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Forensic audit of Pittsburgh oversight agency planned amid claims contracts were manipulated

| Friday, May 13, 2016, 11:30 p.m.
Former Pittsburgh Intergovernmental Cooperation Authority (ICA) executive director Henry Sciortino of West Chester.
Stephanie Strasburg | Tribune-Review
Former Pittsburgh Intergovernmental Cooperation Authority (ICA) executive director Henry Sciortino of West Chester.
State Auditor General Eugene DePasquale speaks withTrib reporters and editors for a interview at the DL Clark Building on Pittsburgh's North Shore on Thursday December 5, 2013.
Sidney Davis | Tribune-Review
State Auditor General Eugene DePasquale speaks withTrib reporters and editors for a interview at the DL Clark Building on Pittsburgh's North Shore on Thursday December 5, 2013.

The corruption probe of the Pittsburgh Intergovernmental Cooperation Agency will expand to include a series of contracts the state watchdog agency allegedly forced on the city between 2011 and 2013, the Tribune-Review has learned.

In July, investigators for state Auditor General Eugene DePasquale will begin a forensic examination of all ICA spending. Part of the audit will look at ICA's role in the city's multi-million-dollar Enterprise Resource Planning project, called ERP.

“All questions that have been raised about this program will be investigated as far as the law will allow,” DePasquale told the Trib.

Most of the $7.4 million the city spent on ERP went toward creating and maintaining a payroll and accounts payable system that piggybacked on Allegheny County software. But other programs branched off of it: everything from a tracking system for Pittsburgh paving projects to upgrades of the city's digital maps.

On April 20, detectives for county District Attorney Stephen Zappala served search warrants on the ICA and banking giant PNC, which handled the agency's checking account. According to the warrants, the detectives targeted ICA executive director Henry Sciortino in their search for evidence of the destruction or mass loss of ICA financial records — details revealed by a Trib investigative series.

ERP targeted

Former ICA board member Ann Dugan told the Trib that investigators also wanted to learn more about the ERP program. In early April, she turned over internal ICA paperwork and communications to detectives to shed light on what she considered questionable, behind-the-scenes ICA efforts during the ERP project.

“To me, these should be public documents,” said Dugan.

The interest by investigators comes long after Dugan and city officials tried to raise red flags about the project with state agencies and lawmakers — including the auditor general — according to files obtained by the Trib.

The documents show Pittsburgh officials in 2013 were concerned that they were being extorted to buy unwanted software, equipment and services from vendors chosen by ICA at inflated prices. If they didn't go along, they risked losing out on millions of dollars in Rivers Casino tax revenues earmarked for city coffers but withheld by ICA.

“The reality is that ICA wanted to control the city. And I believe that ICA wanted to control the city so that ICA would control contracts,” said Joanna Huss, communications director for then-Mayor Luke Ravenstahl, who left office in 2013.

Huss' statement was echoed by five other high-level figures of Ravenstahl's administration. They demanded anonymity because they say that they fear retaliation by state officials and lawmakers who might be linked to the ERP project.

Coercing force

Formed a dozen years ago to save Pittsburgh from possible bankruptcy, ICA works alongside a similar state body organized under Act 47 to approve Pittsburgh's budgets. Unlike Act 47 overseers, ICA can stop the flow of $10 million in annual gambling revenues to the city to coerce its behavior — a tool it threatened to use during the ERP procurement process, according to city documents and ICA files.

In a March 17, 2013, email, for example, ICA's Sciortino told five ICA board members about his efforts to prod the city into purchasing from technology leader Oracle nearly $6 million in “business intelligence tools that we mandated based on both my request and the request from the city project manager.”

Five days later, Sciortino told the same ICA officials that because the city balked at buying what “they were directed to acquire, the ICA should capture the (casino) money already given them, acquire the modules, employ an agent to work with the city auditors and staff to oversee installation, and proper use of the modules that will help the city manage the problem account as well as address the needs the ICA has identified.”

“Modules” are pieces of software that perform specific tasks with a larger ERP framework, but they're bought separately. Neither Oracle's representative on the ERP project, Mark Zimmerman, nor Sciortino returned messages seeking comment.

Blocking bids

Although it was implied in Sciortino's initial email that Pittsburgh's ERP project director favored the 2013 Oracle upgrades, Chuck Half, former Pittsburgh Innovation, Performance and Strategy manager, was exploring cheaper bids from rival vendors and reaching out to state investigators to probe the ICA.

According to ICA correspondence, the state agency moved to block Half's search for cheaper products because the proposed contractors were not “proven vendors” with software compatible “with one another or with the Oracle system currently in place.”

On April 2, 2013, Half contacted the Auditor General's hotline about the ICA's pressure to select Oracle, but the city didn't get a response until July 25, 2013, when a state official requested more information. On Aug. 20, 2013, a follow-up message from Liz Gerloff Wagenseller, now the Auditor General's chief of staff but then the agency's external communications director, told City Hall that DePasquale would not make a decision for “a month or two” on an ERP probe.

Auditing efforts

DePasquale told the Trib that he was stymied in 2013 by state laws that legally put the ICA “beyond our jurisdiction.” Two years later, following a similar request from Mayor Bill Peduto's administration, state auditors were able to take a brief look at the ICA's books only because the agency's board president, Nicholas Varischetti, volunteered to let DePasquale's investigators in.

The Auditor General's investigation last July triggered a November report that DePasquale used to try to broker a truce between ICA and City Hall that failed.

DePasquale said that his upcoming forensic audit is “not a problem now” because his team will track state money — not gambling revenues owed to the city — and his agents will share duties with local, state and federal investigators.

City Controller Michael Lamb told the Trib that Half, Huss and other city officials apparently bypassed him about these concerns — perhaps because of his public support for the overall ERP project but also because they knew Lamb lacked legal authority to probe ICA. He cautioned that concerns about Sciortino might be overblown.

Oracle had been locked in as a key vendor on the project by 2011, two years before the scuffle over additional sales of equipment and services, and the company and its subsidiaries were the only vendors that could offer Pittsburgh products that were compatible with Allegheny County's technology, he said.

Lamb recalls that Sciortino's overriding concern seemed to be garnering millions of dollars in free services from Oracle for the city, efforts that ultimately shaved costs in a key part of the project.

“The decision to go with Oracle was made when we decided to merge the city and county on the project,” Lamb said. “We'd been told that that portion of the project would cost between $10 million-$15 million, but by using Oracle we cut that to less than $5 million.”

In the end, the city never bought the additional Oracle products. Although ICA continued to withhold casino funds, it never seized the money to buy products on Pittsburgh's behalf. The Auditor General's Office did not announce plans for a forensic audit until the Trib series.

Carl Prine is a Tribune-Review investigative reporter. Reach him at 412-320-7826 or cprine@tribweb.com.

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