The State Auditor’s Office has issued a demand for $54, 215.17 in payments from former Pascagoula City Manager Joe Huffman and former city comptroller Robert Parker to cover investigative costs and accrued interest related to their “improper” financial management of bond proceeds.
State Auditor Shad White announced the demand in a news release Wednesday. An investigation began after the state received a complaint about a possible violation related to $27 million in bond agreements the city had entered into in December 2014 and June 2017.
The bonds, White said, should have been deposited into a bank account separate from the city’s general fund account to “ensure adherence to bond terms,” which mandated the bond revenue be spent on city infrastructure and other specified projects in the Flagship city.
Their actions resulted in what appeared to be $14 million in missing funds, prompting layoffs and other action in the city.
The investigation, White said, showed that Huffman and Parker knew what they were doing when they “improperly transferred” the bond proceeds in the city’s general fund.
Though no criminal wrongdoing was found, White said, the actions of the former city manager and comptroller ultimately cost the city $31,500 in interest revenue. White also said his office is able to pursue civil litigation based on the findings.
“It also created the illusion of a budget surplus,” White said. “While payments for bond debt were made in a timely fashion, and no money was stolen from the city of Pascagoula, mixing bond money into the general fund account is improper.”
“The taxpayers of Pascagoula should know that $14 million is not missing from their account, but millions in bond money was spent on general operations in 2014 and 2017,” he said. “These laws about bond money exist for an important reason. They exist to make sure policymakers don’t tell the public they are taking on a bond debt for one purpose but then actually spend the money on something else. They exist to avoid confusion about how much a city or county actually has to spend on general expenditures, like salaries and administration.”
District Attorney Angel Myers McIlrath said the details and results of the investigation went before a grand jury, but they did not find that any criminal wrongdoing occurred.
“The state Auditor’s Office conducted a thorough investigation into the the city of Pascagoula’s finances, as a result of concerns brought to them and my office by Mayor (Dane) Maxwell,” McIlrath said. “The Grand jury, after having heard the details and outcome of the investigation, determined that there was no criminal wrongdoing and I am confident in their decision. The fact that the grand jury did not find any criminal conduct does not preclude the State Auditor from pursuing civil remedies based on their investigation.”
Parker’s cash demand accounts for $47,395.91, with Huffman’s cash demand being $6,819,26 to cover the loss of interest revenue during their tenure in office.
Surety bonds are similar to insurance in that they are designed to protect the taxpayers from corruption, White said.
Should Huffman and Parker fail to pay the money they owe within 30 days, the case will be passed on to the state Attorney General’s office for potential civil litigation to recover the money that is owed.
Maxwell thanked the state auditor, district attorney, federal agents and other legal authorities for conducting “a thorough investigation into the financial crisis this administration discovered and promptly reported in July 2018 when a formal complaint was filed by city officials.”
“Collectively, we are glad to see this investigation conclude and that those responsible for the mismanagement of our tax dollars will be held accountable,” Maxwell said. “We are also happy that the city will be able to recoup those funds lost as a result of the mismanagement by the previous administration through civil penalties....”
The mismanagement by the former city manager and comptroller, Maxwell said, led the city administration to believe they had a budget surplus when a deficit actually existed.
“Make no mistake — challenges remain as the city recovers from this unfortunate episode in our history but this City Council and administration are committed to staying the course and righting this ship,” Maxwell said. “We have taken the steps necessary to ensure our city will be financially and legally healthier as a result or our efforts, and we are happy that Pascagoula will be better than we found it as a result of this administration’s diligence and commitment.”