Deconstructing the Denardo Payroll Fraud: A Detailed Look at the Transactions

I bring many years of experience auditing to this project and that is how I approached the Denardo payroll fraud story. Before an auditor can assess individual transactions, professional standards require gaining an understanding of the internal control environment surrounding the transaction stream. Internal controls are the policies and procedures an entity uses to conduct business, in this case being the policies and procedures Bay St Louis used to generate payroll. Auditors gain this understanding by reviewing written policies and procedures, interviewing people involved in the internal control process along with a walk-through. It makes sense because to breathe life into financial transactions it helps greatly to understand the process that creates them. I relied on interviews with two former employees that have requested anonymity who have a detailed knowledge of the City’s payroll processes dating to the time Chief Denardo took his own life and what follows is directly based on those interviews.

The first step to being able to draw a paycheck is being listed on the annual payroll ordinance and I examined those going back to the year ended September 30, 2013 and sure enough Patricia Denardo was listed as a reserve police officer without fail. With that basic step understood the payroll process at Bat St Louis consists of two major parts.

Part 1 – Departmental time keeping:
1. The Employee turns in a time sheet to their supervisor, in the case of the Bay PD that would have been the Patrol Captain.
2. After approval the time sheet was sent to the Records Clerk for entry.
3. The Chief of Police approves and sends to City Hall for payment.

Part 2 – Finance Department
1. The time is received by finance, balanced, prepared for payment and sent to the Mayor for Approval.
2. Once approved by the Mayor, the payroll is generated including a direct deposit file which sent to the bank for payment.

In the case of the paychecks that I scheduled for Patricia Denardo, no less than 5 people would have been involved in the processing. The checks and balances are such that no one person can generate a paycheck. It is why the mechanics of the fraud required collusion, or in this case collusion by silence thus the audit finding in part 1. Continue reading “Deconstructing the Denardo Payroll Fraud: A Detailed Look at the Transactions”

Deconstructing the Denardo Payroll Fraud: The Mechanics Require Collusion

So who are we to believe folks, the 2016 Auditors or the Outgoing City Attorney? This is what the draft 2016 audit report says:

Excerpt from City of Bay St Louis draft 2016 audit.
Excerpt from City of Bay St Louis draft 2016 audit.

And per Cassandra Favre this what Board Attorney Trent Favre said the FBI said at the last City Council meeting:

Their findings were that fraud had occurred, that the fraud was committed by Chief De Nardo through the processes of payroll to his personal account. They cleared Patricia De Nardo in their investigation, she was not complicit in the fraud. They determined that there was no other person involved in the fraud.

Did the FBI truly tell Trent Favre that Denardo acted alone with “no other person involved in the fraud”? My informed opinion is no way folks as Favre was whitewashing what happened and blamed the dead man, which is easy to do considering the circumstances plus he is contradicted by the City’s own audit firm who used the term “collusion” to describe the events.

Slabbed New Media is conducting its own investigation into the events leading to the suicide of Mike Denardo as a police department that was seething with corruption imploded under the weight of years of lies and deceit. I have interviewed sources close to the investigation as well as several former City employees that have requested anonymity due to the sensitive nature of the subject matter and fear of reprisal. I also spent the better part of Wednesday at the Bay St Louis Council chambers combing through years of official Council minutes. I’d like to personally thank Mayor Mike Favre, who ultimately declined to be interviewed about this topic but who ensured the complete and total cooperation of the City and Deputy Council Clerk Caitlin Thompson, who assisted on Wednesday fetching the 8 or 9 minute books. The City Council has two keepers in Council Clerk Tilley and her Deputy Clerk Ms. Thompson.

Ultimately I scheduled payroll transactions that were done in Ms. Patricia Denardo’s name stretching back to 2014 and it was very clear from the annual salary ordinances that she was being paid back to the previous City Council in 2013. Those early records were fragmentary but I still managed to schedule 65 paychecks totaling $78,209.71 gross payroll that were issued in her name. We also obtained Ms. Denardo’s salary history from FEMA dating to 2008 which indicate she started with FEMA in late 2007 at GS-11 on the federal salary scale. Notably Ms. Denardo’s own LinkedIn page contains work dates that correspond to the salary information Slabbed obtained via FOIA.

There is much work that remains to duplicate the FBI investigation within the constraints of not being able to obtain warrants so this project is ongoing but we will not stop until the Citizens of the Bay St Louis get some much needed transparency on how the City ran under former Mayor Les Fillingame.

