Lawmaker: Letter shows payments no computer ‘glitch’
Effort under Gold Dome to criminalize behavior tabled
by Andy Phelan
andy@dekalbchamp.com
While an ongoing independent investigative audit looks deeper into the possibility that high-level DeKalb officials might have knowingly circumvented the county’s purchasing procurement policy, a letter circulated at the Capitol on Feb. 11 shows how those violations might have occurred.
Administration officials, including the CEO’s Executive Assistant Richard Stogner and his assistant Morris Williams, continue to blame what the county finance department described as “a dangerously compromised process” on problems they say arose after the installation of an Oracle system in 2004.
Stogner called the problem a computer “glitch,” and Williams testified before a House subcommittee last week the alarm that supposed to sound when contracts and purchases were allegedly being done improperly “was not turned on.”
But a letter dated April 20, 2007, from New Jersey IT company Basic Commerce & Industries Inc. to Stogner concerning how it wishes to be paid shows splitting purchase orders was likely no computer glitch.
In the letter, BCI’s president references discussions he had with Samit Roy of Scicom Infrastructure Services Inc., the police chief, his deputy and Stogner that he would like to be paid in five monthly installments of $49,500 for “ongoing work on the Police Advance Systems since 2006.”
The check equaling five payments of $49,500, signed by the CEO, was for $247,500 that did not go through proper county procedures, according to an internal audit signed by Finance Director Michael Bell.
It was paid, the audit said, without any accompanying invoices.
Bell’s internal audit called this an “intentional violation of those guidelines to circumvent sending items to the BOC for approval or to obtain bids.”
Stogner said not true.
“I was simply trying to get people paid,” said Stogner, who indicated that the Board of Commissioners approved a $402,000 contract with BCI in June of 2006 and then amended it for an additional $586,000 in November of that year.
“The money referred to in that letter was approved by the board,” said Stogner. “Bell is wrong.”
It’s all part of both an administration audit and an independent audit being conducted on more than $20 million in information system and other contracts. A report of the first phase of the outside audit being conducted by firm KPMG LLP is expected as early as next month.
Meanwhile a state lawmaker who represents parts of DeKalb is floating a bill to make it illegal to conduct business this way. He used the letter as exhibit “A” in an attempt persuade lawmakers to allow his bill to the floor for a vote, but was tabled for the foreseeable future.
If an official knowingly circumvents the process and is found to have received a kickback, that is a crime, but simply skirting the system currently is not, said author of the bill Rep. Mike Jacobs [R-Brookhaven].
“I was astonished to learn that violating the competitive bidding and commission approval safeguards is not a crime,” said Jacobs. “That’s why I’m trying to pass this bill, which will make this misconduct a misdemeanor, punishable by a fine, jail time or both. It shows we are serious about these bidding thresholds.”
If passed the way it stands today, Jacobs’ statewide law would also apply to purchasing procedures for school systems and cities, but would not be retroactive.
Jacobs said it is obvious to him from the letter that there had to be some consultation from someone in the county to the vendor.
“If you are doing this, then someone is potentially doing something that is tantamount to a criminal offense but it is not a criminal offense today,” said Jacobs.
Known as “bid-skirting” or “splitting” purchase orders, the practice is used to achieve lower dollar limits either to avoid the bidding process or laws that require the approval of elected officials, such as a board of commissioners.
In DeKalb County’s case, all contracts and purchases greater than $50,000 must be competitively bid, and all contracts and purchases more than $100,000 must first receive board approval.
Contracts and purchases over $50,000 do not have to be formerly bid if the vendor has existing contracts with the state of Georgia or the federal government at the time of purchase.
An audit late last year by the county’s Finance Department found that more than $20 million was paid to 14 technology companies from 2004-2007 using methods they contend circumvent the system. Independent auditor KPMG, hired unanimously by commissioners, is currently conducting an independent forensic audit of these and possibly other questionable contracts and purchases.
In DeKalb, it was an annual audit by KPMG for 2006 purchases and contracts that first revealed publicly that millions of taxpayer dollars might be improperly being funneled to mostly technology firms for consulting fees.
