Feds: Franklin County DA’s office mishandled seized assets
The Franklin County district attorney’s office mishandled more than $450,000 in asset forfeiture funding it was awarded over a five-year period by the U.S. Department of Justice, according to a federal audit released Thursday.
Among other things, auditors found the DA’s office did the following:
¯ Kept large amounts of cash used for drug buys in a bank bag in an office and didn’t track how it was used
¯ Opened an unauthorized credit card account and used seizure funds to pay the bills
¯ Used more than $73,000 to purchase materials for a garage without the necessary approval
¯ Didn’t follow procurement policies for $45,000 spent on telecommunications equipment, including surveillance cameras.
“Without a well-designed process and good internal controls, the district attorney’s office is subjecting the equitable sharing funds to fraud, waste and abuse,” the audit concludes.
County District Attorney Craig Carriero, who took office after the period covered by the audit, said his office has taken corrective action to address the problems. He’s also asking federal officials not to take back the $454,673 in funding that auditors have questioned.
“The policies and procedures weren’t there, but there’s no misconduct anywhere,” Carriero said. “We’ve accepted all their recommendations. I think now it’s just negotiating that dollar amount.”
“Circumvented” the county
Conducted by the U.S. Department of Justice’s Office of the Inspector General, the audit covers a five-year stretch from 2011 to 2015. Derek Champagne, who declined to comment on the audit, was the county’s district attorney for four of those years. He left the office in 2015 to become a county Family Court judge. Glenn MacNeill served as acting district attorney in 2015.
Over the five years in question, the DA’s office received $604,649 and spent $802,196 in funds from the DOJ Equitable Sharing Program. The program allows a law enforcement agency that participates with the DOJ on an investigation to request a share of any forfeited cash, property or other proceeds.
Auditors said the DA’s office didn’t follow federal guidelines for managing those funds, and it didn’t follow the county’s accounting, banking and procurement procedures.
“The district attorney’s office established an accounting system and bank accounts for the expenditure of equitable sharing funding and spent that money in a way that circumvented the county’s system of controls and oversight,” the audit reads.
Under federal guidelines, funds used for drug buys are supposed to be taken from other sources, then reimbursed with asset forfeiture money.
Instead, the DA’s office “provided nearly $60,000 in equitable sharing funds directly to investigators for buy money via check, which the investigators cashed themselves and provided to informants in order to purchase illegal drugs as part of drug smuggling investigations,” the audit reads. “Investigators told us they held the cash in a bank bag located at offices leased by the county until it was needed for a drug buy.”
Auditors also found there was no system of records to identify or track which checks funded a particular investigation, raising questions about whether the funding was used properly.
The DA’s office used $43,851 in asset forfeiture funds for its investigator’s overtime expenses, even though county rules prohibit individuals in this position from working and receiving overtime, the audit says.
The timing and the amount of overtime worked by the investigator was largely determined by the investigator without prior approval from a DA, the audit found.
“We determined that the district attorney’s overtime procedures were not appropriate, and the related expenditures were both unsupported,” the audit reads.
In December 2014, auditors said the DA’s office used $73,328 asset seizure funds to buy building materials for a garage to house equipment. The money was spent without the required prior approval, the audit says.
The DA’s office issued a check to the county Highway Department for materials to construct the building, and the highway superintendent endorsed the check, in violation of county cash management policy.
“In addition, there was no documentation of approval of any invoices provided to the DA’s office for the materials acquired,” the audit reads.
Credit card use
A former DA, who isn’t named in the report, had “exclusive use” of a credit card that was used for $55,717 in expenditures over the audit period. The DA’s office used asset forfeiture funds to pay the balance every month. The card was issued in 2007 but was not authorized by the county.
Auditors looked at a sample of 14 highest statements, totaling $37,828, and found that for 28 percent of the expenditures reviewed, or $10,648, the DA’s office didn’t have any supporting documentation for the charges.
“Therefore we were unable to determine whether these equitable sharing fund expenditures were permissible,” the report reads.
