard said no: ‘Escheatment was not a revenue generator.’”

Company and industry lawyers, he says, told him to let state officials correct the company, if needed, and not to volunteer problems if outsiders didn’t ask. But many states “can’t find this issue,” Capps insisted. "The auditors didn’t ask the right questions” about how the company tested to see whose accounts were inactive and how closely that complied with state requirements.

In 2012 Vanguard lawyers put together a “not exhaustive” list of 16 states, including Pennsylvania and New Jersey, where the company risked being “noncompliant” because it wasn’t tracking inactive accounts, only noting active ones.

Sampling data for some states on the list, Capps estimated that there was an additional $100 million in funds subject to escheatment that Vanguard had not identified or paid.

“I pressed the issue,” Capps said. He said his period performance reviews began to suffer.

“They came up with something — they said I ‘didn’t network enough’! Are you kidding? I don’t have time to run my department and stage all compliance-related functions if I ‘networked,’ I didn’t have time for lunch! I stood up to my boss and said, ‘If you can find one person in this entire division who doesn’t know who I am, I’ll agree I don’t network enough." The boss, he said, conceded the point.

“It’s when I realized, I’m just a cog in the machine. That was the first time I felt that."

Next, Capps reported to his bosses on the vulnerabilities he saw in the company’s defense of customer accounts.

“The first way is to steal passwords,” Capps said. His team members “had 17 passwords, for different systems,” with varied expiration cycles. “It’s complicated. So people had to write them down." People left passwords in predictable places. An unscrupulous supervisor might change employee passwords, send and cancel checks, approve and deposit replacement checks, even shut a dormant account — and wipe the records so they couldn’t be retrieved, covering any tracks.

Capps said he tested this with Vanguard IT people and reported it to Vanguard auditors, with no apparent result.

Capps says he suggested solutions: “When your password was to be changed, you would get an email, with a link. It’s an email that I as a supervisor couldn’t get to. That’s the way to beat this. I showed them how to do it. But I was told, there was no money in the budget to generate that function.”

“So then I did it."

A family member helped

Capps says he brought up the system’s vulnerabilities at a Fourth of July family party. “I said I could steal this money, if I had someplace to deposit the checks."

His brother-in-law volunteered. The first time he raided an account, Capps said, he immediately considered giving the money back and confessing. But he expected that would mean the end of his Vanguard career. And he wasn’t ready for that.

A year, two years; a million dollars, two million. Capps stopped stealing in 2014, as if he had worked out the anger that led him to steal. Soon after, he went out on disability, he says, for “stress and anxiety. They kept paying me until 2016.” He got a job with a real estate broker, and left Vanguard behind.

Then something changed with his brother-in-law: “He started calling me and asking dumb questions. ‘Did you delete the records? How did you delete the records?'” Was he cooperating with authorities?

When in 2018 the FBI finally called, “it was a relief.” After Capps was charged with fraud, “Vanguard further tightened and enhanced controls to protect our clients and the firm since the incident,” said company spokeswoman Carolyn Wegemann, declining to provide details. It also made good on what Capps took.

Capps thought he might ease his penalties by telling the government about the compliance issues, the $100 million — or more, by now — that he figured Vanguard owed the states. He was not referred to state officials, the most obvious victims of noncompliance. (Jennifer Crandall, spokeswoman for U.S. Attorney William M. McSwain, said the office doesn’t discuss cases.)

Pennsylvania Treasury officials “have encountered some difficulty with how Vanguard handles retirement or investment accounts and their steps to ensure clients have not deceased,” noted agency spokesperson Mike Connolly. After Capps left Vanguard, Connolly said, the company admitted that it did not check death indexes to confirm when an account holder died, instead waiting until the person reached the statutory age

That policy “had the effect of keeping accounts open” for years after death in some cases, Connolly added, and fell short of what Treasury considers “best practice.”

Capps finds it ironic that among his convictions from the case is tax evasion — for not reporting the money he took, while the government took no obvious interest in the much larger sums he said weren’t being escheated. His sentence includes repaying the $2.1 million once he gets out: “It will take me 360 years to pay it off as ordered.”

Capps says he can’t blame the company: “Vanguard gave me a shot. I did the work. They allowed me to do it. I’ll always be grateful.”

Yet he also believes that the way the place ran back in his day created extra stress. “They talked a lot about ’people management.' The problem was that the middle management, the supervisors who run Vanguard, got rewarded for business results only. Not for developing people.

"And they squeezed too hard. I get that they need results. But they want more: ‘Go above and beyond.’ I hate that. Saying it is a big mantra at Vanguard: ‘Continuously raise the bar.’ If I don’t bust it more next year, I’m a failure? That’s how it was. That’s what we were up against every single year. It becomes too much. It will wear you out.”