Winchendon MA: Commonwealth Must Consider Receivership – Not Bailout

Winchendon MA: Commonwealth Must Consider Receivership – Not Bailout

From the  BarreMuckraker

Gov. William F. Weld today proposed legislation that would place this impoverished city of 25,000 people in state receivership, and urged the Legislature to pass the bill within two days.

The measure was introduced against a backdrop of gloom and crisis in Chelsea. Mayor John Brennan said that city employees received paychecks on Wednesday but that there would not be any more if the state did not act. The school system, which laid off more than a quarter of its 300 teachers last month, will not begin classes until next Wednesday at the earliest, five days after the new term was to start.

The crisis deepened Wednesday night when a financial control board of state and city officials rejected a $3.4 million short-term budget for Chelsea, saying that stopgap measures had already been proposed too many times.

The above article appeared in the New York Times back on September 6, 1991.


The same Fate should befall the poor, rural community of Winchendon where a nearly $6M shortfall could force the Worcester County municipality to file bankruptcy  – here in a place where 10% of its population (~10,000 residents) lives below the poverty line.

From the outset this story has been buried with conflicting facts reported by the media all the while the Commonwealth, through its Department of Revenue, Attorney General’s Office and Office of Inspector General, has displayed little leadership in demanding answers and accountability.

According to the most recent news article appearing in today’s Worcester Telegram & Gazette (Winchendon Petitioners Not Allowed to Speak at Meeting on Town Deficit), Town Manager James Kreidler continues to assert the deficit is $3.8M despite the fact DoR claims it’s more like $5.8M (see T&G Winchendon Selectman Quits 10/16/14).  Despite this $2M difference Kreidler, who’s been the town’s chief operating officer since December 2000, has submitted a deficit reduction plan to the state which calls for:

unspecified cuts in municipal services;
$700k Prop  2 1/2 override that would cost taxpayers an additional $232/year (based upon $200k home valuation);
$2.2M bailout from the state which requires legislative approval;
How any reasonable deficit plan can be considered at this juncture given the two disparate figures would seem not only premature but also irresponsible.
How any reasonable deficit plan can be considered at this juncture given the two disparate figures would seem not only premature but also irresponsible.

Further troubling is the fact the board of selectmen refused to allow residents to comment on the myriad conflicting facts, rumors and innuendos now suffocating this community.  Rather, board chairman Fedor Bendt “said all comments and questions must pertain to the deficit reduction plan” and “those wishing to speak must first be recognized by the chairman or be placed on the agenda by going through the town manager’s office“.

One unconfirmed fact circulating involves a certain private email involving the municipality’s former accountant, Charlotte Naponen-Gallant. The following letter to the editor appeared in the Gardner Daily News just days after this story broke:

                                              Clearing up Winchendon’s financial debacle
To The Editor: 10/1/2014
To The Editor:
On the 25th of September, I received an email from Ms. Naponen which was also addressed to Beth Hunt. In the email she stated that she had not sent it to any others.Ms. Naponen asked for a sit down meeting after which she said she would prepare a statement and read it to the full Board of Selectmen (BOS) of the Town of Winchendon.Within days I was called by The Gardner News and told they had a copy of the email. A day later in reading the article TGN wrote they mentioned Selectman Robert O’Keefe also had the email.I have no idea how a private email between Ms. Naponen and Ms. Hunt and I became so public, but I feel free to express and opinion now that it has appeared in the newspapers.
The Town Accountant has a direct line to the Board of Selectmen and, I believe, a dotted line to the Town Manager. In her email, she essentially admits she was concerned over certain matters and to her concerns to the Town Manager and the state Department of Revenue (DOR) and the Auditors.

She did not bring her concerns to the Board of Selectmen, which would have been the proper channel of communication.

That being said, it is fair to fault her for not following the route but I would not be quick to absolve the Town Manager, the DOR and the auditors to have ignored her, if they did.

One small part of her email included the following:

“At various times, I told Jim that the Health Insurance Fund needs to be addressed. Rates need to be raised and more money appropriated for our share.  The auditors also told him that he needs to have his consultant review the amount of money being taken in versus what we are spending.  Also our DOR rep told me and I relayed to him that DOR would let the deficit not be counted as needed to be raised in FY2012 but he had to take care of it in FY2013.  Which he did not do.”

Accordingly, it would seem the appropriate next steps would be to ask Ms. Napponen what evidence she has to back up her charges and to bring such evidence to the next meeting of the Board of Selectmen so we can clear the air on all of this.

It was not proper for the accountant not to tell the BOS.

But if she told the Town Manager it was not proper for him not to tell the BOS.

And certainly if she raised the issue with the DOR or the auditors, it was not proper for them not to tell the BOS.

If she has evidence of making these communications then all those mentioned above need to answer to the BOS as well as Ms. Naponen.

If she does not have evidence to support her claim, then an apology is due the Town Manager, DOR and auditors for her remarks.

At the outset, on first learning about these financial problems I publicly stated — as advised by the DOR — that from that moment forward, everything we did needed to be transparent to the people of Winchendon, regardless of where the chips might fall.

I have taken that approach and continue to believe it is the only way forward.

If Ms. Naponen is willing to appear before the Winchendon Board of Selectmen at our next meeting, I am willing to put her on the agenda and to ensure she will be treated fairly and with respect. In the absence of proof of her accusations, such an appearance would be not recommended.

I am speaking here not as a member of the Select Board but rather as an individual, a resident of Winchendon, who received a private message that was leaked to the press and received wide coverage.

                                                                    Jackson Blair
                                                                     Winchendon

Well, Gallant would never appear before selectmen.  As for Blair, two weeks after going public with the letter this former Wall Street executive and finance committee member resigned from the board. But Blair’s sudden exit was preceded by Gallant’s public claims she had been “thrown under the bus” by Kreidler (see T&G 10/07/14).

