Some claim 'taxpayer money not accounted for' in EEF

Englewood Environmental Foundation is entity with complex history

Posted 12/3/18

An Englewood resident stood at the lectern and delivered an address that won applause from some in the audience, asking the question: “Millions of dollars of taxpayer money are not accounted for. …

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Some claim 'taxpayer money not accounted for' in EEF

Englewood Environmental Foundation is entity with complex history

Posted

An Englewood resident stood at the lectern and delivered an address that won applause from some in the audience, asking the question:

“Millions of dollars of taxpayer money are not accounted for. Why?” said Chris Duis, addressing the Englewood City Council at its meeting Aug. 20.

Duis voiced support for a forensic audit of the Englewood Environmental Foundation and Englewood McLellan Reservoir Foundation, two nonprofit corporations that are separate from the city but run by high-level city employees. Known as EEF and EMRF, the city created them in the late 1990s to oversee property the city has indirect influence over, including the Englewood Civic Center and the surrounding CityCenter Englewood shopping development under EEF.

Following months of scrutiny over claims of various kinds of past financial improprieties — like allegedly giving work to friends — city staff recommended in early November that the council look into the claims against EEF with an audit.

“The truth will come out, as it always does,” Duis said in August.

But a look into EEF's history presents a more nuanced story, and whether alleged mismanagement occurred isn't clear from what's publicly known about the organization that has dominated recent political attention in Englewood.

'Piggy bank' alleged

JJ Margiotta, a local business owner and perhaps the loudest resident engaged in criticizing EEF, has claimed the public has been “kept in the dark for many years.”

“I think we're going to find the checkbook for EEF was used as someone's personal piggy bank for a while and checks were written out to friends and family of (EEF) board members and city employees,” Margiotta said at the Nov. 5 city council meeting.

An examination of EEF by the 18th Judicial District Attorney's Office in 2017 included statements from a previous public-works director for the city — who was also a former board member for EEF and EMRF — that outlined he had played hockey and golf, respectively, with two individuals who did work for EEF and EMRF. But the DA's office's report said no city employees “offered any evidence to support” allegations of improper contracts or getting “kickbacks.”

“It appeared to be speculation,” the DA's investigator, Brian Ahlberg, wrote in the report.

Margiotta, who is embroiled in a legal fight with the city over allegations of failure to file tax returns for his business, did not provide evidence of his above claims about EEF.

'There would still be expenses'

The city created EEF in 1997 to oversee redevelopment of the former Cinderella City mall into the CityCenter Englewood site — in the areas along Englewood Parkway east of South Santa Fe Drive — and to “shield the city from potential environmental liability” from issues including asbestos and gasoline contamination leaching from nearby property at the time, according to a city fact sheet.

At the outset, the city council approved a transfer of $1.1 million on Sept. 2, 1997, that went to EEF for the acquisition and remediation of property on the site and to pay for property management and other related costs, according to a letter from the federal Internal Revenue Service to EEF. That letter was posted on the city's website as part of the public information for the Nov. 13 city council study session meeting.

Most of the property was donated by Cindermak Associates in August 1997, according to the Nov. 13 information packet.

EEF oversees CityCenter's maintenance, which is paid for each year by common-area maintenance payments, or CAM. That cost is shared by those who control land on the CityCenter site. The Englewood Civic Center, home of the city's library and government offices, is owned by EEF, and the city, as a tenant, pays into the CAM.

In 2017, Englewood paid about $260,700 of the $1.4 million in total CAM costs, according to the Nov. 13 packet. That total includes items like electricity, snow removal, landscaping and security, according to a July city memorandum.

Elaine Hults, another frequent council critic, implied at the Nov. 19 council meeting that the loss of Englewood's fire department in 2015 wouldn't have happened without alleged financial problems with the nonprofits.

“All you have to do is look at the figures of EMRF and EEF and really realize what's been going on,” the Englewood resident told the council.

Broadly, EEF and EMRF are not funded through Englewood's general fund budget, but the city does pay to lease the civic center from EEF. The annual lease payment is about $1.45 million per year with five years remaining, said Benny Stiemsma, city spokesman.

Stiemsma responded to concerns like Hults' in a Nov. 21 statement.

“While the redevelopment costs could have been utilized in a different manner,” Stiemsma said, “there would still be ongoing expenses to the city for City Hall, a library, meeting space” and so on.

'I had no evidence'

The DA's office's 2017 report on EEF and EMRF contained interviews with about a dozen city employees and administrators and centered around alleged practices of the previous public-works director in question. Englewood's then-assistant city manager brought the matter to the office's attention in 2016.

The report looked into the allegations to determine if a criminal investigation would be warranted, but the report itself was not a criminal investigation.

A main source of concern surrounding EEF and EMRF is that they are not required to put work out to bid — in other words, they don't have to search for offers from different companies to seek the best price, the way the city does. The nonprofits were not bound by city policies, the report said.

City employees believed overpayment for services and kickbacks — the public-works director pocketing money based on his relationship with the service providers — to be taking place, but no one had direct knowledge or evidence to back up the accusations, the report said.

Although it's a separate entity from the city, EEF's governing board consists of the directors of the city's Public Works, Community Development and Finance departments.

In the report, the public-works director acknowledged that he and an individual who did work with EMRF had “played golf together on occasion and they speak regularly, but said they were business acquaintances and not personal friends.”

The city itself at one point declined to use him as a vendor, but the director continued to use him for services for EMRF starting around July 2013, the report said.

He also said the EMRF ground was maintained by an “off duty City police officer” but later learned the arrangement could be at odds with a police department rule, “meaning the arrangement would not be repeated.”

The city's finance director — who was also a board member for EEF and EMRF — said he was hopeful that when the then-new city manager, Eric Keck, arrived in late 2014, the improprieties would stop, the report said. When it appeared to him “that would not be the case,” he resigned.

But he said he “believed and/or understood” there was no evidence to support allegations of misconduct by the public-works director, the report said.

“The overall review determined there was no evidence to support a criminal investigation and no further investigation is warranted,” the investigator, Ahlberg, wrote.

'Not out of the ballpark'

Keck wanted the public-works director to start putting out work for bid, the report said, something the city staff currently plans to do for EEF.

“Keck noted the CAM rate seemed a little high but not out of the ball park for being realistic,” the report said. “This was based on Keck's previous experience in commercial real estate development and portfolio management.”

Keck directed that going forward, contracts should be put out for bid, but the public-works director said Keck couldn't say the contracts had to be bid because the nonprofits aren't subject to city policy, the report said.

Now, city staff “will be issuing detailed requests for proposals/bids in the first quarter of 2019 to establish new contracts to ensure the city is receiving reasonable costs for all services,” Stiemsma said.

City staff recommended in November that EEF undergo a forensic audit that could examine mismanagement or alleged criminal behavior. Another option would be a performance audit, which evaluates the effectiveness of how an organization runs. The council could seek an audit for both forensic and performance matters, according to Interim City Manager Dorothy Hargrove.

Council was set to discuss steps toward putting an audit in motion at its study session meeting Dec. 3, after the Englewood Herald's press time.

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