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Fort Smith Board again rejects review and audit of city legal services (Updated)

story by Ryan Saylor
rsaylor@thecitywire.com

Editor's Note: Updated with comment from City Directors Mike Lorenz and Andre Good.

It happened again.

Fort Smith City Director Philip Merry's attempt to get an up or down vote on whether the city should hire an auditor to look into legal billings and also whether to establish a committee to review whether the city should continue a contracted service agreement with the Daily and Woods Law Firm or hire inside counsel on the city staff was removed from the July 1 meeting agenda.

The move is allowable under Fort Smith's city code, which requires four city directors to request the removal of the item.

City Director Mike Lorenz, who led the effort to remove the same items from an earlier meeting agenda in June, also led Thursday's (June 26) effort. He was joined by City Directors George Catsavis, Keith Lau and Vice Mayor Kevin Settle. City Director Andre Good had not responded to attempts for contact from Gard by the time she notified the Board and the media of the removal of the items.

The only two directors to indicate to Gard that they would like to have the items remain on the July 1 meeting agenda were Merry and Pam Weber, who have been outspoken in their calls for some sort of independent review of legal billings since attorney Matt Campbell, who runs the Blue Hog Report blog and is representing a group of city employees in a whistleblower case against the city, made the accusations in posts on his site earlier this summer.

While the Daily and Woods Law Firm said it looked into Campbell's claims of billing for services never rendered, it said no wrongdoing took place. But Merry has said that while he does not have reason to believe that Daily and Woods improperly billed the city, the firm's review of its own billing practices could not be objective.

Merry told The City Wire that he had heard from numerous residents and business leaders who have asked for a review like the one he has requested now at least three different times during public meetings of the Fort Smith Board of Directors. One business leader Merry and the rest of the Board has heard from is Richard Griffin, chairman of the Central Business Improvement District and the head of Griffin Properties.

In an e-mail to the Board dated June 2, Griffin said the Board needed to hire the outside auditing firm.

"The people that I talk to in this community, with good cause, are paying attention," he wrote. "Campbell has some valid points. What are you thoughts on the proper procedure to look into this matter? (City Administrator) Ray (Gosack) may not have it right in allowing the firm members, in the City's behalf, reviewing their own billing procedure. That is not quite arms-length.”

On the other side of the issue, all Board members received an e-mail from Baldor's Executive Vice President of Rick Management and Compliance George Moschner, who said the set up with Daily and Woods is saving the city money and said the audit would hurt taxpayers.

"I am so glad to read that both the leal bill audit and in house legal study resolutions were overridden," he wrote on June 12. "The audit would have been a waste of taxpayers' money. … From what little I have seen of the City's legal expense, I believe the City is receiving a great value and controlling costs by using the current system. This matter was analyzed (in 1999-2000) and the results were as I already expected. The City administration is on top of this matter.”

Moschner also said Merry's push for an audit and a review committee was an “overreaction."

"I agree that the Directors should not overreact to something someone else writes. All of you should have immediately had that thought run through your mind. When relevant facts are not available, attorneys often try to gain an advantage by obfuscating matters.”

In response, Merry said Wednesday (June 25) before his items were removed from next week's agenda that he understands the different views on the issue.

"Two distinct, great people. That's the spice of life in America, right? I happen to, in that particular thought process, align clearly with Mr. Griffin and I'm trying to carry that kind of sentiment when I'm asked by people like you.”

Merry said the range of opinions and views he is hearing go from the top to the bottom in terms of power and socioeconomic status and said the majority of people he is hearing from want this review.

"All walks of life. Clearly, a cross section where it was very clear to me. … I think the choosing to allow to have an agenda item and then a day later choosing, 'You know, on second thought, we don't want to have an agenda item,' by way of phone voting, you know concerns people. That's created I think another issue separate in and of itself. Why didn't we want to vote in front of the people?”

Lau, also speaking Wednesday before the items were removed, said he respects the opinion of Moschner and Griffin, but said there was a big difference between the opinions expressed by the men.

"I think George Moschner understands the big picture a lot better in terms of how legal services charge companies and how much they charge in the private sector. I rely heavily on that.”

Lau also repeated his view that Campbell is using the question of legal billings to muddy the water with regards to his legal cases against the city and said he was not going to allow the Little Rock attorney to "wag my tail.”

