E-mails offer details on financial error
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By SUE ALLEN Times Argus Staff - Published: October 23, 2009
MONTPELIER – Responding to public anger about perceived secrecy surrounding a 2004 accounting error that cost Montpelier's water fund $400,000, City Manager William Fraser on Thursday released e-mails, documents and other correspondence relating to the case that provide detail about what city officials knew, when they knew it, and how they responded to the facts around the case.
The material relates to an overpayment to Scott Construction Inc. of Newport that wasn't discovered by the city until October 2006, and then not fully disclosed to residents until Oct. 9, 2009. The correspondence was between Mayor Mary Hooper, Fraser, the City Council (members changed from 2006-09), Scott Construction President Daniel Scott, city attorney Steven Stitzel, and others.
“I've looked through every file and every e-mail that I have in my possession and believe that I have assembled the full record,” Fraser said in an e-mail Thursday. “As per the council's decisions last night to waive attorney-client privilege, the city is not claiming withholding or exemption on any record relating to Scott Construction, Inc., during this time frame.”
The first letter to the City Council on the subject went out from Fraser on Oct. 27, 2006, describing what he called “a serious financial issue,” and suggesting they keep it private as the city tries to recover the funds. In a follow up letter on Dec. 15, 2006, Fraser said the city's attorney recommended against filing suit against Scott at that point so as not to force his bankruptcy and jeopardize the chance of getting the money back.
One interesting note from Fraser to the council in January 2007 indicates that Scott wanted to hide his debt to Montpelier from TD Banknorth; Fraser had reservations but Stitzel advised the city to not disclose the debt unless approached by TD Banknorth (he said the bank would discover the arrangement because it was a public transaction).
By July 2008, Fraser was advising the council that payments from Scott were falling behind, and in September 2008, Scott Construction sent Fraser an e-mail saying business was off and trying to get better repayment terms (in a Sept. 22, 2008, e-mail, council member Tom Golonka told Fraser he's not “impressed” with the offer; Golonka the following month discovered assets belonging to Scott on Lake Memphremagog that were later valued at $1.2 million).
On June 2, 2009, Fraser informed the council that a New Hampshire bank was foreclosing on Scott's property in Pembroke, N.H. – which Fraser has since noted was put up as collateral for Scott's debt to Montpelier. There were several e-mails about possibly attaching other receivables and properties from Scott.
Subsequent e-mails between Fraser, attorneys, Hooper and the council kept everyone apprised of the legal situation involving Scott and the company's deteriorating financial position, including the discovery that his construction equipment was scheduled for auction this month.
On Oct. 8, 2009, Fraser sent an e-mail to the council entitled “Scott Construction – game over,” saying the Chittenden Bank was foreclosing on Scott, it appeared the money was lost, and it was time to go public with the situation.
“As Manager I will assume the responsibility for this error,” he wrote. “Any support that you all feel like offering would be appreciated. I think we can all expect this to be difficult.”
Hooper agreed with the plan, and recommended that Fraser contact The Times Argus reporter to disclose the situation to allow for a thorough discussion. The morning of Oct. 9, Fraser e-mailed the Council that he had a public statement drafted, and suggested holding it until the following week.
Fraser e-mailed the council later that day, however, saying, “Don't know how this happened but I just got a voice mail from Sue Allen at the Times Argus asking to speak with me about the Scott Construction situation. Someone somewhere told them. I'm going to eat my lunch and consider how to respond to her.”
In an exchange of e-mails throughout that day, Fraser and the council agreed to pay for a full page ad in the Times Argus detailing the situation; Hooper and Fraser met with The Times Argus that afternoon to discuss the case.
Through e-mails, the council, Fraser and Hooper began planning for the next City Council meeting, which the members agreed would be heated.
In e-mails from Fraser to Montpelier Police Chief Tony Facos on Oct. 14, the two discuss taking the case to the Attorney General's office for criminal investigation; Facos does not rule out the possibility Scott committed a crime, but he does express some doubt. Fraser agrees to refer the case to the State's Attorney and Vermont State Police.
Throughout the 2006-2009 time period, letters and e-mails to and from Scott track the city's efforts to first negotiate repayment and later go to court for the money (see Saturday's Times Argus for more on this).
As noted, Hooper and Fraser disclosed on Oct. 9 that the city had mistakenly cut a check from the water fund for $548,111 to Scott Construction on Dec. 22, 2004, for a water line improvement project. The amount should have been $85,775.
The $462,336 overpayment was subsequently cashed by Scott Construction and the mistake wasn't detected by the 2005 audit and was discovered by the city in 2006. The city has been able to collect $114,688 of that overpayment from Scott Construction over the years, but last week Chittenden Bank called in its $4.8 million loan to the company and foreclosed on Scott, making it almost certain no further funds will be obtained.
The Montpelier City Council met several times since 2006 behind closed doors in executive session to discuss and approve action to try and recoup the funds.
In a special City Council meeting this week, the panel authorized Fraser to release the correspondence related to the Scott case.
Fraser grouped the material into three sections: 1) Communications between the city and Scott Construction, Inc. between October 2006 and October 2009; 2) Public records that have been previously available relating to Scott Construction, Inc. and the city. These include the relevant sections of meeting minutes, agendas and the city manager's weekly reports to the council; and 3) Communications between Hooper, the council and Fraser concerning Scott Construction, Inc. from October 2006 through 2009. These include some forwarded or paraphrased communications from Stitzel to city officials, he said.
He said a fourth section containing communications between Stitzel and himself concerning Scott Construction, Inc. will be posted soon.
“I want everyone to have the information,” Fraser said Thursday evening. “It's not my place to reach a conclusion for the people. I hope they have all the facts, at least all the facts we had. I hope people can see what the city did and didn't put out in the public realm. I hope they understand what we knew and what we did. At least they'll have the same information we did.”
To view the documents, visit www.timesargus.com/montpelier or the city's Web page at www.montpelier-vt.org, click on the appropriate icon under Notices on the right side of the screen.
(Coming tomorrow: A closer look at the legal issues outlined in the documents.)
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