Why an FBI raid of this small N.J. city has been a long time coming
NJ.com, January 17, 2017
ORANGE
— When about two-dozen federal agents rolled up in their black-tinted SUVs to Orange City Hall this past week, forcing the government to shut down for the day as they combed through its files, few people gave much notice – and none seemed all that surprised.
There were no flashing lights or police lines. Passersby shrugged and continued to their cars with their shopping bags. A make-shift sign on the front door said city hall would reopen the next day, and a janitor politely turned people away.
“It’s going to be a long day,” he said.
But records show it’s a day that’s been a long time coming.
An NJ Advance Media review shows that, for at least five years, a tightly knit web of political operators has left behind a trail of financial problems in Orange, a city of about 30,000 where playing fast and loose with taxpayer funds appears to be the norm.
The three-month review – including hundreds of pages of city and court records, as well as interviews with current and former city officials – found nearly every city department has been cited since 2011 for violating some of the most basic spending rules.
Among other things, auditors have warned that residents may have been over or under-billed on their taxes, that grant money was not properly monitored, that pay-to-play laws may not have been followed, and that contracts might have been improperly bid.
Despite the warnings, many of the problems recurred year after year.
Those practices appear to have bled into two of the city’s oldest institutions – the YWCA and public library – which are now also under scrutiny for their financial practices, and their connections to some of the same people responsible for running city government.
In addition, Mayor Dwayne Warren’s administration has been hobbled by fights with city council over his hiring of top administrators to highly paid jobs that weren’t on the books. When one was forced to resign, he was then given another line of work – with the library.
The tangle of troubles have left many residents asking, “What took so long?”
“I wasn’t surprised at all,” said Bruce Meyer, a 30-year resident and former member of the city’s budget advisory committee. “I’m just surprised the FBI didn’t come to Orange sooner.”
The investigation
With an annual budget of $60 million, the small city struggles with many of the big issues other urban centers face – violence, unemployment, a poor tax base and a lack of resources. In the shadow of neighboring East Orange and Newark, its problems often fly under the radar.
“We get overlooked,” Meyer said. “But, I’d say the issues in Orange have been here for years.”
The tale is all too familiar.
In September 2007, then-mayor Mims Hackett was one of 11 New Jersey mayors busted in an FBI bribery sting. He pleaded guilty to accepting a $5,000 bribe and falsifying expense receipts and served about a year in prison before being released on probation.
In the current investigation, federal search warrants name two senior members of Warren’s administration, without officially accusing them of any crimes: Willis Edwards, the former deputy business administrator, and Tyshammie Cooper, his chief of staff.
The search warrants sought documents at city hall, the YWCA and the library relating to a host of suspected crimes, including theft, fraud, conspiracy, extortion and money laundering. They also seek records that might show city officials tried to cover up their actions.
Federal agents are focusing on the city’s water supply and general spending practices, its purchase and maintenance of the YWCA’s Main Street building, as well as the library’s use of grant money and its hiring of vendors and contractors, among other things.
Warren, a Democrat in his second term, said in a statement his administration “continues to make itself available to assist in this investigation.” The FBI declined comment, and no one has been accused of any wrongdoing.
Fishy finances
The city’s financial audits, a mundane annual review of its books, read like a laundry list of how not to handle taxpayer money. In at least the past five years, the city has received hundreds of audit comments outlining bad financial practices, sloppy bookkeeping and a lack of oversight over its spending.
Among the most notable:
Residents may have under- or over-paid their taxes for at least two years because the amount the city billed them did not match the amounts approved by Essex County. The auditors noted “inadequate controls” over the city’s property tax accounts.
Money from grants awarded to the city was not properly monitored and tracked, making it difficult – if not impossible – to ensure it was properly spent.
Not all spending could be accounted for because accounting records and bank accounts in city departments were not reconciled, and did not match the finance department’s records.
Contracts were awarded without using the proper bid process. Auditors have noted several other bidding issues, including the city not obtaining political contribution information on its vendors – a possible violation of pay-to-play laws.
Vouchers laying out the approved scope of work and pricing for contracted services were sometimes prepared after vendors had already performed the work.
“This tells you that there are issues,” said Judy Tutela, a municipal accountant and auditor with the Spire Group in Livingston, who was asked by NJ Advance Media to review two of the audits and comment on the irregularities noted in the reports.
