DMR Scandal Day 136: “In God we trust, all others we audit.” Not…..

In God we trust, all others we audit. ~ Former State Auditor Phil Bryant.

It was massive accounting frauds at ENRON and WorldCom that led to government regulation of large swaths of the CPA profession and deservedly so I’ll add.  For instance at ENRON there was an ossified, ineffectual Board of Directors stacked with politically connected phonies like Senator Phil Gramm’s wife Wendy, an economist that could rationalize about anything. At DMR, by their own admission we have a Board of Trustees that had no clue what was going on and who evidently did not bother to engage their jobs beyond the free boat rides, fishing trips etc.  When the people that are supposed to be running the show are asleep at the switch bad things happen as we found out at ENRON and now DMR.

ENRON used off balance sheet special purpose entities or (SPE in accounting lingo) as a major vehicle for much of the criminal activity that occurred   DMR director Bill Walker created an off books foundation that sucked all manner of tax dollars away from DMR’s  mission to support the boats Walker used to wine and dine everyone on the taxpayer dime and lord knows what else.

And speaking of what else I detailed some of it as it relates to Hancock County’s role in the CIAP disaster.  None of these schemes are particularly innovative and in fact are of the in your face variety.  When there is no oversight to begin with why bother with the bells and whistles of a complex corruption enterprise like the one Aaron Broussard created in Jefferson Parish. Lest I digress.

Governor Phil should well remember from his time as State Auditor that in 1992  the Governmental Accounting Standards Board issued GASB Statement 14, The Financial Reporting Entity under which Billy Walker’s Private Foundation certainly fell.  Yet here is Walker with his own private slush fund buying millions of dollars of fishing boats and lord knows what else and no one knew anything about it.  The question ladies and gents is what does this say about the level of oversight at these state agencies?  Simple folks, despite Governor Phil serially saying for years at speaking engagements “In God we trust, all others we audit”, nobody was auditing his coast based political cronies at DMR, or even worse if someone did audit them there is an audit failure of massive proportion. It is just that bad folks but we already know all this from months ago.

And all those days ago seeing where this would end up was too predictable:

DMR hasn’t been audited by the state in over 10 years ~ Michael Newsom

Sadly what both Bryant and Pickering referred to as “audits” in Michael’s piece is nothing of the sort. To be very precise the DMR should have been annually “Single Audited“. A Single Audit is a very specific kind of Audit under Generally Accepted Auditing Standards. Had this happened on a regular basis the kind of chicanery we are seeing at DMR may well have been stopped in its tracks. Let’s re-visit another of my early posts on the unfolding scandal at DMR:

There is a larger story here in the complete lack of state oversight and self accountability, which at first blush is ironic as Bryant started out in state-wide politics as State Auditor.  Once upon a time the State Auditor’s Office actually had a fair amount of auditors in several different divisions from Higher Education to local school districts.  The auditing these folks did was very good though I’ll grant they tended to over-audit.  Through time the capacity to conduct audits at the OSA has diminished to the extent where I think everything is now contracted out to private firms.  The audit quality is very uneven.

I mention this because the type of fraud revealed by the Sun Herald yesterday is fairly easily caught in a well designed audit but I think it also illustrates the environment that Walker perceived he was operating to so blatantly split purchases to steer work.

And what do Gov Phil and current State Auditor have to say about this sorry state of affairs? They do what most lying politicians caught in a pickle do and point the finger at someone else, in this case the legislature and this brings me to ol’ Phil’s former throwaway line featured at the beginning of this post because he obviously left out some important details. Speaking of predictable the truth is now all coming out.

DMR commissioner used foundation boat in fishing tournament ~ Karen Nelson

Everyone knows everyone in the environmental community and from my read of the last recipient header before the chain made it to my inbox I could have easily nabbed the communication from one of several people. I say that because people inside the CMR surely know the brother in laws. The reaction was one of defensiveness on part of officialdom as the suggestion that Slabbed unfairly tarred MGFB along with Kerwin Cuevas and Mike Holmes was made along with a promise to get to the bottom of it.

