City of Philadelphia: Case Archives

City of Philadelphia reaches no-fault agreement with William Betz Jr. Inc.

October 24, 2012--The City of Philadelphia signed a no-fault settlement agreement with William Betz Jr. Inc., a local heating and plumbing supply company, for its involvement in circumventing minority-business requirements and anti-discrimination policies for at least 15 City contracts. According to the settlement, William Betz Jr. Inc. will not participate in any contracting with the City for 24 months, will pay the City $128,000 and will comply with the provisions of an Equal Opportunity Procedures Policy.

“The agreement between the City and Betz achieves the objectives my office wanted from this case,” Kurland said. “Betz has voluntarily accepted the sanctions that would have been imposed on the company if it had not made a good faith effort to resolve this matter. We appreciate their cooperation.”

According to the agreement, Betz will pay the City $128,000, in full, within a 90-day period. The agreement also stipulated the following:

Betz and all related entities will refrain from performing work for the City and bidding on City contracts for 24 months, effective October 23, 2012.

On storefront signage and on key sales-related documents distributed to its customers, Betz must disclose that it is prohibited from selling supplies to companies that plan to use those goods in work performed under contract with the City.

On October 23, 2014, Betz will again be eligible to participate in City contracts but must comply with the terms of an Equal Opportunity Procedures Policy (EOPP).

Under the EOPP, all of Betz’s sales transactions must be “arms length.” This provision prohibits Betz from negotiating arrangements between prime contractors and disadvantaged subcontractors that are certified by the Office of Economic Opportunity (OEO) as minority-, women- or disabled-owned business entities (M/W/DBEs). Betz may direct customers to the OEO Registry of M/W/DBEs if they are seeking a certified subcontractor to perform a Commercially Acceptable Function, as defined in the City’s anti-discrimination policies.

Additionally, the EOPP contains the following provisions:

Within 30 days of the EOPP’s adoption, Betz must provide at least one hour of training to all of its sales employees to ensure compliance with both the EOPP and the City’s antidiscrimination policies. Betz must review the program annually and update its training to reflect any changes in the City’s anti-discrimination policies.

Within 90 days of the EOPP’s adoption, Betz is required to issue a report to OEO summarizing the implementation process of the agreement.

A compliance manager at Betz will be responsible for communicating the terms of the EOPP to sales staff on a monthly basis. The manager will also be responsible for reporting noncompliance to the OIG, the Procurement Department and the OEO.

If Betz does not fulfill the terms of the agreement, the City reserves the right to pursue civil action to ensure compliance.

In a case summary released in January, the Office of the Inspector General established that William Betz Jr. Inc., JHS and Sons Supply Company and UGI HVAC Inc. colluded to make it appear that JHS, a City-certified minority vendor, had provided equipment and supplies for a government-funded weatherization project when JHS was paid only for the use of its name and minority certification.

As a result, the City entered into a $100,000 settlement agreement with UGI HVAC, Inc. and removed JHS and Sons from its list of certified minority businesses on January 12, 2012. The City also began debarment proceedings against William Betz Jr. Inc. but has withdrawn the notice after further negotiations and agreeing to the earlier mentioned terms.

City Employee charged in million dollar scam

November 28, 2012
An indictment was unsealed today charging three people, including a city employee, in a scheme to defraud the City of Philadelphia of more than $1 million, announced United States Attorney Zane David Memeger, FBI Special Agent-in-Charge George C. Venizelos, and City of Philadelphia Inspector General Amy Kurland. Calvin Duncan, 61, of Philadelphia, worked for the Philadelphia Water Department as a mailroom clerk. As part of his responsibilities, Duncan was responsible for mail deliveries and purchasing supplies, including printer ink and toner cartridges, for the administrative offices of PWD. Today, agents of the Federal Bureau of Investigation in Arkansas arrested Derek and Danita Willis.

According to the indictment, Duncan submitted requests for approval to purchase printer ink and toner cartridges, falsely claiming that the cartridges were for PWD employees. After receiving the printer ink and toner cartridges from the approved vendors at the City of Philadelphia’s expense, Duncan sold the printer ink and toner cartridges to Laser Cartridge Plus, Inc. (“LCP”), a business located in Russellville, Arkansas, owned by co-defendants Derek Willis, 48, and Danita Willis, 34, both of Russellville, Arkansas. Derek and Danita Willis sought to obtain thousands of ink and toner cartridges at prices significantly below the prices usually charged by ink and toner cartridge vendors.