"I really do want to have transparency, don't get me wrong. But on the other hand, I was elected to lead and I was elected because my constituents felt I was able to make good decisions. I took the information I've been given and given weight to what I've been given and said this is not a big enough deal now to allow this attorney that's suing us to divide and conquer us or go after the law firm that's defending us," he said. "If we want to look at a strategic plan down the road, that's merited and we should do it if that's what the Board wants to do. … But it's not the time to do it and that's why I'm making that my decision and I think that's where I'm taking a leadership role as a director. And I know that's going to make the transparency guys angry."

E-MAILED STATEMENT FROM CITY DIRECTOR MIKE LORENZ:
Regarding an audit of legal billings to the city:
"Let me be very clear in my opinion of this matter.  I am not in favor of moving forward with the proposed audit at this time.  It makes no sense that every occasion that Director Merry has presented this idea he is very adamant that he in no way feels that any wrongdoing has occurred and has re-iterated this multiple times, as has Director Webber with her support/second of the motions.  Why request an audit of a vendor/contractor's billing when there is no concern of wrongdoing by the person(s) requesting the audit.  I continue to maintain that this action would set a terrible precedent where anyone with an allegation can engage the board in an expensive forensic audit of a vendors billing records.

"I also disagree in the contention that this audit is about transparency.  It is the responsibility of this board to show leadership and make informed decisions for the citizens that have elected us while assuring that we are respectful and responsible with the taxpayer's money we are entrusted to oversee.  Engaging in an expensive audit to simply "prove there isn't an issue" is a misguided suggestion.  The records in question as well as the responses to the accusations and proof therein have been presented to the media, though maybe a release of simpler and more detailed information report about this subject along with the findings of a billing FOIA request from Mr. Campbell on June 6 which showed Daily & Woods had under billed for services between January 13 and June 6, 2014 to satisfy this question.

"Again, I contend that  it is important we remember these allegations were made by legal counsel for the plaintiffs in multiple lawsuits AGAINST the city of Fort Smith and understand that Mr. Campbell is NOT an unbiased third party and has everything to gain by providing distractions and potential conflicts between administration, the board, and the legal counsel for the city.  These lawsuits are not about billing of phone calls by Daily & Woods or about whether we use a contract attorney or have an in-house legal team, these lawsuits are about personnel issues within the FSPD only. The FOIA request that administration received on June 23 from Mr. Campbell's office confirms my impression that he is trying to create distractions and division.  The lawsuits have serious accusations and potential serious consequences for the city of Fort Smith and if we as a board participate in any distraction that could weaken the case puts a large amount of taxpayer funds at risk and I will not accept or be a part of that.
 
"We need to spend our time working to make Fort Smith better and end this issue now."

Regarding establishment of a commission to review whether the city should hire outside council or staff attorneys:
"While this idea has merit at first glance and I am supportive of researching this issue to assure we are using the most cost-efficient method, there is much information that would need to be gathered in order for any committee to make a recommendation to the board.  I have serious doubts that hiring an in-house legal team is a more cost-effective option as it would take more than a single attorney as we would most likely need to staff for 1 attorney, 1 paralegal and a receptionist or legal assistant.  However, for us to undertake this at the current time as a reaction to the comments/allegations presented by Mr. Campbell sends the wrong message.  What we need to do is stand behind our current legal counsel while they are defending the city and taxpayers money from potentially costly lawsuits."

E-MAILED STATEMENT FROM CITY DIRECTOR ANDRE GOOD:
​"My apologies, but my work schedule and work load at FedEx has increased and has gotten very demanding, thus the reason I was late to the last board meeting, late to the last parks meeting, missed the last A&P meeting and missing today's TAC meeting.

"Be that as it may, I feel I need to make time to express myself on this matter.

"I am supportive of having the City attorneys billing records being audited, but not for some $30k give or take.

"I am supportive of creating a commission to review how the city does our legal services.

"Not discussing the accusations from Matthew Campbell shows a lack of concern to me personally. So if I feel that way, I know citizens feel that way as well. 
* Another perception issue - Are we doing the right thing by either using tax payer money at our discretion for such in the tune of $30K give or take or by not publically discussing the issues that surround why we are even here?

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"City Auditor - This audit could be completed by our internal auditor I would imagine. I just recently found out that we did not have an Internal Auditor in place. We do have a the position listed on the City's website. The IA works for the board but with administration and should be independent. In this case, since none of us are placing fault on our city attorneys, we still need to be looking at doing things better.

"Trust - Of course we should trust the people we hire, same as citizens want to trust us and we, as a board want to have that same trust in administration. Regardless, someone has to be watchful. Checks and balances. Accountability.

"This is why I believe we should move forward with appointing a commission to review how we do our legal services. The Internal Auditor, when hired, could audit the billing. Even at that cost savings, the city will still be billed by our attorneys to gather and submit the requested documentation needed.

