Report cites wrongdoing in Toledo neighborhoods department

City law director Adam Loukx attends a council hearing on questionable bids and favoritism in the city's Department of Neighborhoods in this November, 2011, file photo. THE BLADE Enlarge | Buy This Photo

An internal investigation of the city’s neighborhoods department details allegations of bid-rigging, favoritism, misuse of funds, and document falsification, but concludes most of the accusations could not be fully verified.

The 19-page report, provided to city council members Wednesday morning, paints a picture of a deeply dysfunctional department where problems included an off-the-books petty cash fund, intimidation of a police officer who was investigating a department employee, an employee running his or her own contracting business, licensed contractors lending their names to unlicensed contractors, and a “probability” that one contractor was given access to another’s sealed bids.

After reviewing scores of documents and interviewing about 30 people, including employees and contractors, the city investigators outlined allegations that included:

• possible theft of money and equipment
• improper bidding procedures
• unexplained increases in project costs
• payment for the same work to different contractors
• “hand-holding” certain contractors through the process, giving them a competitive advantage
• special efforts to ensure more prompt payment for certain contractors
• missing, incomplete, and unorganized records

“This investigation uncovered or confirmed the existence of many singular irregularities and there is probable cause to believe that other improprieties may have occurred,” the report concludes. “It is difficult, within these few short pages, to comprehensively illustrate the depths of the problems within the Department of Neighborhoods.”

The city probe, prompted by a Blade investigation, took exactly two months to complete and was conducted by city Law Director Adam Loukx and Special Projects Manager Dan Hiskey. They emphasized that the results were preliminary.

The report also acknowledges that the FBI and the U.S. Department of Housing and Urban Development are continuing to interview witnesses and reviewing documents. The federal investigation is more extensive, the report says, encompassing the Code Violation Abatement Program administered by municipal housing court Judge C. Allen McConnell as well. The program is funded with federal dollars and provides up to $4,500 to income-qualified homeowners to bring their properties into compliance with city code. Judge McConnell did not immediately return a phone call Wednesday.

The tone of the report differs drastically from the initial reaction of Mayor Mike Bell’s administration. The city refused at first to answer The Blade’s questions about allegations of wrongdoing in the department, saying “there is no wrong-doing.”

The latest report says, “As the investigation proceeded, it became apparent that the issues within [the department] were more extensive than initially imagined.”

The report stops short of finding any criminal activity. “Determination of criminal wrongdoing, if any, is better left in the hands of law enforcement authorities with jurisdiction,” the report says. “In the final analysis, the types of allegations that we encountered are difficult to corroborate due to an atmosphere that invited misfeasance.”

The city has already taken several steps to address the problems. Mayor Bell fired the department’s director and housing commissioner and disciplined two other employees. He has also re-organized the department and proposed several changes to the department’s bidding procedures.

The report makes several additional recommendations, including putting bid invitations online for projects over $10,000, retraining employees in record-keeping and ethics, and improving security for department equipment and sensitive documents.

Contact Tony Cook at: tcook@theblade.com or 419-724-6065.

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