In order to accomplish this, the indictment alleges that they purchased cartridges from Duncan knowing that the cartridges had been stolen. Derek Willis dealt directly with Duncan prior to 2005 when he tasked Danita Willis with arranging to buy the illegally obtained printer ink and toner cartridges from Duncan. Duncan mailed the illegally obtained printer ink and toner cartridges to LCP using United Parcel Service (“UPS”).

The alleged scheme was carried out between January 1, 2006 and January 5, 2012 and caused the City of Philadelphia to pay approximately $1,368,091.19 on purchase orders and shipping costs for printer ink and toner cartridges never intended to be used by PWD employees. Additionally, Derek and Danita Willis allegedly paid Duncan approximately $545,412.79, which was not due to him, for the printer ink and toner cartridges purchased with the City of Philadelphia funds and shipped to LCP using PWD’s UPS shipping account.

“The fraud alleged in this indictment cost the city crucial funds that might have benefitted the taxpayers in other ways,” said Memeger. “This office will work with our partners in federal, state and local government to pursue people who steal from their municipal employers.”

“The case against Duncan was initiated by the Philadelphia Office of the Inspector General in September 2011 after investigators received a tip from a city employee. The OIG then teamed up with the FBI to conduct a joint investigation,” said Inspector General Amy Kurland. “Collaboration is the key to fighting public corruption in Philadelphia. Oftentimes, cases like this start with tips from City employees who have the courage to do the right thing. Together, we’re changing the culture of corruption that has damaged the reputation of too many good public servants.”

“The FBI, with the United States Attorney’s Office, and the Inspector General’s Office, is committed to pursuing individuals who blatantly steal from the City for personal gain,” said Venizelos. “Today’s indictment illustrates law enforcement partners working together to send a message that these types of actions will not be tolerated, but prosecuted to the fullest extent of the law.”

Duncan, Derek and Danita Willis are charged in five counts of mail fraud and aiding and abetting. Derek and Danita Willis also are charged with obstruction of justice for the destruction of documents related to the fraud scheme. They also are charged with perjury for knowingly making false statements to the grand jury on May 8, 2012.

If convicted of all charges, Duncan faces a maximum possible sentence of 100 years imprisonment, a maximum fine of $1.25 million, a $500 special assessment, and supervised release; Derek Willis faces a maximum possible sentence of 120 years imprisonment, a maximum fine of $2.25 million, $900 special assessment, and supervised release; Danita Willis faces a maximum possible sentence of 110 years imprisonment, a maximum fine of $1.75 million, a $700 special assessment, and supervised release.

The case was investigated by the Federal Bureau of Investigation and the City of Philadelphia Office of the Inspector General. It is being prosecuted by Assistant United States Attorney Tomika N. Stevens.

City of Philadelphia Signs Settlement Agreement with Aramark and Strother Enterprises

December 13, 2012
The City of Philadelphia has signed a no-fault settlement agreement with Aramark Correctional Services (ACS) and Strother Enterprises, Inc. (Strother) to conclude a dispute over allegations that the companies circumvented the City’s minority-business requirements and anti-discrimination policies by submitting inaccurate invoices to the City for payment under ACS’ food-services contracts with the Philadelphia Prison System (PPS).

According to the settlement, the companies will pay the City a total of $400,000 and incorporate new internal policies to ensure their compliance with anti-discrimination policies on future contracts with the City and/or City-related agencies.

The settlement was the result of a Philadelphia Office of the Inspector General investigation into allegations that ACS had inaccurately reported payments made to Strother in documentation submitted to the City. Although Strother, a City-certified minority-business entity, performed actual work in connection with PPS food-services contracts, the OIG found that the company had engaged in a circular billing arrangement with ACS, which made it appear that Strother had performed a larger percentage of the contracted work than it had actually performed.

“We take our anti-discrimination policies very seriously because it is our mission to ensure fairness and equality for all who do business with the City,” said Inspector General Amy Kurland. “Everyone deserves a fair shot to compete for contracts in Philadelphia, and ACS’ scheme denied opportunities to legitimate M/W/DBEs. We will continue to pursue companies that circumvent the City’s anti-discrimination policies.”

