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City of Toledo report backs allegations of wrongdoing
Neighborhoods Dept. probe uncovers widespread abuses
Mayor Mike Bell, left, calls the report thorough. Law Director Adam Loukx and Special Projects Manager Dan Hiskey say most allegations cannot be fully verified.
THE BLADE
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The city of Toledo released a crushing report on its Department of Neighborhoods Wednesday that supports allegations of widespread mismanagement, bid-rigging, misuse of funds, and possible criminal wrongdoing within the division but stops short of a full indictment.
The 19-page report is the result of a two-month internal investigation. It paints a picture of a department where problems included an off-the-books petty-cash fund, document falsification, 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.
However, the city's investigators -- Adam Loukx, the law director, and Daniel Hiskey, the special projects manager -- concluded that most of the accusations cannot be fully verified because of shoddy record-keeping and conflicting statements from those interviewed.
"Preliminary investigation has, to date, resulted in inconclusive evidence of some of the more serious allegations," the report states. "However, preliminary investigation has revealed that there are serious issues within the [Department of Neighborhoods] that should be addressed."
Investigators talked to a total of about 30 people, including contractors and department employees, and reviewed scores of files and documents.
The report confirms that the FBI and the U.S. Department of Housing and Urban Development are conducting their own investigations of the department and does not rule out possible legal action.
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Among the most egregious allegations outlined is that of possible theft of money and equipment within the Neighborhoods Department's neighborhood beautification action program.
The report says program officials cashed in scrap metal collected on the job and used the money as "petty cash."
Records from the scrap sales -- in themselves a questionable practice -- indicate just over $6,000 in proceeds, but expenditure receipts account for only $1,308. The fund was closed in 2010.
The report also details missing equipment from the program, including a forklift, a loaded trailer, and a chainsaw.
Other allegations deal with alleged favoritism, bid-rigging, and procedural mismanagement.
In one case, two contractors submitted three home-rehab bids that were nearly identical, with the exception of a few differences that gave one contractor an advantage.
The losing contractor, Sam Khalaf of CSK Construction, alleged that his sealed bids were provided to his competition.
The city's investigation backed up that contention but did not prove it definitively.
The report says: "Virtually all knowledgeable witnesses agree that the likelihood of complex line-item bids being virtually identical is extremely remote."
Employees also approved change orders that increased project costs, but they provided no explanation for the additional work, the report said.
City employees told investigators that bid openings often occurred without a city employee present, and in some cases the city may have paid multiple contractors for the same work, the report says.
Those interviewed also alleged certain city employees favored some contractors by guiding them through procedures and paying them more promptly.
Shoddy record-keeping made such allegations difficult to prove, investigators wrote.
Other potential wrongdoing was not fully investigated because of the passage of time, the report said.
In 2008, for example, Toledo police were investigating Jody Prude, a neighborhoods employee, for reportedly fleeing the scene of an accident and later reporting her vehicle stolen, according to police records.
During the investigation, the lead officer received a notice at her home that her property was not up to code. The administration of then-Mayor Carty Finkbeiner found that an unidentified individual had used another employee's computer to send a "fake and grossly improper" notice, the report said.
In the city's new report, investigators called the incident "indicative of an atmosphere that fostered such rampant misconduct" but did not comprehensively probe the matter because it happened several years ago.
Ms. Prude was disciplined by the city last month and was moved to another department.
"It is difficult, within these few short pages, to comprehensively illustrate the depths of the problems within the Department of Neighborhoods," the report concluded.
Investigators emphasized the results were preliminary, but Mayor Mike Bell said Wednesday he considers the city's side of the investigation complete, unless further evidence or questions are brought to his administration's attention.
He said the report has been handed over to the Toledo Police Department; the department has opened files on the petty-cash and lost-equipment issues, he added.
"I think the report's very thorough," he said. "The police department has it, HUD has it. … they have the ability to act on it if necessary."
The report says the federal investigation of the department is more extensive, encompassing the Code Violation Abatement Program administered by municipal housing court.
The program is federally funded and provides up to $4,500 to income-qualified homeowners to bring their properties into compliance with city code.
The city investigation followed a series of articles in The Blade detailing many of the accusations contained in Wednesday's report.
The report's tone differs drastically from the Bell administration's initial reaction. The city refused at first to answer The Blade's questions, saying, "there is no wrongdoing."
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 makes several additional recommendations, including putting bid invitations online for projects over $10,000, retraining employees in record-keeping and ethics, and improving equipment and document security.
Several city councilmen, who received the report Wednesday morning, cited the investigation as a good "first step." Council is scheduled to hold a hearing on the report Thursday at 10 a.m.
However, Paula Hicks-Hudson, vice chairman of council's neighborhoods committee, said she wants to see additional regulation of the department.
She said she plans to propose creation of a task force of citizens with federal program and auditing expertise to make sure the report's recommendations are followed.
Committee Chairman Adam Martinez expressed a similar desire for greater supervision.
He said he plans to hold quarterly meetings with administration officials to ensure progress is made.
Mr. Khalaf, the contractor whose sealed bids the report says probably were provided to a competitor, said the alleged bid leak potentially cost him three jobs worth more than $150,000.
"I have faith in the people who are investigating. I have faith they will find the truth," he said.
"It's very clear that my bids were compromised. There's no doubt collusion was committed."
Contact Tony Cook at: tcook@theblade.com or 419-724-6065.
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