Second in a semi-monthly series by Jim Sneddon
There were times, over several years of public meetings of the Lancaster Convention Center Authority, when various board members and the executive director claimed they were keenly aware of their fiduciary responsibility in handling tax dollars. In reality, after a careful and meticulous check of years of records, there was little justification required of consultants who were paid millions of dollars for work allegedly done for the Authority.
When questioned, however, it didn't stop the Authority from creating a picture for the public that it was being "prudent" in how it was spending millions of dollars in taxes for consultants and attorneys.
Chairman Ted Darcus told the audience at the Oct. 13, 2005 board meeting "our goal is to be prudent towards the taxpayers’ dollars." He echoed comments from former Chairman James Pickard who "acknowledged the grave responsibility the Authority has in managing public dollars…"
Executive Director David Hixson regularly functioned as cheerleader for the board and the project. Often he responded to questions about bills and lack of details by talking about "negative discourse" rather than providing substantive answers.
Willie Borden stated that as treasurer he reviewed the monthly billings for accuracy.
Board member Joe Morales told the public "I trust the people we've hired to run this project and I take a lot of stock in the … experts that do this for a living."
Even auditor Donald Diehm stated that he looked at a sampling of the detail of invoices and found that all invoices had sufficient detail. Since the audit was for the 2004 – 2005 fiscal year it would have included $122,000 in miscellaneous expenses for Dan Logan that provided no detail. It also included invoices from another consultant, Fairmount Capital Advisors that were woefully short on detail.
With offices in Center City Philadelphia, Fairmount Capital Advisers signed its original contract with the Authority in June 2003 while Pickard was still Chairman.
As with some other consultants, the firm had a link to the Pennsylvania Convention Center Authority and the City of Philadelphia's Convention Center project. It touted its ability in the financial markets and provided a glowing reference for Thomas Beckett, its Senior Vice President, who had 15 years of municipal market experience.
The contracted rate for Beckett was $150 an hour, the same as the controversial Dan Logan, the Medford, N.J. businessman who would work enough hours to be paid almost a million dollars over a four-year period. In one way, however, Beckett outdid Logan. In six months, Beckett’s rate jumped to $225 an hour. Then, in another six months, it was hiked to $275, almost double the original contract.
Fairmount was paid a total of $409,039, almost all of it for hours billed by Beckett.
Beckett's bills were exemplified by their simplicity and lack of justification for what he was being paid.
In fact, under the Pennsylvania Right-to-Know law, the Authority could produce no substantiating documentation for work done in 2003. There are listings in the monthly Pay the Bills reports in 2003 for Fairmount Capital that total $121,218.51.
It isn't until April 2005 that Beckett started detailing his hourly billing. Up until this time he merely submitted the number of hours allegedly worked per day. During this period of time he was paid over $280,000 which included about $6,000 in unsubstantiated expenses. At no point does Beckett ever submit back-up receipts for his expenses, yet they are paid without question.
In fact, for 22 months after the contract was signed, Beckett submitted bills that simply listed hours worked. For example, in his Aug. 29, 2004 bill, he has a total of 107.02 hours. That cost the Authority $24,079.50. It is broken down by various dates, but there is no explanation of what Beckett did on those dates, simply "consulting."
Even when he provides more details there are questions.
The contract required reimbursement for expenses incurred, including "travel," but there is no indication this would include paying Beckett at his hourly rate for the time traveling between Philadelphia and Lancaster. The contract notes "…we expect these expenses to be modest for this engagement." No one on the Authority board asked for an explanation.
Beckett does not provide any detail of "travel" hours. In looking at his bills and the length of Authority board meetings he attended, if the meeting lasted only a couple of hours, he might submit a bill for 6.0 hours as he did for Sept. 14, 2004. No one questioned the extra hours.
Beckett provided expertise in the bond markets for the authority. Fairmount Capital touted itself by telling the Authority that "as an independently owned financial advisory firm, Fairmount is not affiliated with any bank or financial services company. The firm believes that its clients are best served when its financial advisor is free from the actual or preconceived conflicts of interest that are created when an underwriting firm also serves as financial advisor."
That didn't stop Beckett from a potential conflict of interest.
When it came time to secure an underwriter for the issuance and re-marketing of 2003 and 2006 bonds, Beckett recommended as financial advisor the George K. Baum & Company of Denver, Col. with local offices in West Conshohocken.
Baum's fees were $130,000. Those amounts came out of the bond issuing proceeds and thus do not show up in the Authority bills.
Apart from the fees received at financing settlements, there was a separate bill from Baum for $25,937.50 for 103.75 hours ofwork at $250 per hour. The bill was for work performed by Baum's new vice president: Tom Beckett!
Fairmount Capital's last work was in February 2006. The Baum billing period for Beckett's work is from March 7, 2006 through May 19, 2006.
Good business acumen? Or conflict of interest?