I did not think it was right to name names or directly quote anything I saw in the email I referenced last week and I’m sticking with that. That said I think our readers will find this snippet from Karen’s story instructive:

Taylor, an avid sport fisherman and tournament winner, told the Sun Herald last week how he came to use the Topaz.

He said he had planned to take DMR employee Kerwin Cuevas and a friend on the tournament to teach them the sport of billfishing.

“Then I blew an engine in my boat, a 42-foot Bertram,” Taylor said. “I was planning on Kerwin and his friend going with us. When we blew the engine, I said, ‘Kerwin can we use the Topaz?’ And he said, ‘Let me check with Dr. Walker.’

Indeed but in Mr Taylor’s defense, even though he was on the Commission of Marine Resources as Vice Chairman he knew absolutely nothing.

Karen’s piece was also instructive for another reason as the real power calling the shots at DMR was revealed by Vice Chairman Taylor:

Taylor and Asper both said the commission doesn’t truly govern the DMR, and doesn’t have access to the day-to-day operations of the agency, even though state law charges them with formulating policy, having authority over the executive director and setting up rules for the department.

“We don’t have oversight on a lot of stuff,” Taylor said. “We’re really not an oversight agency like you would think. The governor really has the word on that. Really all we can do is make rules and stuff.”

Like I thought all along Mr Taylor. This brings us to the current State Auditor, Stacey Pickering and his team of investigators as it appears DMR, with the assistance of the State Auditor’s office, has pulled a bait and switch on the Sun Herald:

DMR’s refusal to produce records limits public information ~ Anita Lee

“When an agency refuses to open public records, especially financial records, it’s a red flag that immediately triggers suspicion that there is something they want to hide from the public,” said Jeanni Atkins, a University of Mississippi journalism professor and executive director of the Mississippi Center for Freedom of Information.

At this point I’ll remind the readers that I suggested the State Auditor’s office was hovering close by the Bolton Building in order to contain the unfolding scandal. There are people that communicate with me that still suggest that is indeed the case, as the FBI has evidently brought in reinforcements according to the local rumor mill. I imagine the State investigators are mainly getting in the way of the professionals at Team FBI. Speaking of Team FBI allow me to share my limited journalistic experience with the G men.

First they do not care what we in the media write.  They do not tell the media much to begin with and by that I don’t mean they won’t shake your hand, smile and tell you the sky is blue because they will. They are also very tight lipped about what they are looking at in any particular investigation, which they typically do not acknowledge to begin with. That said occasionally a journalist will stumble across a subject or two that interest the good guys and believe me when that happens they are not shy. The FBI uses good journalism as a resource to accomplish their mission.

Over at the State Auditor’s office instead the local newspaper of record is seen as a mark for a bait and switch scheme on the public records involving DMR. The lack of transparency is disturbing so all we have is speculation so here are a two possibilities:

  1. Stacey Pickering’s role is to contain the scandal as many state wide politicians benefited from Bill Walker from campaign contributions to on ground political support here on the coast.
  2. Pickering, like so many that preceded him as State Auditor views the office as a means to obtain another high office.  A high profile investigation complete with prosecutions would be a nice springboard just as tackling corruption back in the 1980s catapulted Ray Mabus to a term as Mississippi Gov.

At this point I would posit that possibility #2 would be the worst scenario due to the inherent Beavis and Butthead potential associated with a politician looking to make a name for themselves.  I mean heck folks, this is the same krewe that tailed Waveland Mayor Tommy Longo for a year in an investigation that resulted in a spectacular crash and burn for the prosecution.  State Auditor investigators are excellent for terrorizing school secretaries and other such small fish but a complex financial fraud like we see at DMR? Fuhgeddaboudit, that’s what the FBI is for.

Finally, speaking of auditing, wouldn’t it be nice if the State Auditor actually did some:

Editorial: Every agency of state government should be audited every year ~ Sun Herald Editorial Board

To their recommendations I’ll add that oversight over Municipal Audits should also be charged to OSA and fully funded by the legislature.

