Sister Act: Nuns allegedly embezzled up to $500,000 from a suburban Los Angeles Catholic school

Two nuns allegedly embezzled up to $500,000 in tuition, fees and donations from St. James Catholic School in suburban Los Angeles, spent some of the money on gambling trips at casinos and then told parents the school was strapped for cash.

What happened?

Representatives from the Archdiocese of Los Angeles told parents and alumni of the school this week that the figure represents only what auditors have so far traced through six years of bank records. Other cash transactions may not be included, the Long Beach Press-Telegram reported.

The information came from an audio recording of a two-hour meeting on Monday at the Torrance, California, school. The Southern California News Group obtained an audio recording of the meeting, which was reportedly attended by a few hundred people.

According to the school, Sister Mary Margaret Kreuper, who served as principal, and Sister Lana Chang, who was a teacher, allegedly stole a substantial amount of school funds for personal use before Kreuper's retirement after 28 years at the school.

The archdiocese launched an internal investigation six months ago after irregularities surfaced during a standard audit of procedures. A family happened to request a copy of a check made out to the school, and staff members noticed it was deposited in a bank account other than the school's, according to the report.

Kreuper allegedly became "very nervous and very anxious" about the audit and asked staff to alter records, Michael Meyers, the church's monsignor, told the news outlet.

According to Meyers, funds were being misused for at least 10 years. Since the parish and school always ran in the black, no one knew what was happening.

The school hired a retired FBI agent to interview the staff members and nuns, Meyers told the news outlet.

"When he was talking to Sister Mary Margaret, she did acknowledge that she had been taking all the money, so that's not a question," Meyers said.

How did they do it?

Auditors found that the nuns were allegedly using a "long forgotten" school bank to manipulate funds. Only they knew it existed.

Under the system, "Kreuper handled all checks made out to the school for tuition and fees before handing them over to bookkeeping staff for processing," the Press-Telegram reported. "The principal allegedly withheld some of the checks and deposited them into the other account, endorsing the back with a stamp that read, 'St. James Convent' instead of 'St. James School.' "

The nuns have expressed remorse and the archdiocese and the church are not planning to pursue criminal charges, according to the report. They also reportedly plan to pay back the money.

Many parents at the meeting were outraged by the decision to not press charges, according to the Press-Telegram. Some said the nuns would be in jail if they were lay people. Others said restitution should be made to give teachers a pay raise or to pay for things such as an outdoor eating area, which Kreuper reportedly claimed the school could not afford.