Gallant, rather than appearing before selectmen at what would be Blair’s last meeting as chairman, had a one-on-one interview with T&G reporter George Barnes who crafted a one-sided story all the while never including the leaked email information or the former accountant’s allegations of DoR’s quiet approval of allowing the town to ignore the health trust fund deficit in FY’12.

This allegation has become a smoking gun in this multi-million dollar boondoggle of who dunnit & denials.  Because if true then DoR would be legally and ethically exposed since this more than suggests an awareness of a looming financial crisis.

The following are additional facts that should give One pause if thinking the idea of receivership is nothing more than misguided hyperbole.  In no order of significance:

           In 2010 Kreidler created Muni-Sun LLC.  A year later, March ’11, the Office of the Inspector    General cited his company for attempting to receive an exorbitant brokerage fee from nine communities involved in a bundled solar power plan that was determined to be in violation of the state’s procurement laws.  Muni-Sun (Kreidler), in fact, would have netted almost $11M over the 30 year contract.

We believe that you should be obtaining an additional $7-10 million of benefits instead of providing for a consultant to receive windfall profits. By establishing this kind of compensation plan, you will be significantly overpaying for the services associated with leasing your land.

~ Inspector General Gregory Sullivan

Nonetheless, a month later Winchendon’s selectmen would go into executive session and allow Kreidler to moonlight as a private consultant on renewable energy projects as long as he declined future raises in Year 4 & 5 of his contract.

 

In 2009 records show the Town of Winchendon was experiencing problems with its server and technicians from Tyler Technologies (who own MUNIS) recommended a solution to avert a catastrophic event.

Winchendon Observer 2009

According to Winchendon’s independent auditing firm, Roselli Clark & Associates, the town’s MUNIS software crashed last November, causing financial data to be lost.  No public town records exist to confirm this alleged event.

Donna Allard, however, confirmed the MUNIS software failure (see T&G 11/03/14 Winchendon Residents Hammer Town Manager on $4M Deficit).  Nonetheless, Kreidler’s  town manager report from November 25, 2013 makes no mention of any crash – nor do any following reports.

 

Ironically, what did occur on the 25th?  Selectmen Robert O’Keefe (Chair), Elizabeth Hunt, Jackson Blair and Guy Corbosiero unanimously passed a proclamation making November 30th Charlotte Gallant Day.

In 2013 the Commonwealth’s OIG again cited Winchendon (and its town manager) for procurement violations – this time involving its purchase of the old courthouse building.  Records reveal Kreidler had disclosed to the selectboard he would be entering into a business relationship with the firm designing the new police station to be built at the site of the old district courthouse.

Board of Selectmen minutes from October 28, 2013. This document paints a picture of complete ignorance. Mr. Kreidler, it would appear, had no clue as to the dire state of the town’s health insurance trust when answering a question from School Committee Chairman Mike Niles even though Gallant has gone on record claiming the contrary.

Mr. Kreidler prepared a town manager’s report on October 6, 2014 for the selectboard outlining the need to approach the Legislature as a result of “discovering” an additional $1M deficit in a school-related trust fund (a matter the School Board still disputes). The report further reveals how Kreidler has been in talks with Sen. Stephen Brewer and Rep. Jon Zlotnik.  Both assured him they’ll push for a bond bailout of approximately $2.2M (as reported in today’s T&G).  Brewer, no doubt, has the power to make it happen; However, for lawmakers to approve any bailout before a forensic audit is conducted and results known would be fiscally irresponsible.  That being said, just 10 days following the release of this report, the T&G would reveal how DoR “now estimates the shortfall at $5.7M” – a figure still not acknowledged by Kreidler and Winchendon’s selectmen.

 Winchendon, interestingly enough, has a formal fraud policy.  Supposedly if any of the thresholds are “tripped” then Kriedler, as Town Manager, serves as the investigating officer.

Not the local police.

And only after consultation with town counsel, not the selectboard, would a case be forwarded to the District Attorney’s Office.  Nothing of the sort has taken place since Kreidler has steadfastly maintained that no money is “missing”.

I mention this only because when news recently broke about the School Committee seeking a forensic audit and criminal investigation, Mr. Kreidler never responded to the T&G for a comment (see T&G 11/01/14 Winchendon School Board Wants State to Oversee Town Finances).

Then there’s Selectwoman Hunt’s own admission that the town lacks internal controls throughout its financial network which for the past 14 years has been controlled by Mr. Kreidler.

The evidence certainly suggests there exists a systemic problem in Winchendon compounded by the selectboard’s unwillingness to jettison Kreidler.

And for this municipality’s auditing firm, Roselli Clark & Associates, to not only miss millions of red flags but also attempt to deflect its seriousness should raise additional concerns.

What is going on here, town-wide, is there are not a lot of checks and balances employed.  We’re finding the process is broken.  There was a process, but somewhere along the line it stopped being followed across a lot of boards.  It used to happen, but something happened and things imploded over a lot of different departments.

We have to move beyond the last two years.

~Chad Clark Partner, Roselli Clark & Associates

It’s time to extend the olive branch, stop bickering and fighting and solve this problem.  Deficits are everywhere … people need to communicate.

~Tony Roselli  Partner, Roselli Clark & Associates

When a financial system implodes that constitutes a series of material weaknesses in the world of accounting.  But Roselli Clark & Associates, to date, refuses to make such a determination.

Why?  Collateral damage.  Six years this firm has been on board.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Winchendon welcome to Wonderland where honest and impartial public servants are seemingly everywhere – yet nowhere to be found.

BarreMuckraker