14 thoughts on “DMR Scandal Day 136: “In God we trust, all others we audit.” Not…..”

  1. To what degree of participation will the employees be charged with? By that I mean that Directors and employees beneath them have approved/signed off on purchases and/or leases, etc. Will they be able to say that they were doing what they were told? Or ignorance of the law? Or does aiding and abetting apply here? I think that Directors at least should be held accountable for their actions….they knew all of this was wrong. Approvals of money dispersal such as I’ve seen submitted are against State policy….or does the DMR have it’s own purchasing policy?
    The entire purchasing group that allowed this to happen without speaking up should be called to task on this one. They knew it was wrong, or at least they should have to be in such a position of authority. And the people in Jackson should have caught this long ago also. What is wrong with the Department of Finance???? Are they in on this too???? It’s all so confusing!

      1. That case you cite was decided before Skilling v United States and Black v. United States were decided by the Supreme Court. There is little reason to charge Honest Services Fraud when the evidence to support it would support Bribery and it’s associated charges (such as failing to report income, pay taxes, and so on.)

        Justice Ruth Bader Ginsburg, who wrote the majority decisions in both the Skilling and Black cases, said the law must be limited to the offenses of bribes and kickbacks. She was joined by Chief Justice John G. Roberts Jr. and Justices John Paul Stevens, Stephen G. Breyer, Samuel A. Alito Jr. and Sonia Sotomayor. http://www.nytimes.com/2010/06/25/us/25scotus.html?_r=0

  2. If that’s all you got, Doug, we STILL haven’t had an Louisiana audit report showing the diversion of what one ad hoc district attorney stated was $500 MILLION from mineral royalties from one parish and during times when a million was really big time money.

    Eric Blair would be impressed with our local memoryhole routines. Instead of airbrushing the liquidated commissar from a pic, we just don’t even bother with a picture.

  3. Yes the Ms.SA will run in and pursue someone like Longo to be able to get camera time.This is really so freaking unbelievable I grinch just knowing were their time is spent and where it is not.And to add to the insult they act as if its the taxpayers fault for not paying more in taxes so they could get more camera time.Why not make guilty parties pay for the expenses of an audit when it is necessary do to suspected illegal activities. Jimmy Taylor and Vernon Asper just continue on with these dumb statements thinking that it makes them look less guilty of not doing what they are on the CMR to do.Wow this is just outrageous.I want to borrow a boat to go deep sea fishing,who do I see?

  4. Jimmy Taylor and Vernon Asper just continue on with these dumb statements thinking that it makes them look less guilty of not doing what they are on the CMR to do.

    Agree as to Taylor, disagree as to Asper. The failings of the CMR are numerous and well documented. I came away with a deeper understanding of how both men operated within the DMR community.

    Asper appears to be a worker bee that got to play with all the toys the agency had in pursuit of his job as an educator. I don’t have a problem with that.

    Taylor OTOH uses a taxpayer funded boat for his private fishing expedition, tries to justify it, points the finger at Scott Walker and Gov Phil and claims he knows nothing. It smells……like a goat.

    And if it smells like a goat, walks like a goat and talks like a goat then this Taylor fella must be a………

    I’d be surprised if he was still on the CMR by week’s end.

    That suggestion I made about those boards having a retreat with an expert in corporate governance is a keeper. Asper needs to pay a visit over to the business building up on the main campus to find some help.

  5. I was refering to Aspers statement about the boats being Foundation boats and acting like they had nothing to do with the DMR when in fact they are under lease and have been for some time.What about the airplane? First time that has been mentioned.Where is it now? I agree Jimmy Taylor is a gone pecan.

    1. The airplane went out to sea with Katrina. That was in the SH or at least in the comments when all the Asper articles came out

  6. Need to find this plane.Where do we look? Someone also told me the Foundation has a sailboat tied up in one of the harbors.I agree Asper is not driven by money but by science.He loves the job he has and does not want to be a manager of anyone else.People who work around him state is is very pleasant and easy going.He would love to spend more time studying aptenodytes forsteri but that require travel.

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