City emails show Norfolk did nothing to stop bribery scheme

NORFOLK – Norfolk officials had at least two chances to stop a bribery scheme that cost taxpayers $40,000, but they did nothing to end the stealing, according to a NewsChannel 3 review of thousands of internal city emails and documents.

The emails show that even though the city’s top leaders knew plumber Andrew T. Zoby was facing a federal fraud investigation for bribing city workers, they continued to honor the plumbing contracts with Zoby.  City Attorney Bernard Pishko, who prepared city documents for the FBI, wrote in a June 13, 2012, email: “the FBI is reviewing Zoby’s contract with the city. Notwithstanding, a contract remains in effect. Accordingly, this contractor may be the only one available for plumbing services.” That email was immediately followed with a reminder that the FBI investigation was “confidential.”

City auditors compiling records for the FBI noticed what they called “anomalies” in billing paperwork from plumber Andrew T. Zoby.  Auditors noted the city paid some invoices two and three times; there were charges for equipment not authorized in the city’s agreement; and there were invoices of more than $10,000 without any detail.

A.T. Zoby Mechanical had a “price agreement” with the city to provide on-call plumbing services at city facilities. Zoby, the owner, has admitted he bribed city employees for years to get more work. To make up for the bribes, he overcharged the city. He has pleaded guilty to federal fraud charges.

Some city workers who knew Zoby was facing scrutiny asked if the city should keep the company, or turn to another plumber.

“We understand there may be some renewal issues as they (A. T. Zoby Mechanical) were recently audited,” Monroe Lentz , an assistant facilities maintenance manager who knew about the FBI investigation, wrote in an email a year ago.

Angela Bright, the city’s purchasing agent, wrote back: “We have not received any official notice or documentation that this vendor has been debarred or determined a non-responsible vendor … I do not see a reason why we cannot exercise the next renewal period of the contract …”

Bright said that unless there were “performance issues,” the contract would be extended. City leaders did extend Zoby’s contract last year.

This year, when Zoby reached the $250,000 cap on his agreement, city emails show that instead of turning to other plumbers, they stuck with Zoby and increased the cap to more than $380,000. At the same time, prosecutors were preparing documents charging Zoby with paying nearly $40,000 in bribes.  A former city plumber and a city maintenance supervisor who resigned when he was charged admitted they helped Zoby defraud the city so they could take cash and free plumbing work from him.

A review of thousands of internal city emails and documents provided to NewsChannel 3 under the Freedom of Information Act do not reveal a single instance of city leaders asking the FBI or prosecutors for an update on the investigation. Norfolk leaders extended Zoby’s contract, and then gave him still more money, without asking what the FBI had uncovered.

The only communication between the city and prosecutors happened after Zoby was charged, and after city councilmembers demanded to know why Norfolk had taken no action against the accused city employees.

The documents obtained by NewsChannel 3 also reveal:

* Even though several private plumbers and NewsChannel 3 quickly learned who was involved, Norfolk leaders were clueless for a year about the identities of the accused city workers.

*After Zoby was charged, City Manager Marcus Jones asked state police to investigate, but the feds dismissed that notion:  “[A]ny assistance from the VSP or the Norfolk PD is not needed.”

* Prosecutors said Zoby billed the city between $200,000 and $600,000 per year, but city documents show the amount was much higher. For the decade Zoby was the city’s on-call plumber, his company reported nearly $7 million in revenue, the majority from city work. City financial records show from 2007 through 2012, Zoby’s company directly billed the city for nearly $4.5 million in work.

Secrecy Causes Extra Work

The documents show the city’s top managers were focused on keeping the Zoby investigation a secret, even from their colleagues. Records show City Auditor John Sanderlin and City Manager Marcus Jones buried departments with busy work to conceal why they were seeking Zoby invoices.

