January 26, 2010
Fort Pierce city manager to forward Community Services audit findings to authorities
By Alexi Howk
FORT PIERCE City Manager David Recor said Tuesday he would refer the findings of a forensic audit accusing the Community Services Department of corruption to federal and state authorities to determine whether any criminal activity occurred by public employees or private citizens.
The audit, conducted by Kessler International, a New York City-based firm that specializes in uncovering white-collar crimes and corruption, cited acts of "fraud," "theft," "bribery" and "bid rigging" in its review of 52 cases involving the city's use of federal and state housing assistance money.
"This audit found that there was a complete abdication of the oversight role of the (Community Services Department) staff to protect and properly distribute taxpayer funds," the report states. "Taxpayers should never have to worry that their money is treated like candy."
Recor said the audit would be turned over to the State Attorney's Office, U.S. Attorney's Office and the Florida Department of Law Enforcement for review. He also said he's evaluating whether to dismantle housing programs that use federal dollars and reallocate the money toward infrastructure instead, including streets, drainage and lighting.
"I'm disappointed," said Recor, who ordered the audit after allegations of favoritism were raised after two city employees received city-backed mortgages over other qualified applicants. "The audit raises a lot of suspicious activity. This is not one of our brightest, shining moments, and sometimes it takes falling down to pick yourself back up and do things the right way."
Recor said he has not made a decision whether to fire anyone over the results of the audit. He said he wanted to give the department heads involved, Assistant Community Services Director Dorina Jenkins, Finance Director Gloria Johnson and Community Development Director Matt Margotta, time to review the audit and provide a "reasonable and plausible" explanation to the allegations by a Feb. 1 deadline.
"There may or may not be disciplinary action taken," Recor said. "We haven't reached a conclusion. We're still evaluating whether disciplinary action is warranted. The findings and observations that are defined in the audit shouldn't be construed as conclusions. They are opinions."
The Kessler audit accuses the Community Services Department of using state and federal housing dollars to benefit employees, as well as friends and relatives of employees. It also accuses the department of falsifying applications so friends and relatives could qualify for financial assistance.
The Community Services Department assists low-to-moderate-income families and first-time home buyers with obtaining affordable housing and administers the State Housing Initiative Partnership, Community Development Block Grant and Hurricane Housing Recovery programs.
The audit notes that Jenkins, who's the top person in charge of administering the city's housing programs, gave Women with Words, a non-profit corporation she formed with one of her subordinates, former program specialist Serena Knight, money. The audit did not specify how much money Women with Words received from the department.
The audit noted the corporation never filed a federal tax return reporting how it spent its funds for the life of the corporation.
During Kessler's review of a number of city-backed mortgages it found the department repeatedly chose National City Bank, formerly Harbor Federal Savings Bank, as its primary lender over a consortium of other approved lenders. It noted that Finance Director Gloria Johnson's daughter, Ursula Johnson, was the assistant manager and an auditor at the bank and also received money from the program. Ursula Johnson was later hired by the Community Services Department as a temporary employee and was considered for a permanent job until citizens found out and complained to city officials of nepotism.
A city employee in the MIS Department received $55,000 in down payment assistance from the city in November 2006. The mortgages were never reported to the Finance Department or filed with the Clerk of Courts Office, the audit noted. The employee has only made two payments to the city as of November of last year, the audit states.
"Based upon the information developed and the fact that the mortgage was never recorded nor did the city employee ever make an effort to make payments it can be construed that this individual in concert with the (Community Services Department) employees attempted to commit a theft of program funds," the audit states.
Interviews with employees also revealed contractors hired to do rehabilitation work on homes to bring them up to code were to provide "kickbacks" if they wanted to do business with the city. In some cases the city did not choose the lowest bidder on jobs.
During Kessler's review of work performed under the city's rehab program, most of the work conducted appeared to be more of a remodeling program in which applicants received granite kitchen counter tops, kitchen cabinets, screened in porches where no porch previously existed and cast aluminum customized address plaques.
A red flag was raised in 2006 when then-Community Services Director Brian O'Connor tried to clean up the department and reported applicants had been receiving work done on homes "beyond basic code violations" and the cost of some work exceeded the assessed value of the home. O'Connor also wanted the city to establish a "conflict of interest" policy after he raised questions over city employees and their relatives repeatedly coming back for financial assistance.
A year later, Recor, who was at the time the assistant city manager, sent O'Connor a letter terminating his contract "in an effort to reduce operational costs and expenditures."
O'Connor is now the director of the Indian River County Housing Authority.