"There is just so much to this, and I personally don't think allowing someone being questioned to answer accusations and say our hands are clean is openly and honestly doing due diligence. Peace of mind as a board member effects how I move forward on other issues and how the public perceives its public trust of our public service.

"Forgive the errors, at work at my desk at FedEx in a hurry. Sorry for the length also, but these are issues that trouble me and not certain if such would be best discussed in a board setting or not."

Five Star Votes: 
Average: 3.9 (12 votes)

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Comments

George Moschner Says Phil "Overreacted" by Wanting Audit?

The continued effort by Mike Lorenz, George Catsavis, Keith Lau, Andre Good and Kevin Settle to bury their heads against serious allegations against our city attorney and city hall is very disturbing. The allegations made by Matt Campbell are very serious allegations and should not be disregarded by these five directors. George Moschner saying Phil Merry's push for an independent audit as simply an "overreaction", is outrageous, if integrity, transparency and public trust are still principles which should be found in both the public and private sectors today? And what kind of leadership would agree with Keith Lau's assessment that Mr Campbell is only trying to muddy the water? Wouldn't trying to clear up these allegations and restoring the integrity of city hall and the public's trust be true leadership? City Hall forgiving loans to special non-profits, bailouts of private parks, loosing payments due to untimely billing, the providing of questionable utility placements and continued high losses at a convention center, huge comprehensive study costs, numerous water/sewer increases, surely a independent audit to restore the public's trust and the integrity of city hall shouldn't be much of a stretch for these directors? The allegations of overbilling by the city attorney, over paying by the city and Jerry Canfield lying about such, are very serious allegations made by Matt Campbell. Phil Merry and Pam Weber's request for a independent audit of the city attorney for the past 3.5 years is the only right thing to do if integrity and the public's trust is still valued in Fort Smith. The independent audit, regardless of the outcome, would clear up these allegations, once and for all. Email for directors: keithlauward1@gmail.com, good4ward2@gmail.com, directorlorenz@hotmail.com, georgecatsavis@gmail.com, kevinsettle6@aol.com, pweber5469@aol.com, philip_merry@ajg.com
The continued effort by Mike Lorenz, George Catsavis, Keith Lau, Andre Good and Kevin Settle to bury their heads against serious allegations against our city attorney and city hall is very disturbing. The allegations made by Matt Campbell are very serious allegations and should not be disregarded by these five directors. George Moschner saying Phil Merry's push for an independent audit as simply an "overreaction", is outrageous, if integrity, transparency and public trust are still principles which should be found in both the public and private sectors today? And what kind of leadership would agree with Keith Lau's assessment that Mr Campbell is only trying to ...>> Read the entire comment.

Fat Cats and Snakes

You get what you vote for IN YES MEN on the BOD and an audit of City Hall is in the BEST INTEREST OF THE TAYPAYERS of Fort Smith so what's the problem boys? Are you afraid that it may uncover some snakes and fat cats living the good life off the working class of the city? Could it be that old crony Moschner is worried that something may crawl out from underneath the rock? Give me a break.

The Ins And The Outs

The Ins Know that an internal audit of our secretive good ole boy City Hall would turn this town inside out!

Isn't Moschner A Financial Man

and surely he understands the need for independent outside auditors to make sure that all the eggs are in the basket and the fox is not visiting the hen house on a regular basis. The taxpayers and all concerned people have a right to peace of mind and the knowledge that the keepers of the peoples money are doing the right thing. What is the problem with an audit if everything is on the up and up? It was reported on The City Wire that the city may be spending an extra 2 million dollars on the water park so why all the fuss about a less expensive outside audit? Hmmm

The Mosch Botch

If I remember correctly, Mr. Moschner was very supportive of the prepared food tax that was rejected by the voters by a 70% margin and he has the appearance of being a city hall insider. All financial transactions should be audited by an outside firm because the people have doubts about where and how their tax money is being used by this city administration who lacks transparency.

Lau has a point

Mr. Lau makes a good argument. In defense of what he said, to whipsaw the board and its attention into yet another advisory board scenario takes us back into the same dog and cat pony shows we finally got down the river.

If Pam Weber got every city real estate deal since 1968..

how would Keith Lau feel about that in 2014 or in other words 46 years later? There's no need for him to pretty up the place because no matter what Pam still gets the contract. Everything's just fine?

Independent Eyes

There is no doubt in my mind that the city needs an complete financial audit and some of the good old boys on the BOD are trying to hide something.