ACS was required by contract to meet a minority-, women- and disabled-owned business entity (M/W/DBE) participation range of 20 to 25 percent, established by the Office of Economic Opportunity pursuant to Executive Order 02-05, which has since been replaced by Executive Order 03-12. If ACS had made a good faith effort to fulfill the requirement but could not do so, the City could have granted a reduction in the participation range. However, ACS did not attempt to demonstrate a good faith showing, according to the OIG’s investigation, nor did the company apply for a participation reduction. Instead, the OIG found, ACS used a circular billing arrangement to create the appearance of compliance.

Evidence of the circular billing arrangement between ACS and Strother was first discovered by the City Controller’s Office, which prompted an investigation by the OIG. The OIG established that Strother, at ACS’ direction, invoiced ACS for food-service and food-product costs. However, ACS provided the food for the contract, and Strother received a net payment for only the food service portion of the contract.

The billing arrangement did not increase the amount of money that the City paid to ACS because Strother’s purportedly larger participation did not affect how much ACS charged PPS for food. Instead of paying Strother at least 20 percent of the contract proceeds, ACS passed on only 4 percent of the total contract value to Strother, overstating Strother’s revenue by more than $2 million.

ACS and Strother deny any wrongdoing. ACS maintains that Strother purchased food from the company. ACS also maintains that the method by which it calculated its payments to Strother was consistent with its legal and contractual obligations.

The OIG maintains that its evidence is well-founded.

“The Office of Economic Opportunity concurs with the findings of the Inspector General’s Office,” said OEO Executive Director Angela Dowd-Burton. “M/W/DSBEs should represent arms-length relations with prime contractors on City contracts. OEO will work with the Philadelphia Prison System and ACS to insure good faith efforts are used to meet their M/W/DBE goals.”

ACS has agreed to change its minority participation-reporting procedures to more clearly explain its financial relationship with Strother to the City. ACS has also implemented a comprehensive compliance program related to the identification, retention and payment of M/W/DBEs.

Among the key provisions is a requirement that ACS executives certify that all contractual documents and invoices submitted to the City or City-related agencies are true and accurate. Similarly, Strother executives must certify the truth and accuracy of all contractual documents and invoices submitted to prime contractors performing work for the City or City-related agencies. Both companies have pledged to provide compliance training to employees involved in bidding, contract negotiation and invoicing.

The compliance programs will remain in effect for as long as ACS and Strother perform work under City contracts that contain participation requirements for M/W/DBEs.

Indictment Charges Former Prison Guard With Smuggling Drugs

February 5, 2013
Dion Reid, 35, of Philadelphia, PA, was charged by indictment with two counts of honest services fraud and two counts of possession with intent to distribute a controlled substance, announced United States Attorney Zane David Memeger. The indictment alleges that Reid, a former corrections officers employed by the Philadelphia Prison System, conspired and agreed with a prisoner inside the prison to smuggle in marijuana, Xanax pills, tobacco, and cellular telephones.

If convicted the defendant faces a maximum possible sentence of 50 years imprisonment, three years supervised release, a $1 million fine, and a $400 special assessment.

The case was investigated by the Federal Bureau of Investigation, the Philadelphia Police Department and the City Office of Inspector General. It is being prosecuted by Assistant United States Attorney David L. Axelrod.

Philadelphia Office of the Inspector General Wins National Public Integrity Award

February 12, 2013
The Philadelphia Office of the Inspector General is the recipient of the 2013 Public Integrity Award by the American Society for Public Administration.

“We are honored to receive this award, and we will continue working hard on behalf of all Philadelphians to ensure that our government is fair, honest and transparent,” said Inspector General Amy L. Kurland.

The OIG received the award for its “outstanding contributions to responsible conduct in public service.” Previous winners include the State of Wisconsin Ethics Board, the City of Los Angeles Ethics Commission and the Texas Comptroller of Public Accounts.

Mayor Michael A. Nutter said, “The Office of the Inspector General is the epitome of a public service agency working diligently to ensure every City department, agency and City employee is doing the right thing and that companies that contract with the City abide by City rules. The tireless efforts of Amy Kurland and her team are truly deserving of this honor.”

Government and nonprofit agencies at the local, state, federal and international level are eligible for the award when they have executed “significant programs or projects benefiting the general public,” according to the ASPA.

The award will be presented at the ASPA’s national conference in New Orleans on March 19, 2013.