Vendor Reform – The Next Frontier

By Rockland County Legislator – Charles Falciglia. Published in the Rockland Voice – April, 2016.

Defeating bad incumbent elected officials at the polls and preventing equally bad candidates from winning office is only one aspect of the reform that needs to be achieved in Rockland County, New York State and the entire nation for that matter. The interlocking relationships between elected officials in Rockland and certain vendors is another area we must now turn our attention too and begin to ask questions about their cost, oversight and partnership in the process.

The St. Lawrence Indictment recites numerous instances where it is alleged the town auditors were misled through knowingly false statements. A constituent of mine, who is not versed in financial matters, asked the simple question; “Isn’t it the auditor’s job not to be misled?”

You can glean from the Indictment that the auditors may possibly have been asking the right questions. If so, whether it translated into the audit report becomes a key question, along with the final conclusion as to whether the town’s records accurately reflected the town’s financial position.

If not, further questions should be raised. If yes, the question now becomes what can be done. The whole purpose of an audit is to detect defalcations, verify internal controls and financials and make recommendations for improvements.

While a sample can have items fall through the cracks, audits over a period of five years should discover structured improprieties and phantom receivables.

Auditors are also old hands at being spun; in other words an answer is couched in the best possible light to avoid further review. Even the most inexperienced auditor is wary of this. To be fair, the town’s auditors may have been instrumental in assisting in exposing the St. Lawrence creative accounting. Collusion with falsified documents thrown in can additionally be a difficult hurdle for any audit to penetrate.

An audit that cannot confirm the bottom line is a red flag to credit rating agencies and the public. In a normal situation the person in charge, in this case, Chris St. Lawrence, would be responsible for rectifying the problems; but of course he is the antagonist for the entire problem. What if Melissa Reimer was not Melissa Reimer? What if it was someone at retirement age that opted out instead of doing what Ms. Reimer did? Could you blame him or her?

What is lost in this whole episode is a boss whose actions put his employees in a position to choose between right and wrong, having to decide whether to turn a blind eye for economic survival. Nothing can be more reprehensible. As for Deputy Finance Director, Nathan Oberman, the Reimer lawsuit alleges he counseled her to just play ball, plus the now infamous quote, “Make the Supervisor Happy.” If true, it’s hard to feel much empathy for him.

So where do the auditors go? Very few audits produce such serious questions that rise to the level of potential criminality. An audit firm cannot force a client to make changes. When a client’s actions are egregious to the point of potential criminality it is not unusual that an audit firm will resign, rather than gamble with the reputational risk and fallout that may occur; which in itself is a red flag. At the same time revenue from municipalities is a steady staple of income and no one wants to lose a cash cow. They can go to the State Comptroller and/or law enforcement but what happens in the meantime.

In a bank, for example, a federal regulator; the FDIC, Office of the Comptroller of the Currency, or in the case of credit unions, the National Credit Union Administration, conduct their own examination, which in effect also audits the audit. Audit firms want no part of any criticism from a federal regulator. In banking, a matter requiring attention, MRA to use regulator speak, either gets resolved or gets escalated until resolved, which may go as far as an enforcement action, which mandates corrective action or ultimate takeover. Banks were fined twelve billion dollars last year for a variety of breakdowns; not to mention the expensive costs associated with resolving the problems.

Federal regulators in essence act as a built in monitor with veto power.

Most large corporations also have an audit committee made up of several directors. This is further policed by large stockholders, which are often large investment firms relying on dividends. A hostile takeover is a term many of us are familiar with.

In the public sector there is no real mechanism, no quick strike capability to stop the bleeding. Law enforcement and the wheels of justice move slowly, but criminality is not always the problem. The situation in the East Ramapo School District is the quintessential example of a race between a snail and a turtle. This is rooted in a culture that intervention with elected boards is somehow blasphemy. I say there is nothing wrong with intervention, especially since most people elected are beneficiaries of demographics, such as ethnicity, race, religion and favorable voter registration numbers; if they don’t run unopposed to begin with. There are probably hundreds of elected bodies in the country that could use a monitor.

The firm which audits the Town of Ramapo also audits the County of Rockland as well as Rockland County Sewer District One and the Rockland County Solid Waste Authority. They have been engaged for lengthy periods of time at all places. The Chairman for a majority of that time at both Sewer District One and the Solid Waste Authority was Chris St. Lawrence.

Equally concerning is the endless questions that keep arising at Rockland County Sewer District One. Their law firm since August of 2010, Pannone, Lopes, Devereaux and West has been paid several million dollars in fees. They began with an agreement to provide legal services for $85,000.00. They have made 111 contributions for almost $90,000.00 to 30 different Rockland County elected officials, former elected officials, candidates and political action committees over that same period; with a disproportionate amount to St. Lawrence related accounts. Friends of Christopher St. Lawrence received $15,500.00. His political action committee, Leadership that’s Working, received $8,750.00, and my favorite donation – $1,000.00 on August 20, 2010 – Vote Yes for Rockland Baseball. Another former Sewer District One Commissioner, Alex Gromack, received $6,500.00 in contributions.

Common sense on the part of both sewer commissioner and vendor would dictate that a commissioner should not take such huge donations from a vendor. Realistically, is there any incentive to question your vendor about performance or billings? This contribution cancer is too far gone and Sewer District One needs to find a new law firm.

Currently legislation is being proposed in the Legislature to strengthen the oversight and accountability over Sewer District One. Ironically, one of the provisions is to remove a commissioner upon a felony conviction. My hope is that it will be moved out of the public works committee on May 10, and be approved at the full legislative meeting on May 17; than approved by County Executive Day.

We debate term limits for elected officials. The most effective solution may be term limits for certain vendors. As the old saying goes, familiarity breeds contempt.