In April, 2012, Sanderlin sent a directive to all city departments about an “audit” he was doing at Jones’ direction for the “City Manager’s Well-Managed Government initiative.”  He requested from all departments Zoby invoices, payments and other records to comply with the FBI subpoena. But to keep the reason for his request a secret, Sanderlin also asked for the same records for two other businesses, W.W. Grainger Inc., and The Home Depot.

City emails show some departments wilted under the volume of the requests.  “We do not have the personnel” to meet the one-week deadline, one supervisor wrote. Some departments worked around the clock to comply.

Norfolk Leaders Clueless to Workers’ Identities

When federal prosecutors charged Zoby with bribery, they did not name the two city workers who conspired with him, calling them only “Person A” and “Person B.” There is no indication in the thousands of documents obtained by NewsChannel 3 that city investigators sought those names, or even asked for them, until after the story broke.

In March, only after reporters pressed Jones to answer why the city continued to employ a worker under investigation, did Norfolk officials finally ask for information. Nearly a year after learning about the federal bribery investigation, Pishko, the city attorney, wrote to prosecutors City Council was “greatly concerned that current or former employees … engaged in illegal practices with Mr. Zoby.”

Pishko continued: “Upholding the public trust and confidence require that the City make every effort to identify these individuals, remove them from employment as applicable, and facilitate their prosecution ….”

That letter was written 11 months after Pishko was first contacted by federal authorities. Although he said the city needed to “make every effort” to identify the employees, there is no indication in the documents provided to NewsChannel 3 the city made any effort before this letter.

Shortly after NewsChannel 3 broadcast the name of the current city worker under investigation, a spokesperson for Commonwealth’s Attorney Gregory Underwood realized that worker had access to the prosecutors’ private work spaces.

Amanda Howie wrote in an email, “If Patrick Lambert is in fact the accused employee, we need you to be aware that it would be inappropriate for him to be involved with our Office until further notice.”

Lambert, a top maintenance supervisor, admitted in court he took bribes.

When two Norfolk officials asked for access to Lambert’s email account on April 18 — the day Lambert resigned but before he was charged — a computer engineer granted it, without knowing who Lambert was.

“There needs to be better communication around here,” wrote Curtis Kelecava, a network security engineer. “I didn’t learn until this morning and after I had granted permissions to Lambert’s mailbox and H drive that he is involved in the Zoby investigation. This could have been a disaster for the investigation.”

Norfolk Resists Telling the Press and Public

Repeated requests to Norfolk leaders for an explanation were met by spokesperson Lori Crouch with this response: “The city does not have any specific information related to the case.” That answer, or a version of that answer, was provided by Crouch a half dozen times in response to NewsChannel 3 questions.

But internal emails show the city manager’s assistant, Wynter Benda, wanted to be more forthcoming. Bender’s proposed news release revealed when the city was alerted to the bribery case, what the federal investigators wanted, what the city provided, which city workers prepared the city’s response to the federal subpoena, and why the city was not able to speak about it before the charges.

Benda sent the draft to Crouch, who replied that she would provide this statement instead: “The city does not have any specific information related to this case. This is a federal investigation and the city cooperated fully with the federal investigators.” The more full account from the city manager’s office was never released.

Email: Norfolk’s Response Will Cost Taxpayers Still More Money

Only after federal prosecutors charged Zoby did the city cut ties with his company. NewsChannel 3 asked then if the “price agreement” would be put out for bid. The city said it would instead get quotes from plumbing companies for routine or emergency work. That, according to emails from city workers, is a more costly option.

Raymond McEvoy, a manager at Nauticus, wrote to his boss Hank Lynch that the city’s plan “will not work very well.”

“Asking vendors for fixed quotes … will only increase the cost of the repair because vendors will be forced to quote high to stay safe,” he wrote. “The City will end up paying more for that safety margin.”

NewsChannel 3 asked the city for a response to this story. Spokeswoman Lori Crouch’s email at the end of this story.

Zoby, Lambert, and retired city plumber Michael Brown have all pleaded guilty. They each face a decade in prison when sentenced this summer.

