The city’s current auditing firm has detected possible overspending on several professional service contracts, and according to city officials, if a preliminary information proves to be accurate, the city will attempt to recover nearly $900,000 that was overspent in past years.
However, the current mayor was on the City Council during that time, and the current city business administrator was also a member of the past administration. Administration officials say that the council wasn’t aware of all of the expenditures, and that they questioned some contracts at the time.
City Business Administrator Robert Drasheff said last week that his office has been reviewing the awards, payments and management of legal and financial professional service contracts that were approved under the administration of Mayor Anthony Russo, who reigned from 1993 to 2001.
Last year, Russo was indicted for allegedly accepting bribes from certain contractors with the city in the 1990s.
“In attempting to analyze current costs against those of the past,” said Drasheff in a report that was distributed to the City Council recently, “I am encountering some significant anomalies in the award and payment to legal and financial professionals prior to July 1, 2001.”
July 1, 2001 is the date David Roberts was sworn into the mayor’s office.
Drasheff said that his findings have been forwarded to the state Attorney General’s office for further investigation.
Members of former Mayor Anthony Russo’s administration say they welcome the investigation because they are confident no wrongdoing will be found.
“What they are giving out is misinformation,” said former Business Administer George Crimmins Wednesday. “There is absolutely no validity to their claims.”
He added he believes this is just political retribution by Roberts against his opposition.
The investigation centers on three firms that had contracts with the city, and on one firm that allegedly didn’t have a contract but was paid anyway.
The firms in question
On Dec. 15, 1999, the City Council, of which Roberts was a member, approved a one-year contract and set caps on the amount that contractors were entitled to receive. Three firms that got contracts were the city’s auditors at the time, Lisa and Associates, and the law firms of Murray & Murray and Carbone & Faasse.
Six months later, there was a second resolution passed. On June 21, 2000, six months before the first resolution expired, the resolution doubled the amounts allotted to the three firms. But even as their contracts doubled, all three firms were, according to Drasheff, paid far in excess of their contracts.
“The amounts actually disbursed to these professionals appear to be completely outside of the contract limitations imposed by council resolution,” reads the investigation report. “No resolutions extending or amending these contracts were placed before the council, nor were any resolutions authorizing the chief financial officer to transfer balances to fund these account overexpenditures.”
The biggest alleged discrepancy involves Lisa and Associates, which had two contracts with combined caps of $400,000. But according to the city’s accounting documents, which were prepared by Ernst and Young, by the time the contract period ended in 2001, Lisa and Associates billed and were paid slightly over $1 million; a $600,000 discrepancy.
In July of 2003, Gerard Lisa pleaded guilty to paying bribes to county officials to ensure the renewal of accounting contracts.
Lisa also admitted in court that he paid bribes for the Hoboken contracts, but the crime that he was charged with and his subsequent plea agreement only relate to the bribes he paid to sullied former County Executive Robert Janiszewski through an unnamed intermediary for the county contract. No charges have yet been filed in regards to admission of bribes in Hoboken.
Russo was indicted in September with allegedly taking money from city vendors, including a waterfront-parking operator, a towing contractor, an accounting firm and a Board of Education attorney, in exchange for action on municipal contracts.
According to Russo’s indictment, between 1997 to about December 2001, increments of thousands of dollars at a time were allegedly given to Russo from an “unnamed accounting firm” in return for official action on professional services contracts.
Lisa ran the firm with his brother Joe Lisa, a close friend of Russo who passed away in 1997.
Russo has pleaded not guilty to all charges and is awaiting trial.
Alleged overexpenditures also involve the law firm of Carbone and Faasse, the firm hired as the Southern Waterfront Development Council. The law firm held two contracts with a combined cap of $220,000. According to the city’s current auditors, the firm billed and received $395,000 in payments.
If it comes to the city’s attention that more work is needed during the year, the City Council has the authority to amend the contract for more money, but according to Drasheff, that didn’t happen.
The third firm that allegedly overspent its budgetary line item was Murray, Murray and Corrigan, which was the city’s general counsel and labor counsel. The firm collected $40,000 more than what was provided for in its contracts, according to Drasheff.
The final party mentioned in the investigation is lawyer Arthur E. Balsamo, who was paid $18,250 for legal services in the 2001. The only problem, said Drasheff in his reports, was that the firm never held a contract with the city for that period of time.
Crimmins said that Balsamo had a contract and never worked or collected money without one.
The blame game
With the release of the city’s investigation, as is typical with the Hoboken City Council, animated debate is ongoing as to who is to blame if there was, in fact, overspending that occurred.
The present administration blames the former one, while supporters of Russo, past and present, say the City Council is responsible because it they who voted and approved the contracts.
In his report to the council, Drasheff said the council should not be held responsible because the former CFO and business administrator never notified them.
“The final authority for the payments to these professionals, and for the responsibility of notifying the council of these improper actions, rested with the Business Administrator George Crimmins and the Chief Financial Officer George DeStefano,” stated Drasheff.
However, the amounts for legal services and accounting did show up in the city budgets that were approved each year, as the previous year’s expenditures. Those budgets were approved by the City Council. In 2000, according to the 2001 budget, more than $1 million was spent on legal costs and services by the city.
There were those who did question the amount that were spending on those contracts. When the second one-year contract came before the council in one six-month period, there was dissension and discussion on the amount the city was spending on legal contracts. According the minutes of June 21, 2000, the date of the final vote of the second contracts, then-councilman Roberts, Councilman Ruben Ramos, and Tony Soares (who at the time was aligned with Roberts) voted against the contract, and questioned the amount that city was spending.
Crimmins said if there are concerns over contracts, all questions should be directed to the council because that is the body who approved them.
Councilman Christopher Campos, who was not on the council when the contracts were approved, said it is the responsibility of the business administrator to make sure the line items are not overspent.
“It’s not the fault of he council,” Campos said, “because the business administrators never disclosed [there was overspending on these contracts].”
Crimmins said the selected contracts show these investigations are nothing more than payback. All four firms have represented Russo, Crimmins or members of their political organization in the past, or have been generous campaign contributors.
“This is absolutely retribution – plain and simple,” Crimmins said.
Getting the money back
According to Sherman, the city can try to recoup some of the money, but it is going to be difficult. He said one possibility is to try and recover some of the money from the city’s surety bonds. The bonds are there to protect the city from fraudulent use of funds by municipal officials.
But Sherman added that this would not be easy because the city would have to prove there was “fraud or malfeasance.” He added that the surety would only cover $100,000, so it would be very difficult to collect all of the overspent funds.
He added that if the vendors actually did the work, it would be difficult to recoup the money from them even if the accepted funds were more than their state contracts.