After nearly 16 months of questions, investigations, audits and heated political debate, the City Council on Tuesday accepted a final U.S. Department of Justice report that requires the repayment of about $300,000 in mishandled drug-forfeiture money.
The council voted on several measures to finalize a majority of the work that city, state and federal officials have performed on the case. Each measure carried unanimously 6-0.
The most significant measure taken was the council’s decision to move $299,968 from the city’s general operating account into the DOJ Equitable Sharing account, referred to by council members as the “DOJ fund.” The amount was determined by the DOJ and falls very close to the amount reported in a Sun Herald investigation in 2015.
DOJ forfeitures are money seized during joint operations between federal and municipal law enforcement agencies. Federal statute dictates cities are supposed to keep the money restricted for use only for certain police-related expenses. In other words, cities cannot dip into the drug money to cover payroll one week and later reimburse it.
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The council first learned of problems with the account in the summer of 2015. The fiscal-year audit showed the DOJ money had been commingled with the city’s general operating account and the city didn’t have enough to cover the restricted amount.
In its investigation, the Sun Herald obtained records from the DOJ, including an affidavit signed by Mayor Les Fillingame, certifying the city had accumulated $298,108 in forfeitures as of Sept. 30, 2014. As the council had not approved any purchases with the DOJ money since 2011, the balance of the general operating account should never have dipped below that amount.
But during an August 2015 meeting, council members noticed the general operating account had a cash balance of only $80,000. The council called for an inquiry by state and federal authorities.
As a result of Tuesday’s decision, the nearly $300,000 will be transferred to a separate checking account the city now maintains solely for drug-forfeiture money.
Councilman Lonnie Falgout said the council made the decision after a long executive session in which they discussed other alternatives, including dipping into the city’s reserve account.
“It was a long three-year effort creating a reserve fund,” he said. “We felt like it was not fair to the taxpayers (to take the money from the reserve fund).”
The city will be reinstated into the Equitable Sharing program and can use the money on police-related expenses as specified by the DOJ, which will provide monitoring and oversight.
Falgout said only the police chief can spend the money after council approval.
“This money should not have been commingled,” he said. “It should have been separated and restricted. The administration chose not to do that. They instead chose to take it and spend it without council approval.”
Fillingame said those accusations are a personal attack. The mayor acknowledged the money “was never properly separated,” but said it was never knowingly or nefariously misspent outside of federal guidelines.
“It was all spent on very legitimate purchases,” he said. “It’s an accounting issue that we are in the process of correcting.”
Council seeks bond claims
Fillingame signed DOJ affidavits every year, certifying the money was properly accounted for within federal guidelines.
Council members have continuously pointed to the signed affidavits, saying the mayor knowingly mishandled the money. They voted on another measure Tuesday to request the Office of the State Auditor to assist them in filing claims against the surety bonds of the mayor, two former city clerks and late Police Chief Mike De Nardo.
A surety bond is a financial guarantee for the performance of certain duties. A state statute requires most county and municipal officials to purchase surety bonds, which are typically sold by insurance companies and vary in cost and coverage amount.
The mayor called the bond claims “inappropriate.”
“Every agency and every auditor that has looked at the DOJ thing has suggested there is no claim on anyone,” he said. “It’s obviously a very personal thing and they could put themselves in great liability.”
Falgout refuted the mayor’s argument, saying the state auditor’s office reported there are potential grounds for the claims. He and other council members pointed to amended DOJ affidavits that were filed immediately after problems with the DOJ fund surfaced in 2015.
Those affidavits bear the mayor’s signature, but Fillingame said someone placed his electronic signature onto the affidavits without his knowledge.
“I did not physically sign those,” he said Wednesday. “I was not aware of them.”
He would not name the person he believes placed his signature on them, saying their intentions were simply a “knee-jerk reaction” to try to “reclaim expenses that would’ve been justifiable.”
The bond claims, if successful, would recoup any amount the city lost due to the improper commingling and expending of the DOJ money.