The City of Toledo's decision to award nearly a million dollars in federal grants and loans to a development company owned by the mayor's niece may have violated state law, but not necessarily because of family ties.
The two businessmen with whom Mayor Mike Bell's niece teamed up to form the company each gave more than $1,000 to the mayor's election campaign, possibly violating a state law that prohibits the award of no-bid contracts to those who have contributed more than $1,000 to the campaign of an officeholder with ultimate responsibility for awarding the contract.
Mayor Bell, who is traveling in Asia this week with his niece, said he wasn't aware of the law and doesn't believe the city screens potential contract recipients to see whether they've donated to his campaign.
"If anything happened, it wasn't on purpose," he said. "Nobody purposely did anything wrong here. If we have, we'll do what we have to do."
The mayor's niece, Shayla Bell, 27, joined with Paul Pellioni and Jim Nicholson, owners of Toledo Mirror & Glass, to create Fort Industry Development in March, 2010. Mr. Pellioni and Mr. Nicholson each own 24.5 percent of the company and Ms. Bell, who had no prior construction or development experience, owns 51 percent, according to documents filed with the city. Their involvement provided a level of experience that was necessary for Ms. Bell's company to qualify for the program through which the contracts were awarded, according to city officials.
Prior to their involvement with Fort Industry, Mr. Nicholson and Mr. Pellioni contributed to the mayor's campaign.
Mr. Pellioni, a college friend of the mayor, gave $1,000 in August, 2009, and $450 in January, 2010, after the mayor took office and a little more than a month before Ms. Bell submitted Fort Industry's paperwork to the city to qualify for the program. Mr. Nicholson donated $1,250 to the mayor's campaign in August, 2009.
Since Fort Industry was created, the city has awarded about $656,000 in federal grants and loans to the company and has plans to award $262,000 more. The money -- nearly $1 million overall -- is part of a federal housing program intended to stabilize neighborhoods hit hard by the foreclosure crisis and is used by developers to buy, rehabilitate, and sell the houses.
Money from the sales is returned to the city for future use in the program, but the developer keeps a construction-management fee of up to 10 percent of the hard construction costs and a developer fee of up to 15 percent of the construction and acquisition costs. For Fort Industry, that would translate to about $149,000.
Mr. Pellioni said yesterday that he and Mr. Nicholson were unaware of the law.
Adam Loukx, Toledo's law director, said he would have to do further research to see whether the prohibition should have been applied in this case. "It's a complex question I can't answer with certainty unless I do some further research," he said.
There could be other portions of state law that contradict the provision banning the award of no-bid contracts to large campaign donors, and a 2009 decision by the Ohio 10th Appellate District Court of Appeals may have stricken down a portion of the Ohio law in question, he said.
Spokesmen for the Ohio secretary of state and Ohio attorney general offices, however, said the law remains in effect and does apply to the city of Toledo, though they declined to comment on this specific case.
Matt McClellan, spokesmen for Secretary of State Jon Husted, said the law applies to any contributor who owns more than 20 percent of a company that receives a contract. Enforcement of the law generally falls to the Ohio Ethics Commission or the county prosecutor, Mr. McClellan said.
Lucas County Prosecutor Julia Bates said her office rarely handles such cases and likely would not handle this one unless the Ethics commission referred it to her. The penalty is a fine of up to $1,000 and, if the contracted work has not been performed, the contracts could be rescinded, she said.
Ethics Commission officials did not return calls for comment.
Mayor Bell emphasized that he was not involved in awarding the contracts. Those decisions were left to officials in the city's neighborhoods department, he said. His signature is not on the contracts, he said. Rather, another city official signs his or her name on the line where his is listed, writing "for MPB," the mayor's initials, next to the signature. He said he wasn't sure who signed the Fort Industry contracts.
Most of the members of city council contacted by The Blade referred questions about the issue to the city's law department, but Councilman D. Michael Collins said the Fort Industry contracts raise concerns.
"The state adopted that law to avoid the appearances of pay-to-play," he said. He doubted city officials purposely ignored the law but said the city needs to make sure its procedures take the law into account.
As for the involvement of his niece, the mayor has said she earned the contracts the same way anybody else would. About eight other firms or community development agencies have received such contracts. Of those, two have received or are expected to receive larger amounts of money than Fort Industry.
The mayor and officials in the city's neighborhoods department have described Ms. Bell's company involvement as quality work.
Contact Tony Cook at: firstname.lastname@example.org or 419-724-6065.