Though she said audits don’t give enough information to get a full picture of the finances in Orange, they indicate fiduciary management in the city is in “disarray,” which allows for “things to fall through the cracks.”
Before the Jan. 11 raid of city hall, Warren, the mayor, said he believed the city was in “good financial condition.”
And, though the state Department of Community Affairs requires the city to adopt and submit a corrective action plan each year on how it will address each problem noted by the auditors, the records show many of the same problems recur annually.
Responsibility for fixing the problems rests with the administration and city council, said Tammori Petty, a spokeswoman for the community affairs department. Asked if the state could force a fix, Petty said the department has “very limited” enforcement powers.
“Many urban centers face financial challenges,” she said.
The YWCA
The YWCA of Essex and West Hudson, located in Orange, was deep in bankruptcy last year when the state community affairs department delivered the city a $2.5 million grant that would help bail it out. The money would be used by the city to buy and rehab the YWCA’s headquarters on Main Street, officials said.
When council voted to accept the grant, records show its president, Donna Williams, recused herself. That’s because it was Williams who had presided over the YWCA’s demise in the first place.
The non-profit organization filed Chapter 11 bankruptcy in August of 2013, court records show, largely the result of failing to pay years of payroll taxes. The YWCA also faced liens as a result of failing to pay contractors for work, and owed nearly $500,000 to several creditors.
Williams was the president of the organization’s board of trustees.
In early 2014, on the verge of shutting its doors, the YWCA received a lifeline in the form of a $175,000 grant from a private foundation. Lillie Moore, who had just returned to her hometown to become executive director at the organization and turn it around, said in an interview she remembers depositing the check, thinking it symbolized a new start.
But that same day, Moore said, $35,000 of the grant was inexplicably withdrawn from the YWCA’s bank account. For months, she said, she had suspected someone was misusing the organization’s money.
“That’s when I really knew,” she said.
Later that year, Moore filed suit against Williams and the YWCA, claiming a review of the group’s books and records revealed misspending and missing funds. Though there were nearly 50 paid employees on the books, only about 10 worked, Moore claimed.
On July 11, 2014, bankruptcy attorney Jay Lubetkin was assigned as the trustee to oversee the YWCA during its bankruptcy case. Moore dropped the lawsuit and remained in charge. Williams and the other YWCA board members were eventually forced to resign, Lubetkin said.
Moore would not say why she did not pursue the case, and Williams did not respond to requests for comment; neither did the national YWCA organization.
Lubetkin said he did not audit the YWCA’s spending, but noted it was “unusual” for a trustee to be appointed in such a proceeding because debtors usually manage themselves. He was named after the YWCA had allowed its insurance policy to lapse, court records show.
Lubetkin said the bankruptcy judge had “concerns about the existing management (satisfying) its fiduciary duties to the best interest of its creditors.”
The three-year bankruptcy process ended Nov. 17 when U.S. Bankruptcy Court Judge Rosemary Gambardella approved a final plan for the organization to repay its creditors.
Bailed out
The YWCA dug itself out of the hole largely by selling off its holdings, essentially, to taxpayers. Before filing bankruptcy, City National Bank foreclosed on the YWCA’s annex building on Park Ave. In 2013, the Orange Board of Education purchased it for more than $1.6 million, and converted it into an early childhood education center.
Then, in May of 2016, the city closed on a $1.5 million purchase of the Main Street building, using money from its $2.5 million Department of Community Affairs grant.
Today, the building that once saw hundreds of people in and out of it on a daily basis is mostly empty. Visitors to the 47,000-square-foot facility can see the need for major repairs – the pool is unusable, there are holes in the floors of some rooms and sagging ceilings in others.
City spokesman Keith Royster said in October that the city was in the “planning stages” of renovations that were set to begin by the end of last year. It is unclear if those have started.
According to a city budget log obtained by NJ Advance Media, since the purchase of the building, the city has spent about $74,600 on architectural and engineering work, sign printing, and a locksmith. Combined with closing and other costs related to the purchase of the building, the city had a little less than $715,000 left of the grant to spend on renovations, as of Oct. 28.
The mayor, Warren, said in a statement the YWCA’s pool will be renovated into an Olympic-sized swimming pool at the newly named Orange Recreation Center, a “welcome addition to the amenities and services which will soon be available to the families and children of Orange.”