Supplies and utility spending
The audit also found the DA’s office failed to follow county procurement policies in purchasing nearly $111,000 for supplies and equipment for the office and for law enforcement personnel, as well as $45,000 in telecommunication expenditures.
Supplies were purchased directly from vendors via checks from the office’s federal equitable sharing bank account. Since it didn’t go through the county, the county couldn’t determine if the amount paid was reasonable, auditors said.
In addition, the audit says the DA’s office installed surveillance cameras and maintained phone lines throughout the county to help further investigations. At the time of the audit, however, DA’s office officials said many of the phone lines were not working or were no longer needed, and that the location of some of the surveillance cameras was unknown.
“This poor oversight resulted in the unsupported expenditure of funds and a failure to secure the most competitive price for the services that the district attorney’s office required,” the audit says.
In a Feb. 16 response letter, Carriero said the issues identified in the audit “clearly were not attempts by prior district attorney administrations to intentionally circumvent county procedures.
“Rather (they) stemmed from a belief that FES funds could be treated differently than other county funds because FES funds were monies seized from drug dealers and criminals, and not derived from law abiding taxpayers,” Carriero wrote.
“I think this comes down to we previously didn’t follow the process the DOJ wanted us to follow,” Carriero told the Enterprise Thursday.
“I did have some discussion with Judge Champagne about it. The whole reason it didn’t go through the county was the view that this was money that was the result of our work and our investigations, so we should have more autonomy over it.”
“There were occasionally questions about the use of the money,” said Barbara Rice of Saranac Lake, chairwoman of the county Legislature, “but the line from the DA’s office was always, ‘This is our money. We control it. We make decisions about how it’s spent.’ When they were audited, it came up that that was not the case.”
The DA’s office, as of Aug. 1, 2016, has transferred all its forfeiture money over to the county, “so now it does follow the county process and procedure,” Carriero said.
“It is an unfortunate situation, but we are now working very cooperatively with the district attorney and his office,” Rice said. “They are following all the Franklin County policies and procedures in terms of reporting this money, accounting for it and how it’s being utilized.”
Asked about keeping a stash of drug-buy money, Carriero said cash was kept on hand so it was available when needed.
“You just don’t know when the buy is going to happen,” he said. “If it happens on a Saturday at 6 o’clock in the evening, it’s not like you can go to the bank and withdraw the money. It wasn’t as though there was piles of cash in a bank bag in the county office. Our investigator had it in his desk and it was locked and he had a small amount.”
Carriero said his office no longer uses federal asset forfeiture money for drug buys.
He called the payment of overtime to an investigator an “honest mistake” due to a misunderstanding of the person’s county employment classification. The office no longer pays the investigator overtime, Carriero said.
As for construction of the garage, Carriero said it’s an authorized use of the funds under federal guidelines. He also said the building is worth much more than it cost to construct.
Nevertheless, the county continues to investigate the funds spent on the garage, according to Rice.
“That is something that is still ongoing,” she said. “We don’t have a full picture yet.”
Carriero wrote that the use of a credit card by the DA’s office “appears to have been an honest misunderstanding … not an intentional attempt to circumvent” county policies. He said the former DA provided monthly statements to the county treasurer’s office for review, and that the DA’s office no longer has its own credit card.
All equipment, supplies and telecommunications expenditures now go through the county’s purchasing policies and procedures.
Asked why the location of some surveillance cameras and phone lines wasn’t known at the time of the audit, Carriero said that was due in part to the untimely death of county Information Technology Director Rob Green in 2015.
“When that happened, it put some things in disarray, but since then, we know where all the cameras are, where all the license plate readers are, and we’ve been able to kind of shut down what phone lines weren’t needed,” he said. “We’ve got that completely under control now.”
Pay back funds?
The audit recommends the DOJ Criminal Division “remedy” the $454,673 in costs it raised questions about. It could seek recovery of the funds. It could also reduce future allocations to the DA’s office, or it could request more supporting documentation for the questioned costs. Just what option the department picks isn’t known yet.
In Carriero’s written response, he said recovery of the funds seems “unduly harsh and would significantly impede our ability to combat and prosecute crime in the county.”