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Lamb: Police fund's shoddy setup resulted in potential for fraud

| Tuesday, Feb. 26, 2013, 11:42 a.m.
City Controller Michael Lamb, seen here at his Downtown office on Tuesday, Feb. 26, 2013, has implemented a new fraud hotline pertaining to city government. Philip G. Pavely | Tribune-Review

Sloppy accounting six years ago allowed the potential for fraudulent use of money funneling through the Pittsburgh police bureau as a surcharge for moonlighting officers, current and former city officials say.

City leaders talked about tacking on the surcharge as far back as 2005. Then-Chief Nate Harper established the fee in 2007 at City Council's suggestion to recoup administrative costs and legal fees incurred by officers working off-duty security details at bars, sporting events and grocery stores, according to city officials.

“We were being sued, and I didn't think it was fair that the taxpayers should have to pick up the tab on a lawsuit for detail work,” Council President Darlene Harris said. “I requested that we put a pot of money aside that would take care of any lawsuits.”

But nobody put the pot aside. Instead, the fee money — $4.6 million since 2007 — was intermingled in a city account with money from businesses for officers' overtime.

That set up the potential for fraud, Controller Michael Lamb said on Tuesday, because the city can't distinguish between reimbursements for overtime and revenue from the $3.85-an-hour fee, which averages about $700,000 each year.

The FBI and city officials are investigating whether someone diverted money to an unauthorized account at the Greater Pittsburgh Police Federal Credit Union. Mayor Luke Ravenstahl said Harper, whom he ousted last week because of the investigation, gave officers including the mayor's bodyguards debit cards from the credit union to pay for trips, restaurant meals and hotels.

“The (fee) money that came into that (city) account basically padded that account,” Lamb said. “If someone would have pilfered checks, there would have been money in there to cover that.”

Lamb, who is running for mayor, blames the Ravenstahl administration for allowing a situation in which someone could misspend money. He acknowledged this week that he did not begin an audit of the money until this month, even though officers brought concerns to him in November.

It's unclear why officials did not make separate accounts for the fee money and overtime money. Ravenstahl's Finance Director Scott Kunka said the controller's office under then-acting Controller Tony Pokora told the finance department how to direct the funds. Pokora, now Kunka's assistant, said he couldn't remember how or why the accounts were set up.

Lamb's Chief Accounting Officer Marty Elikan, who was in the same position under Pokora, said he was unaware of the $3.85 surcharge.

“The system was set up by me, but I didn't know anything about the $3.85,” Elikan said. “I would have told them to (account for) the $3.85 as revenue.”

Acting police Chief Regina McDonald said Harper instituted the surcharge in April 2007 at her recommendation.

“We felt the city should receive some funds because we were absorbing all the costs for liabilities, for compensation if an officer gets hurt, court costs if an officer makes an arrest while on the detail,” McDonald said. “It was basically to offset the cost to the city.”

She wasn't sure how the bureau decided on $3.85. It includes the surcharge in bills businesses receive once a month, she said.

“We get a monthly total, and we pay the city,” said Tom Williams, general manager at Hofbrauhaus in the South Side, which hires officers on weekends. “It's all in the same invoice.”

Williams said invoices say “special events” office or department. FBI agents seized records from the police special events office this month.

McDonald said officials have no plan to separate the funds, though that could change, depending on Lamb's audit findings.

Common Pleas Judge Tom Flaherty, the controller from 1984 through 2005, said some of today's problems could have been averted if council had approved the fee.

“Any incoming money to the city treasury has to have an account approved by City Council,” he said. “That's where the problem is. If council would have approved that, they would have set up their own code account for that and it wouldn't have been intermingled.”

Harris said she assumed the city was using the money as a legal defense fund for police officers.

“We don't have oversight of money,” she said. “We put the budget in place, and all the checks-and-balances go through the departments, and the controller does the auditing. I assume that all of the city's money is accounted for.”

Lamb said his office has a hotline for people to report anonymously suspected government fraud and abuse. Whistleblowers can call 412-255-4777 or visit the website pittsburghpa.gov/controller/.

Staff writers Margaret Harding and Bobby Kerlik contributed to this report. Bob Bauder is a Trib Total Media staff writer. Reach him at 412-765-2312 or bbauder@tribweb.com.

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