"obfuscating matterss"

You mean, like bringing up completely unrelated matters rather than address the actual accusations which on the surface appear to have merit?

Phony Scandals Or Truth

The city should be required to have an outside audit firm do an extensive internal review of all city spending every five years to quiet all rumors of misconduct. Its just good business and the taxpayers have every right to demand this policy be put into place.

If Moschner and Lau understand

how legal services charge then why can't they understand both sides of them will do this? Two years ago the charges went up 25%...and stuck apparently no questions asked, while at the same time according to the Fed, inflation didn't happen. No doubt all requirements of price, quality, and country club were met. What are the odds Ft Smith that without something major going on that in around 150 years, we would so regularly fail to come up with only 4 people that will notice things like this?

Only 25%

Legal bills for Fort Smith up 25% but the BS is up 125% and yes, people are starting to notice. Its my opinion that more than 50% of the voters would approve a new form of city government in the city.

Knee Jerks

Again, Phil Merry is in the papers talking about outside audits. And yet for the third time, Mr. Merry has failed to indicate the slightest due diligence as to how much his audit would cost the taxpayers. If you want to be a proponent, be a fully prepared one. One thing we do know, is that the audit would reap in results far less in tangible benefits than it cost. As for the intangible ones, who knows. Mitigating the squawks of the Chicken Little Gallery is far from a City priority. Merry says in the Times Record that he just wants a vote. He's gotten his vote twice and it's 'no'. What he wants is his way. It is clearly evident that the City has been overbilled. Handle it procedurally. Let an internal audit take place and should an internal auditor detect improprieties, go forward. The knee-jerk directorship of this City has to end. Hopefully, come 2015.

tight budget

a better question: if it's going to cost $30,000 or more to perform the audit, what's Phil suggesting go away as a consequence. Surely all those calling for an audit know that the money shouldn't come out of thin air. So what's it gonna be? What's on the chopping block?

What's On The Chopping Block?

How about the 2 million dollar overcharge by Flintco of Tulsa to build the Water Park that The City Wire reported could be built better with more facilities by a local contractor who built the Clarksville Water Park? Cut the bull and the spin. 30,000 dollars for an audit of City Hall is "chicken feed" compared to all the waste of money by the Gosack crew.

Tight What

The Fort Smith City Budget is over 270 million dollars per year and Fayetteville is about 50% less and Jonesboro is about 65% less. Gosack himself once said 30 thousand dollars "was just a drop in the bucket" in the city budget and any public corporation has audits by outside firms. Its sure looks like the "boys" are hiding something from the people on this one. Get real!

$30k is random

There is absolutely no basis for the $30k price tag on an audit. Someone threw that out at a meeting as a possible cost for the audit, and everyone has clung to it as gospel since. There are multiple CPAs who would do the audit for $10k or less. I know because I've talked to a few in the last week.

the price doesn't matter

You honestly think City A can hire Audit Firm B and then magically Audit Firm B will have access to the personal files of Law Firm C. Smell the waste of money. All Audit Firm B can do is look over the invoices to City A and assure they were properly paid to Law Firm C. What you want is for Law Firm C to hire Forensic Auditor D. You're not going to get that. Director Merry hopefully has figured that out since you obviously can't.

City A can easily get the personal files from Law firm C

if it's the only chance Law firm C has to see any more money from City A. Next question.

more like impossible

tell us exactly how the city's auditor (internal or outside) will somehow be entitled to review the personal notes and files of a lawyer employed in an outside law firm? Ain't gonna happen.

Good reason NOT to use an outside law firm

if we have to pay for what we can't see. Are lawyers prohibited from revealing their billing records? Enlighten us please. At any rate we both know we're not forced to keep using them at around $33,335 a month either are we?

Jerks And Smirks

an outside auditing firm is needed to clear the air and all the spin and personal attacks on Merry are not solving the problems. fort Smith taxpayers deserve to have peace of mind because doubts have been raised about accounting practices at City Hall and the people have lost trust in the Gosack administration. Transparency and trust are missing in city government so let's get back on track by getting an audit done by an outside accounting firm that is not attached at the hip to this group that has been caught many times in past spinning the facts.

The Need For An Audit

you are right when you say knee jerk directorship must end and the Gosack yes men need to go! we need a new group of movers and shakers that can move the city forward and put the constant failures of the current administration in the past. Phil merry is a hero for standing up for the average citizen and the Fat Cats are getting nervous that their rule may end. Thank you mr. Merry for having the courage to speak the truth about the crony network running our city.