Wednesday, February 16, 2022

The Commission Is Hearing the Velken Issue Tomorrow Night

The issue at hand is an invoice from the Florida Retirement System for $472,546 that arose from the way Lewis Velken, who was presented to North Bay Villagers as police chief and then village manager in 2018, failed to comply with the FRS rules regarding retirement.  For a detailed view, click here.  

The Commission has this item on its agenda for tomorrow February 17, 2022 and while it won't be resolved tomorrow night, they will have to give direction to the legal staff, law enforcement and accounting.  The responsibility weighs on the five elected representatives, not the state and not the staff.  They need questions answered.  

Questions to resolve:

Was Velken ever an employee or a contractor?  

Velken was never a North Bay Village employee. No one is disputing that.

Indications are that he may not have been a valid contractor either.  There was never a written contract, there is a dispute on whether there was an oral agreement, the Commission certainly never approved a contract and nobody seems to know how much money was proposed.  

In the case testimony, former Village Manager Marlen Martell, Lewis Velken and the payee of record, Stephanie Leon, all gave different figures.  That doesn’t look like a contract.  

Did the Florida Retirement System accept that Velken was a contractor after the Administrative Law Judge June McKinney ruled he was?  

Definitely no or they would not have settled with Velken.   

Was Velken even authorized to approve invoices and disbursements for his own pay?  

Since Velken was not an employee of the Village and Velken did not have a written contract approved by the commission, this is a key point that must be answered.

Should North Bay Village accept that Velken was a contractor?  

Probably not.  Without a signed, commission approved contract, one way to look at it is that Velken was basically just a guy that showed up at the office.   I'm surprised that the North Bay Village continues to refer to Velken as a contractor.

Isn’t this criminal fraud?   

It could be.  I understand that the State Attorney General’s office is looking at the matter and I hope there are other criminal investigations.  

In my opinion, the Commission should formally request (by resolution) that the Florida Attorney General assign an investigator to assist other Law Enforcement to analyze and investigate the situation. The state may not be needed but it's better to be prepared.

What are the odds that North Bay Village will have to pay the $472,000 fine to the FRS?  

In my opinion, very high if North Bay Village continues to insist that Velken was a contractor and continues to take an argumentative position with the FRS. 

The odds might improve greatly if North Bay Village considers the possibility that the Village itself was a victim and works with the FRS to investigate the situation.

Wasn’t Velken also police chief?  

Yes, well, he was presented as such but never had a contract or was an employee.  The Village did submit an affidavit to the FDLE stating Velken was a full time employee, but that was wrong.  Since law enforcement authority comes from the employer, there could be issues around this.   

Was this the only non compliant payment or contract? 

There is no definitive answer for this. 

I have proposed to the Financial Advisory Board that they request a full accounting and legal review of all contracts and third party payments from November 2017 through February of 2019, the time frame that this issue was happening.  The Commission should absolutely instruct the staff to do that now. NBV does not need another surprise bill.

In my experience, when there is misallocated money, it is never just once.  It's time to put it all out there.

Kevin Vericker

February 16, 2022

Wednesday, February 2, 2022

Anti Fraud Measures In North Bay Village

 In my last post, I wrote about 2018 and the lack of controls that would have prevented someone who was neither an employee of North Bay Village nor had any approved written contract from submitting, approving and signing payments to himself from Village funds while evading Florida Retirement System and Florida Statute rules for his own benefit.  In the piece, I wondered what has changed since 2018 that would prevent a repeat of the same.  After publication I received a detailed response to my questions from Deputy Village Manager and HR Director Carla Gomez.  Honestly I'm impressed.  

First - What Is This All About?

On January 5, 2022, the Village received an unexpected invoice from the Florida Retirement System for $472,546 as its penalty in a scheme perpetrated by Lewis Velken to avoid complying with FRS rules.  Velken was never a North Bay Village employee and never had a written contract with NBV yet he was first sworn in as police chief then moved to Village manager under the shambolic administration headed by Connie Leon Kreps.   
From at least August 2018, while he was "interim village manager", Velken submitted invoices for his own services to the village, approved the invoices and signed the checks along with then Mayor Kreps.  
Velken was not an employee and had no written contract with the Village.  
In most organizations, this would have raised huge red flags.  It is standard government accounting practice that every non-payroll disbursement needs to refer to the legislation or contract that supports the payment.  In 2018, in North Bay Village, this didn't happen.  

North Bay Village in 2022 is faced with a huge issue - what to do about the $472,546 fine.  That has to be addressed.  

Looking at that impending payment which would kill our reserves, I also wanted to know two things - 
  • Has NBV fixed the holes that allowed an individual to pay himself without a contract and a careless mayor from signing those checks? 
  • Is there a plan to recoup the more than $70,000 noncompliant payments?

The Answers From The Village - YES  AND HOW

These are the questions I posed to Village Manager Ralph Rosado and HR Direct/Deputy Village Manager Carla Gomez.  The answers are very detailed so I have taken the  liberty of summarizing them. For the full response, click here.  
1.     Are you currently reviewing employee training and procedures on the need for Village disbursements to be clearly supported by more than verbal agreements?  
The short answer is “Yes”  
Following the consulting assessment done by Alvarez & Marsal in 2019, the Village updated the accounting and procurement procedures.  These are detailed in the report but for the purposes of the real question, “How did a non-employee who had no written contract manage to get paid?” it’s clear that in 2018 the procedures were not in place.  
They are now.  
2.      Are you working on clearly laying out a procedure for staff to report suspected non-compliance and fraud?
Again, there is a very long answer but the short answer is that the current administration requires employees to submit an affidavit if there is reason to suspect non-compliance or fraud in payments.  This was not the case in 2018 and it’s a good thing.  
3.      Is there a plan to recoup the disbursements to Stephanie Leon PA (Velken) as they were noncompliant with the Village policies?
Legal is reviewing this as an option.  

Alvarez & Marsal Report

To be honest, I had forgotten about the Alvarez & Marsal Report.  So let’s cover that now.  
When Mayor Brent Latham, along with Commissioners Julianna Strout and Marvin Wilmoth first took office in 2018, it was clear that the Village was out of control.  
As it has emerged now, nowhere could that be more clear than the fact that someone who was not employed by the Village nor had a written contract with the Village was able to oversee the payment of over $70,000 to himself without any alarms being raised.  
Latham took charge immediately and one of his first big moves was to bring in a consulting firm, Alvarez & Marsal, to do a bottom up assessment of North Bay Village and its processes.   
The result was a comprehensive set of recommendations.  North Bay Village Manager Ralph Rosado created and executed a tactical plan based on the recommendation and for several years reported monthly to the commission on progress.  In my view, the most critical aspect has been the rebuild of the Finance Department with strong anti-fraud measures.  Fraudsters will always probe for weakness but North Bay Village is no longer a sitting duck.  
For a complete look at the Alvarez & Marsal Report, click here

People Fought Mayor Latham and The Commission About This Report

The entire Commission agreed to hire Alvarez & Marsal but Latham took the heat.  A failed mayoral candidate and former commissioner who was on the dais in 2018 kept JAQ’ing (“Just Asking Questions” as the kidz say or used to) wondering why it was so costly.   Others began accusing random people of missing money.  But Latham and the Commission persisted and the final report provided the roadmap to reform.  
It's been a long hard road and North Bay Village has not yet closed this chapter, and it won't until the fraudsters make the village whole, but the Village has shut down an opportunity for a repeat performance.  

Kevin Vericker
February 3, 2022