Tuesday, September 19, 2006

Denver International Airport - Purchasing Fraud? Nonfeasance? Misfeasance? Malfeasance? PART I

Three things: 1) I am--for what it's worth--intimately knowledgeable with regard to public sector procurement; 2) Black's Law Dictionary: "'Nonfeasance' means the omission of an act which a person ought to do; 'misfeasance' is the improper doing of an act which a person might lawfully do; and 'malfeasance' is the doing of an act which a person ought not to do at all;'" 3) There are some very fine, intelligent, capable, honest, articulate, hard working public servants who serve at Denver International Airport and who are dedicated to providing the traveling public and the citizens of Denver with impeccable effort, untiring dedication to public sector "best practices."

This post is NOT about those good people.

Here's the story from the Rocky Mountain News of a week or so ago that caught my eye:

Audit shows DIA paid overcharges

Denver International Airport might have paid more than $50,000 this year in overcharges for toner and ink cartridges, according to initial results of an internal audit looking at discrepancies in inventory.

The airport said some purchase orders and receipts appear to have been falsified, and it has placed one employee on investigatory leave. The findings also have been turned over to the district attorney's office.

The airport said it doesn't know the full extent of the dicrepancies but that the activities may have spanned more than seven years.

DIA management said it was unaware that an employee had been transacting business with companies owned by Richard S. Joselit, who pleaded guilty to larceny in connection with a 2002 scam against the New York Mets.

In a news release from DIA on September 1, 2006, came the following information:

"'We discovered a problem. We stopped it, and took a number of appropriate actions to make sure it doesn't happen again,' stated Turner West (Manager of Aviation). 'We believe it is important that other organizations and governmental agencies be aware of the schemes and the questionable companies. To that end, we have created a watch list of these office supply companies. We will be sharing this list with other agencies and governmental entities in Colorado.'

"...In order to maintain the integrity of the investigation, the City (City and County of Denver) will not be making any additional statements."

The Airport also advised that a "forensic accountant" had been hired to assist in the investigation of the alleged fraud. Additionally, it is axiomatic that the forensic accountant--simply given the nature of work he/she is hired to do (see link)--will provide the string of evidentiary data necessary to support litigation and, presumably, to identify the lack of accountability that, I believe, necessarily led to this shameful--possibly seven-year--breakdown in a segment of DIA's purchasing process.

The alleged purchasing fraud at Denver International Airport was, as is noted in the News story above, perpetrated by an employee of the airport in sync with the self-admitted larcenous machinations of one Richard S. Joselit who, in October, 2002 was indicted by the Queens County (New York) District Attorney Richard A. Brown as part of what was described by the DA as a "...$2.0 Million ripoff of [the] New York Mets. The news release of the Queens County DA reads, in part:

"Queens District Attorney Richard A. Brown today announced the indictment of six individuals--including the former technical services director and three other former employees of the New York Mets, as well as two vendors --on charges of stealing over a six-year-period between 1994 and 2000 nearly $2.0Million from Sterling Doubleday Enterprises (SDE), the baseball team's parent company, in five separate white-collar schemes involving bribes, kickbacks and other illicit payments of nearly $600,000, fictitious companies, fraudulent invoices, phantom merchandise and inflated prices.

"District Attorney Brown said, 'The defendants are alleged to have ripped off the New York Mets organization for almost $2.0 million over a six year period. The key player in the alleged ripoff was a trusted employee of the baseball organization who was responsible for approving purchases of data processing, telephone equipment and services, office supplies and printing services. He is alleged to have traded his insider position for a windfall of bribes totaling nearly $600,000.'

"The District Attorney said that his investigation began in August 2000 when the new York Mets discovered apparent purchasing irregularities during an internal audit..."

Suffice it to say, the recapitulation of the 2002 indictments in Queens County and the story coming out of DIA are eerily similar: Internal auditors scratching their heads when digging into the books (significantly, it is NOT higher authority, management at the institutions discovering the alleged fraud); trusted long-time employee(s) allegedly involved in the so similar despicable schemes.

Part II of this post will examine how this alleged fraud could have occurred at Denver International Airport and, additionally, where, in my opinion, the buck should stop with regard to the ultimate accountability in the public procurement process.

P.S. The comments attached to this post were copied from Haloscan which I utilized prior to moving over to my new format. I include these two comments because I think--as this will be a multi-part piece--they highlight important issues. The first comment was posted by "Roger M.," my comments follow Roger's.


George said...

Look forward to your next related post. I just stumble across your blog and enjoy some of the local color relating to Denver.

But is 50K, if that is in fact the true damage, that big a deal. Anyone in government or corporate who wants to defraud can do so. Vast majority get caught eventually. Hence the axiom: If you're going to steal then steal big! I would guess that the sick leave, vacation leave and overtime abuse of an airport the size of Denver's would dwarf that 50K--if those abuses ever came to light.
Roger M. | Edit comment Delete comment | 09.20.06 - 3:13 pm | #

George said...

Ah, Roger, that scheme--abuse of leave time at DIA--was the story that preceded (within the past several months) this story on purchasing fraud. Here's a link to the Denver Auditor's investigation of that imbroglio: http://denvergov.org/Auditor/ tem...plate325224.asp

Your first point echoes George Washington Plunkett's conclusions when asked how he became such a success within New York's Tammany Hall machine: "I seen my opportunities and I took 'em."

And, yeah, I think 50k is a big deal within the context of a public sector procurement operation; i.e. knowing what I know intimately about public sector procurement practices within the City and County of Denver and Denver International Airport.
George In Denver | Edit comment Delete comment | Email | Homepage | 09.20.06 - 3:34 pm | #

roger m. said...

I will be interested to here the rest of the story, as Paul Harvey might say. Was she duped initially and then just got sucked in deeper. Office supply scams are a dime a dozen. Or was it just greed, pure and simple. You must concede, though, that 50K (if that is the amount per year) is trivial given the size of the Denver airport. One reads about Federal procurement scandals with credit cards and other means in the tens of millions and higher. Doesn't make any of it "right". But you can't prevent criminal activity in any organization by a person in that organization determined to steal. Just catch them eventually and transfer them to another division in the organization!

George said...

Hmmmm... Perhaps you know more about this case than I do. The use of the word "she" is your offering to the mystery, I presume?? A hint???

In any event, Part II is on it's way. Maybe tomorrow.

Yes, you can prevent fraud in a purchasing environment and I will propose how you do that. And, no, you don't transfer them to another department. In a public sector environment, you presecute them, your fire them. Period.