In a 10-page letter dated June 25, 2007, KPMG said the county’s purchasing and information system departments, which are controlled by the CEO and his staff, conducted “numerous purchases that were required to be competitively bid in accordance with the county’s purchasing policy, that were not bid” in 2006.
The report goes on to state that the administration approved contracts in excess of $100,000 for consulting contracts “on numerous occasions, ” which should have gone to the board.
“It was obvious that there were intentional violation of those guidelines to circumvent sending items to the BOC for approval or to obtain bids,” said Deputy Finance Director Eugene O’Mard to the CEO in a letter dated Nov. 14 Bell signed. The letter goes on to say this practice is in violation of the county’s Organizational Act, the law that establishes how the county operates.
In just one case of splitting purchase orders, Bell’s internal auditors discovered “nine short-term contracts ranging from $42,000 to $49,500” to technology company Scicom Infrastructure Services Inc. from 2005-2007 that totaled more than $420,000. But Scicom was paid more than $2.8 million during the audit period, the letter said.
None of these purchases went out to bid or were approved by the board of commissioners as required by county law.
In December, Scicom President Samit Roy said his company has nothing to hide and welcomed the audit.
“Absolutely, this is not a concern,” he said. “I’ll open up my books to anybody.” When asked whether he thought receiving contracts in a manner the finance department deemed to be “gross violations” was acceptable, Roy said, “I don’t think that’s inappropriate.”
At a board Audit & Contracts Review Committee meeting two months ago, Bell told commissioners Stogner “initiated, approved and signed” the contracts to Scicom and others. Purchasing and Contracts acting Director Kelvin Walton confirmed that Stogner approved the contracts.
Stogner did not attend that meeting, but he told The Champion earlier he was to blame because he had become “too lax.” “I should have done a better job of oversight,” he said.
In testimony before a House committee debating Jacob’s bill last week, Stogner’s assistant Williams, who opposes the bill, told lawmakers “we made some mistakes.”
“I wasn’t the guy who did it – good thing for me,” said Williams, who told lawmakers that if someone knowingly used these methods to circumvent the system “it should be a felony.”
Jacobs is still considering whether a threshold should be established, which once transgressed, would be a felony.
“They should be fired and prosecuted to the full extent of the law,” said Williams. But the bill is unnecessary, he said, because “safeguards are already there.” Williams said the problems in DeKalb were caused by “carelessness” and that “I don’t think the CEO had anything to do with this.”
“There was no intention to skirt any laws,” said Williams, who indicated that if DeKalb commissioners thought laws were broken “they could just pick up the phone and call the GBI [Georgia Bureau of Investigations], FBI [Federal Bureau of Investigations] or the DA [district attorney].”
State Rep. Kevin Levitas (D-Atlanta), who represents parts of DeKalb and is a member of the Judicial Non-Civil Review Committee reviewing the bill, disagreed. Levitas, a former prosecutor, said he was troubled by Williams’s testimony, particularly that safeguards are in place.
“I don’t share your view that there are proper checks and balances,” said Levitas. “I’m not saying this is corruption, we don’t know that yet. But that’s not true that you can just call the GBI or FBI. Those just are not the facts. If they [DeKalb administration] were knowingly violating the bidding process that upsets me as a lawmaker and a taxpayer.”
Jim Grubiak, general counsel for the Association County Commissioners of Georgia, said they also do not support Jacobs’ bill. Officials from Gwinnett and Cobb counties also testified before the subcommittee opposing the legislation.
Grubiak said it is a knee-jerk reaction “stimulated by the DeKalb IT [information technology] situation.”
“We think you should let local officials, who are affected directly by it, take care of their own business,” said Grubiak. “From our point of view, the commissioners are following their proper procedure by launching an independent audit.”
Grubiak said it would be different if county commissioners did not have the tools to deal with these kinds of problems.
“Jacobs doesn’t need to be micro-managing the county government as a state legislator,” Grubiak said. “That’s not his job. He’s trying to fix a problem that doesn’t exist.”
As a lawmaker, Jacobs said he’s just trying to make government more responsive to the taxpayers and make this activity illegal in the future.
“These safeguards are in place to ensure that taxpayers receive the best services at the lowest possible cost,” he said. “They are designed to thwart the practice of giving high-priced sweetheart deals to favored vendors. Hopefully this law will deter officials from doing this ever again.
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