To understand how the auditors came to their conclusion the Payroll Fraud involved collusion is to understand how the City processes its bi-weekly payroll. It is also clear that certain personnel actions taken by new Mayor Mike Favre directly relate to what I think the FBI really told him and the City Attorney a couple of months ago. Continue reading “Deconstructing the Denardo Payroll Fraud: The Mechanics Require Collusion”

Who Dropped the Dime on Chief Denardo? Inquiring Minds Want to Know….

Of all the work she has ever done covering Bay St Louis, yesterday’s story by Cassandra Favre on the latest in the Denardo payroll fraud saga may be her best work yet. And when you couple it with the piece Robin Fitzgerald wrote for the Sun Herald a picture is painted that is both interesting and curious. First a snippet from Cassandra:

Favre said that someone from within the city anonymously reported the fraud to the Hancock County Sheriff’s Office. After the report, the sheriff’s office in conjunction with the FBI conducted an investigation, he said.

“During this period of time, we were asked to basically stand down and let them conduct their investigation,” Favre said. “About a month ago, two months ago, we were contacted by the FBI and asked to attend a meeting. They advised us that they had concluded this investigation. Their findings were that fraud had occurred, that the fraud was committed by Chief De Nardo through the processes of payroll to his personal account. They cleared Patricia De Nardo in their investigation, she was not complicit in the fraud. They determined that there was no other person involved in the fraud. He was approving payroll for Mrs. DeNardo, though she had not worked.”

It’s almost as if the payroll transactions were completed by a magical process that only Chief Denardo controlled yet someone else in the City clearly knew what Chief was doing thus the dime drop. How about a snippet from Robin’s story:

“The FBI determined he and he alone did the payroll fraud and gun sales,” Favre said.

The term “heresay” comes to mind as Robin also snagged a quote from Mayor Favre: Continue reading “Who Dropped the Dime on Chief Denardo? Inquiring Minds Want to Know….”

PSA: City of Bay St Louis Needs Attorney

Via The City’s Facebook Page:

The City of Bay St. Louis is seeking to hire an attorney. The candidate will Work under the direction of the Mayor & City Council. The City Attorney is the legal adviser & attorney for all officials, officers, & departments of the City & represents the City in all litigation & proceedings. Work involves drafting & reviewing ordinances, resolutions, policies & procedures, & contracts prior to consideration by the City Council to ensure compliance with state, federal, & local laws. Emphasis is placed on municipal law, civil code enforcement, land use, Zoning, labor relations, & legislative interpretation. Duties include researching / preparing oral & written legal opinions for City Council, Mayor, Department Heads, staff, committees, commissions & boards, & preparing city ordinances, resolutions, contracts & other legal documents involving the City. Should have 10 years of experience. Must have knowledge of labor relations, civil litigation, municipal, state, federal and constitutional law affecting municipal government. Must be skillful in managing situations requiring diplomacy, fairness, firmness & sound judgement, providing coaching to improve staff performance & understanding / applying City policies & procedures. Doctor of jurisprudence degree from an accredited law school. 10 years experience in municipal law is preferred. Must be licensed by the State Bar of Ms. Resumes & cover letter should be mailed or hand – delivered to the office of the Mayor, City Hall, PO Box 2550, Bay St. Louis, MS 39520 by December 13 , 2017 for consideration.

Bay Taxpayers, Utility Users Stuck Repaying Excessive Post Katrina Engineering Firm Fees

If there was one lesson of the post Katrina rebuilding process that some places had to learn the hard way is that FEMA and Uncle Sam should not be confused for Santa Claus. Santa Claus is a role reserved for the local taxpayers and in this case Taxpayers/Utility ratepayers in the City of Bay St Louis that are stuck repaying what FEMA has termed excessive to the tune of $62,925 in engineering fees, an amount which is not chump change in small town Mississippi. There are a few things that I noticed researching this topic and it is at this point I must acknowledge the contribution of Lana Noonan of the Hancock Alliance for Good Government to this post as she went up to the City Hall complex and read several years worth of minutes that adds a great deal of color. Before we get to any of that we first check in with Cassandra Favre at the Sea Coast Echo and her telling of Tuesday a week ago’s Council meeting:

The Bay St. Louis City Council on Tuesday approved a motion to extend the $13 fee on utility billings through Dec. 31 to satisfy a payment to FEMA for the Beach Blvd. sewer, drainage and lift station project.