Norfolk’s Response, From Spokeswoman Lori Crouch

Mike,

The federal investigators did not warn the city before it issued the Zoby indictment.  When I started getting calls from the media, I reached out to U.S. Attorney’s Office and the FBI for assistance and information.  The City Attorney was the only one who received a subpoena.  However, since this was still an active case, I was instructed by the federal agencies not disclose the subpoena (sent to the City Attorney) until their case wrapped up.   What I said in those earlier emails was true.  The administration did not have specific information related to the federal case.

As you know both Michael Brown and Patrick Lambert were long-term employees and supervisors in the Facilities Maintenance Department.  Their actions are egregious.   Michael and Patrick knew the city’s controls and abused the city’s system for their personal gain.  Both Michael and Patrick were in positions to call Zoby and certify the invoices. Michael Brown was the only master plumber on staff.  He had the credentials to check the work.  In their positions both Michael and Patrick conducted the site visits and verified Zoby’s tradesman licenses.

Their decision to commit fraud against the City of Norfolk and its hardworking residents is inexcusable and should not be reflective of the hard work of the more than 5,000 employees who provide services for the second largest city in Virginia every day.

In April 2012, the City Attorney received a subpoena from the U.S Attorney’s Office requesting all documents referring to A.T. Zoby.  The subpoena clearly stated “because the premature disclosure of this request might impede the investigation in this case, you are requested not to disclose the existence of this subpoena.”

The City Auditor, who operates independently of the administration, never received a complaint or allegation regarding Zoby.  In fact, during annual independent city audits nothing raised a red flag to the ongoing scenario.  Collusion is very difficult to discover and even with controls in place, people who make the conscience decision to commit a crime will find a way to override those controls.

The city has three levels of controls.

One person orders and inspects, another person enters it into the financial system and another person approves it.  Historically, these controls work.

As you know price agreements are used by departments to address specific needs.  Price agreements are competitively bid and take the guess work of emergency rates out by establishing the rate up front. It is a common practice to have these agreements.

Out of the 20 price agreements, plumbing, diving, oil spills and HVAC are time-and-materials.   Time and materials contracts are typically used for emergencies or public health issues and effective because a worker doesn’t know what he may find responding to a repair. Plumbing is considered such an issue.

The Zoby “cap” was never a hard stop point but an estimate used to anticipate what the city could procure each year.   Plumbing is a health and safety issue.  If the job was not an emergency and considered large, the city would seek an estimate for the work.  However, if the job was an emergency, no matter the size, Zoby was called.

The city maintains the minimum staffing requirement for plumbers.  We use a price agreement to handle the excess.  It is cost-effective because we are paying for what we need instead of hiring excess staff who may spend a day idle because there is no work to address.

A review of all internal controls was underway before the city learned of the federal indictment.  For example:

.               A review of system controls and levels of approved authority

.               Periodic reviews of all Agreements for consistency, term and limits

.               Review of contract lengths, ensure qualified personnel in key positions

.               Ongoing internal audits of transactions

.               Review and update policies and procedures for procurement and finance

.               Provide training, specifically in areas of purchasing, financial management, and procurement policies and procedures

The federal case has heightened the city’s awareness of potential issues and the administration is taking steps to do our best to prevent another incident of collusion.

As you know, the city is seeking to hire a procurement specialist.   One function of this person’s role will include overseeing the agreements which are used throughout the city.  This person will be responsible for conducting reviews to ensure vendors are providing services and invoices are correct.  This step will improve our current process.

As a function of Well-Managed Government, there is an ongoing effort across the entire city to improve all policies and procedures.  Part of this effort I mentioned above.

At the City Manager’s request an investigation is underway.  If findings warrant criminal charges could be filed.  We take this matter very seriously and will respond accordingly

The above is probably more than you wanted to know but I think it’s important you understand the processes, and the positions these men were in which made it very difficult for the city to “stop the fraud”.

Lori Crouch
Public Relations Manager
City of Norfolk
810 Union Street, Suite 1109
Norfolk, Va. 23510

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