But the federal search warrant obtained by NJ Advance Media suggests the FBI thinks the YWCA deal might have resulted in a losing situation for taxpayers. The agency has requested all documents related to the grant money used to purchase the building, and information on the vendors and contractors who have done any work there since the building changed hands.
Search warrants have not named Williams, the former board president.
The library
The FBI is also scrutinizing another historic institution in the city, the Orange Public Library, and ties to two members of the mayor’s administration: Edwards, the embattled former deputy business administrator; and Cooper, his current chief of staff and a member of the library’s board.
Shortly after his election in 2012, Warren attempted to appoint Edwards, a former state Assemblyman, as business administrator, but council blocked the move. A convoluted series of moves to keep Edwards in the administration followed, including a brief job swap with Cooper, and Warren appointing Edwards deputy business administrator.
During that time, records obtained by NJ Advance Media show, Edwards was reimbursed $12,392 in tuition to take courses in administration at the New Jersey Institute of Technology. Under continuing pressure from council, Edwards stepped down in late 2015, and a few months later was ordered by a state judge to repay about $268,000.
Edwards said in an interview that, after he left his city jobs, the library hired him and his firm, Strategic Ace Solutions, for $50,000 worth of consulting work. He said $25,000 was paid before the library ran out of money to pay him.
According to federal search warrants, the FBI now wants to know more about those payments, as well as the reimbursement he was paid by the city for his tuition.
Edwards said his work in the city consisted of “nothing improper on my part.”
There are also questions about a $48,000 federal Department of Housing and Urban Development grant, awarded through Essex County to the library in 2014 and intended for replacing the heating and cooling system. But, the money was never used for those repairs.
County officials raised questions about library spending in 2015 when they noticed the library had submitted a request for reimbursement for work on the HVAC chiller without providing an invoice from the contractor. So, they asked for the paperwork to back it up.
Instead of providing it, county spokesman Anthony Puglisi said, the library told the county it, too, had questions about the contractor’s work. When the county asked the library to put those concerns in writing, it instead responded by saying that it was abandoning the HVAC project.
The county demanded repayment within 90 days of the $18,239 that had already been spent. But Puglisi said it took 216 days to recoup the funds and pay back the federal government. The library only returned the money after it had been raided by the FBI, county officials said the administration has tried to distance itself from the library’s troubles. Royster, the city spokesman, said it was wrong to “assume that the City of Orange Township is responsible for the overall operation of the Orange Public Library–when in fact, it is not.”
But the library receives most of its budget from local tax dollars distributed by the city, and the federal search warrant executed at the library and city hall both sought records related to Cooper, who serves as a member of the library’s board of trustees.
Cooper earns $109,000 a year as chief of staff. But, similarly to Edwards, council contends Warren hired her even though it’s illegal and not in the city budget. The council, however, has not sued over the matter.
Board officials have declined to comment on the investigation. Cooper has not responded to requests for comment.
Though library budgets are typically small compared to that of cities and towns, there’s almost no oversight of their spending beyond their own boards of trustees, said James Lonergan, deputy librarian at New Jersey’s state library. They are trusted to operate within the law, Lonergan said.
Lonergan said the state library is not responsible for making sure libraries don’t misspend public money. Neither are municipalities or counties, he said. Libraries are independent and they manage themselves.
They were set up that way to ensure “intellectual freedom” – so that political interests could not be used to prohibit or slant the distribution of information, Lonergan said.
“By and large, the statutes work, and libraries follow them,” he said.
For his part, Warren, the mayor, said the library was “growing as a community center and technology hub” and should receive more funding from city council.
But that may have to wait, as the latest FBI raid – the second in six months — shows federal agents are only expanding their probe of the city and his administration.
Thomas Calcagni, who has worked as both a state and federal prosecutor and is now in private practice, said indictments are probably only a matter of time.
“Once a search warrant is executed, brace yourself — charges generally follow,” Calcagni said.
Jessica Mazzola may be reached at jmazzola@njadvancemedia.com. Follow her on Twitter @JessMazzola. Find NJ.com on Facebook.
Source:http://www.nj.com/essex/index.ssf/2017/01/why_an_fbi_raid_of_this_small_nj_city_has_been_a_l.html