LINCOLN — Disgraced and disbarred, Terry Malcom left prison a decade ago. Then an old law school chum decided to give him a chance to start over.

P.J. Anderson, a developer and former county administrator in Colorado Springs, said he knew his fun-loving buddy had spent time in prison for embezzling client funds.

But Anderson said his impression was that Malcom had taken a fall for others back in Nebraska, and that his criminal record was a one-time mistake.

“I never knew the whole story,” Anderson said. “There really wasn’t a Google then. I didn’t know how to use it.”

Now he — and dozens of customers of two water districts in the mountains west of Colorado Springs — wish he had.

A month ago Malcom was sentenced to 18 years in prison for embezzling $1.1 million from the water districts, which have been forced to raise rates because of the ripoff.

The prison term came 16 years after he had been sentenced in Nebraska for stealing $2.7 million from his law clients’ estate and trust accounts.

Malcom, now 67, once was the toast of the town in McCook, Nebraska. He lived in the nicest house in the community, bought drinks for everyone at the local steakhouse, ran a fundraising drive for the local hospital and had been appointed to the Nebraska Highway Commission by then-Gov. Kay Orr.

Friends felt the smooth-talking lawyer could have run for governor back then. Now they’re scratching their heads.

“Really? After being caught and imprisoned, you’d do it again?” said Red Willow County Attorney Paul Wood, a one-time law partner with Malcom.

“He was the most fantastic liar there ever was,” said Tom Noffsinger, a veterinarian in Benkelman, Nebraska.

Noffsinger, whose family lost $245,000 that had been entrusted to Malcom, said he had lost track of Malcom in the years after his imprisonment.

For a while, a check from the U.S. Treasury would show up in the mailbox each quarter — part of the $2.73 million in restitution Malcom had been ordered to pay his dozen victims in southwest Nebraska.

But the checks were a pittance — about $40 each quarter is what Noffsinger said he got. Overall, Malcom still owes $2,576.068.10 in restitution. His last check to repay his victims, of $500, came more than two years ago, just before ratepayer money was discovered missing from the Cascade Metropolitan and Arabian Acres Metropolitan water districts in Colorado.

Noffsinger, who has a veterinary practice that stretches from feedlots in Kansas and Nebraska to the West Coast, said he was able to financially recover from his losses. But others around McCook weren’t so lucky. One family lost $1.4 million from a trust account; another was left with a $300,000 bill for federal taxes that Malcom failed to pay.

“He ruined a lot of lives,” Noffsinger said.

Anderson, the old college chum, said that he had kept in touch with Malcom after both graduated from the Washburn University law school in Topeka, Kansas. Malcom and his family went out to Colorado a couple of times to go skiing.

“I’d make an annual bet with him on the Nebraska-Colorado football game, and I’d lose every year,” Anderson said.

Then, one day, Anderson called McCook and found that Malcom’s office phone had been disconnected. Eventually he reached a friend who told him Malcom had been arrested.

“Your friend is not going to be the next governor of Nebraska,” Anderson was told.

But Anderson kept in touch with Malcom while he served time in prison and promised that he would help find a job for him when he got out.

That led to a job running the Cascade Metropolitan water district, serving 350 rural customers near Manitou Springs. The pay: $3,000 a month. Eventually Malcom ended up running a second water district.

Anderson said he employed some safeguards. He required two signatures of board members on water district checks, and an annual audit. But Malcom forged the signatures, he said, and audits didn’t detect the diversion of money into Malcom’s personal accounts.

“I still don’t believe it,” Anderson said. “The only thing I can understand with this kind of thing is that it’s an addiction. There’s something wrong. From people I talk to, you don’t get over that.”

An attorney who represented Malcom in Nebraska, Bob Creager of Lincoln, declined to comment when asked about his former client’s recent conviction.

Where the money Malcom stole went is as big a mystery in Colorado as it was in Nebraska.

In Nebraska there were rumors that Malcom had expensive boats hidden in scattered garages. Malcom lived like “the king of Siam” in McCook, according to one former friend. His family took nice trips and drove new cars, but people thought there had to be assets hidden elsewhere.

Anderson said there are similar suspicions in Colorado Springs. Malcom, he said, lived a lifestyle much larger than his income, but that didn’t account for all of the money. Anderson said Malcom was involved with a son in a software deal in California’s Silicon Valley that didn’t pan out.

Malcom’s home computer records showed to the penny what he stole, Anderson said.

“He was the meticulous thief that the audit firm I hired never discovered,” he said.

When Malcom was sent to prison the first time, he apologized profusely at the sentencing hearing.

Anderson said he did the same thing in Colorado, and expressed regret again in a recent letter to him — a letter he doesn’t plan to answer.

“I thought I was giving him a second chance,” he said. “But he really took advantage of me, and people in this water district.”

Contact the writer: 402-473-9584, paul.hammel@owh.com

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