Bookkeeper Gets 33 Months for Bilking Danielle Steel

SAN FRANCISCO (April 21) -- A former bookkeeper who worked for author Danielle Steel for 15 years was sentenced Tuesday to 33 months in prison for embezzling $768,000 from the popular romance novelist.

Kristy S. Watts, 48, who pleaded guilty to one count of wire fraud and four counts of tax evasion, used her position of trust to award herself bonuses, divert payments to Steel into her own account, and appropriate the author's credit card points to take her family to Europe, according to United States Attorney Joseph P. Russoniello.

Watts, who has already repaid Steel more than $969,000 in the case, was ordered by Chief District Judge Vaughn R. Walker to pay an additional $60,677 for evading taxes.

Steel, who lives in San Francisco and Paris, is a prolific author who has published 77 best-selling novels with more than 580 million copies in print. Steel's own website calls her "the most popular author writing today." She is often working on several books at a time, and it is not unusual for her to work 18 to 20 hours a day, her website notes.

Steel claimed in a civil lawsuit filed last year that Watts embezzled $2.7 million before she discovered the theft in 2008 and fired her.

Watts, also known as Kristy Siegrist, "was trusted with significant oversight," the U.S. attorney's office said, and was responsible for the day-to-day management of Steel's personal and professional finances.

Her duties included paying bills, overseeing bank accounts and credit cards, handling the author's payroll, overseeing petty cash and obtaining foreign currency for international travel.

According to the U.S. attorney's office, Watts used three methods to embezzle funds from Steel.

She took checks that were made out to "cash" and deposited them in her own bank account. She used hundreds of thousands of the author's American Express rewards points to take herself and her family on trips in the United States and to England, Italy and Spain, and to purchase gifts for herself and her family. And with her authority over the payroll system, she gave herself unearned salary increases and bonuses.

"To conceal this aspect of her scheme, the defendant made false entries in the computer accounting system used to authorize and to track payments, such as falsely reporting that certain checks were payable to legitimate vendors for seemingly legitimate expenses," the prosecutor's office said.

Watts, who pleaded guilty in September, admitted using Steel's money to finance a lavish lifestyle. In 2004, she and her husband purchased a home in San Rafael for nearly $1.3 million and then spent more than $1 million remodeling and furnishing it. Watts and her husband also drove luxury cars and expensive motorcycles.

They have since sold the home, its furnishings and the cars to repay Steel.

Watts did not pay taxes on any of the money she took from the novelist, the prosecutor's office said.

In addition to sending Watts to prison, Judge Walker ordered her to serve 400 hours of community service after her release.