A termination hearing for two Friend city employees was set for Nov. 13. Former Utilities Superintendent Patrick Gates and City Clerk Debbie Gilmer were allegedly involved in overspending on swimming pool and maintenance supplies, costing the city over $1 million.
The hearing comes less than a week after the release of a Nebraska Auditor of Public Accounts report on Nov. 7 detailing an investigation into more than $1.4 million spent on swimming pool and maintenance supplies since 2014.
The report states that the supplies were sold to the city at heavily inflated prices, but where the excess money went is still to be officially determined.
“It is unclear if the City was simply duped into paying these astronomical prices or if any City staff were receiving kickbacks from the vendors,” the report said.
The investigation begins
The investigation began Aug. 5 after a call to the APA by Friend City Attorney Katie Spohn.
Spohn declined to comment Nov. 8 on the reason for requesting an investigation, but the auditor’s report said city staff began looking into typical swimming pool maintenance costs after the city board became concerned about “frequent, high-dollar” purchases.
The city recently held a bond election with the question of whether to pay for a new swimming pool, so pool funding has been a priority topic for the city council for some time.
“The board members realized that the City’s existing costs were significantly inflated. Consequently, the City suspended both Mr. Gates and Ms. Gilmer,” the APA report read.
A call to Gates Nov. 12 was unanswered, but Gates reportedly told the Lincoln Journal Star he was unaware of the high mark ups until reading the auditor’s report.
“I’m sick. I can’t believe that I was that stupid, but I guess I’d have to say that’s what I was,” he said, according to a Nov. 8 article. He denied receiving any kickbacks from the purchases.
The APA reviewed invoices and claims back to 2014.
According to the report, Gates was responsible for purchases from two specific vendors, Central States Lab and Metro Chemical, both operated by Stephen Weihs.
Both companies are registered with an office address the same as Weihs’ personal residence in Ankeny, Iowa.
Gates told LJS he had worked for the City of Friend for 26 years and had purchased supplies from Weihs’ company for the duration of those years.
The APA report, however, said Central States Lab was organized in December 2007, with Metro Chemical following in 2011.
An online search of the companies shows Central States Lab opened in 1986 but is now permanently closed.
Because of vague descriptions on invoices from the companies, the APA requested a catalog or product listing from Weihs, who said he didn’t have one.
After city invoices from Jan. 1, 2016, through July 31, 2019, were provided to the state auditor’s office, as well as those from five similar-sized cities, it became clear to investigators the items were available for much less than what Friend paid for them.
“It took very little effort for the APA to find a number of the same items – as evidenced by the identical labels – being sold from different suppliers; however, in every such instance, the price was much lower than what the City had paid for the product,” the report said.
In one instance in April 2017, the City of Friend purchased a pallet of sewer degreaser for $5,872.32 from Central States Lab.
The City of Madison purchased the same amount of the same product from Central States Lab for $2,939.76 in August 2018.
“In reviewing the purchase information, the APA was unable to find a single instance of the city having paid less or even close to the same amount to Central States Lab for the identical products,” the report said.
Friend purchased a total of 267 items from the two companies from January 2016 to July 2019, making 12 payments to the companies each year in 2014, 2015 and 2016. In 2017 and 2018, the number of payments jumped to 19 each year.
Since the investigation began, the City of Friend has stopped purchasing from Central States Lab and Metro Chemical and is instead fulfilling maintenance needs through Aqua-Chem Inc. of Bellevue.
As one example, the city paid $5,078.59 for a 55-gallon barrel of a live liquid enzyme from Central States Lab and is now purchasing the same amount of enzyme from Aqua-Chem for $591—a difference of $4,487.59 per barrel.
“It is difficult to believe that neither Mr. Gates, who made the purchases in his capacity as the municipal Utilities Superintendent, nor Ms. Gilmer, the City Clerk, could have failed to find the same products at far more reasonable prices elsewhere,” the APA report said.
Council approves claims
Over the years, the claims, or bills, were approved for payment by the Friend City Council.
Nebraska state statute requires the city council to approve all municipal claims before payment is made. The city clerk provides a list of claims for the council to review and approve each month.
The APA report cited an “inadequate review of claims” on the council’s part.
According to State Statute 17-714(1), all claims must be “presented in writing, state the name and address of the claimant and the amount of the claim and fully and accurately identify the items or services for which payment is claimed.”
“It is clear from these documents that the City Council lacked a proper review of not only the items purchased but also the prices paid for them,” the report said, adding that the invoices listed only item codes, such as “GR 412,” which isn’t descriptive enough for the council to know what was purchased.
“Nevertheless...the City Council approved all of the unidentified claims presented,” the report said.
The APA found that the council approved one such claim from Central States Lab for $12,848.47, but the payment was made for $21,848.47.
The APA’s report included a statement from the city, saying, “The City Council for the City of Friend...placed tremendous trust in its employees to act in an ethical and fiscally conservative manner. Unfortunately, the APA identified a number of deficiencies in the City’s internal controls, oversight, and claims approval processes. The City has implemented the APA’s recommended protective measures to ensure sufficient accountability and review processes are in place going forward.”
The APA said it had not verified any corrective action at the time the report was released.
Friend Mayor Jewels Knoke issued a statement, saying she appreciated the state auditor’s help throughout the challenging process.
No criminal charges have been filed against anyone involved as of Nov. 12.