Mayor Mike Favre told the council that MEMA owes the city about $168,000 for the Rutherford Pier project.

“We write the check back to them and they give it back to FEMA,” Favre said.

The city owes FEMA about $238,925, he said, for the Beach Blvd. sewer, drainage and lift station project. That would leave the city owing $70,000, which is due by March 31, Favre said.

Favre said the second appeal to FEMA for engineering costs reimbursement was denied in December 2016.

According to the second appeal analysis from FEMA, “on Sept. 10, 2014, FEMA”s Region IV Regional Administrator denied the applicant’s request for an additional $171,499 for engineering design costs. The RA noted that the $171,499 awarded for engineering fees is considerably more than the suggested percentage normally allowed for engineering and design services of above-average complexity.”

It is here that I recommend those interested in this topic should read or re-read Cassandra’s story but here is the bottom line for Bay Utility Rubepayers Ratepayers: Continue reading “Bay Taxpayers, Utility Users Stuck Repaying Excessive Post Katrina Engineering Firm Fees”

Goodbye Chief, we hardly knew ya… (Updated)

Never a dull moment folks:

Acting police chief in BSL removed after ‘disagreement’ with mayor ~ WLOX

We are waiting for a press release from the Mayors office on this latest development. Stay tuned.

Update:

Mayor Farve’s office issued the following Press Release:

Press Release9.26.17 by Slabbed on Scribd

Analysis: Chief Freeman now a Free bird

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….I must be traveling on, now…..

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What is truly amazing is how long the allegations of now former Chief Darren Freeman choking a handcuffed man took to break in the media. Guess who’s back folks.

THE INVESTIGATORS: Bay St. Louis police chief resigns amid brutality allegation ~ Wes Muller, Investigative Producer WAFB

Those following Slabbed’s twitter account were in the loop since last Friday evening that something major was going down with the scandal ridden Bay PD. Lana Noonan noted the irony of the word leaking out on the exact date one year ago that Chief Denardo took his own life in the parking lot at the police station.

I’ll back the time period up to late August on the original leaks as Slabbed began receiving tips about major scandal brewing at Bay City Hall on August 30, 2017. To the extent this latest choking incident happened in May, 2017, it has been held close inside the police department for months. The optics can’t get much worse.

This is what I do know and this bit of wisdom I shared months ago with select local civic leaders because there was a major red flag on Mr. Freeman’s resume that was ignored.  Wes gives us a clue:

Freeman, who has been on the job less than a year, was hired as chief to reform the department which suffered a series of embarrassing scandals and the late Chief Mike De Nardo’s suicide. His resume boasts serving as the head of internal affairs for the Mississippi Highway Patrol.

I understand some of y’all are scratching your heads going “huh” but for those of us that followed the multitude of embarrassing revelations involving DPS that have broke in the Jackson media over the past year……here is a sampling:

DPS settles discrimination suit for $84,474 ~ Jackson Jambalaya Continue reading “Analysis: Chief Freeman now a Free bird”

These things tend to happen when a new administration takes over.

The winds of change are blowing through City Halls across the coast. When measured against the speed of the changes in Pascagoula, the Bay has seen far less but then last night I received the names of some city employees that had either lost their jobs or were demoted. The much maligned Building Department is the place that has Mayor Mike Favre’s attention.

We purposely did not mention any names on Twitter and outside of the two public figures in Charles Oliver and CAO Jerry Beaugez, I’d ask you good folks commenting to exercise some discretion with artful comments appreciated. As for the Building Department employee terminated earlier this week, it was not Mr. Oliver.

The winds of change are blowing over at the Bay-Waveland School District but that is another post.

Where does the time go….

Its been nice to get away for a couple of weeks. That said some significant things have happened including the Hancock County beat losing Wes Muller. Tonight is Inauguration for the City of Bay St Louis. Worthy of note is incoming Ward 4 City Councilman Larry Smith showing Hancock County Alliance Chair Lana Noonan a text message that he purportedly received from Patricia Keating a week or so ago at a Hancock County Board of Supervisor meeting before threatening her with bad karma. I get the feeling that watching the City Council for the next 4 years may just be fun in a train wreck sorta way. We’ll see.

I’ll be checking in over the next few days with a few things – to set things up I highly recommend starting here.

Meantime have a safe and fun extended holiday weekend y’all.