Dayton to boost anti-fraud effort in wake of indictments

The city of Dayton is working to tighten its contracting processes and root out fraud as another round of public corruption indictments involving city contracts was announced on Tuesday, according to City Manager Shelley Dickstein.

Those efforts began after the first four indictments were unsealed on April 30, Dickstein said at a Tuesday evening news conference.

“I would say that the things we are doing and putting in place are going to strengthen the processes, but again there is no way to prevent it 100 percent. If people intend to commit a crime they’re going to commit a crime,” Dickstein said.

The May 28 federal indictment was unsealed on Tuesday and names Steve Rauch, 64, of Germantown, owner of Steve Rauch Inc., Joyce Sutton Cameron, 71 of Trotwood, owner of Green Star Trucking Inc. and former mayor of Trotwood and James Cameron, 80, of Trotwood, an employee of Green Star and Cameron’s husband.

Each is charged with one count of conspiracy to commit mail fraud and six counts of mail fraud, all related to fraudulently obtaining demolition contracts from governments, including the city of Dayton. Rauch pleaded not guilty and the Camerons have not yet appeared in court.

The indictment alleges Rauch, along with the Camerons, fraudulently sought and obtained "hundreds of thousands in demolition contracts," from government entities between 2012 and 2014. Green Star was certified under programs for disadvantaged and minority businesses, and Rauch claimed he subcontracted with them so he would win government contracts that required participation by those kinds of firms, according to Interim U.S. Attorney Benjamin C. Glassman at Tuesday's news conference.

But, Glassman said, Rauch instead did the work himself and the Camerons signed paperwork to make it appear they were doing the work, for which Rauch paid them a few thousand dollars or forgave their debt to him.

Indictments part of ‘Operation Demolished Integrity’

Three of four public corruption indictments announced in April also related to city contracts, including ones that involved awarding a portion of the work to disadvantaged, minority and other small businesses. A former city commissioner and a city employee, who was subsequently fired, were among those indicted.

All of the federal indictments are part of a broad probe the FBI dubbed “Operation Demolished Integrity.”

At the city’s Tuesday news conference Dickstein outlined progress on steps the city has taken in the wake of the April indictments. She said an independent investigation by the Green & Green law firm is nearing completion.

“I do know they have completed all interviews and made followup requests for emails and losing bid packages, which have been provided,” Dickstein said. “And I anticipate a work product soon to review and brief the city commission on.”

Credit: HANDOUT

In August the city rolled out a whistleblower program, which employees can use to report complaints or concerns regarding wrongdoing. The city has received no complaints, said Toni Bankston, city spokeswoman.

The city also is taking a hard look at its procurement process, using a task force facilitated by Julian and Grube, a Westerville accounting firm.

The task force is looking at construction and demolition contracting, affirmative action and disadvantaged business programs, requests for proposal activity, professional services contracts and purchase orders.

“That task force is identifying a detailed process flow, identifying areas of risk and providing recommendations to mitigate those risks and strengthen oversight and compliance activity,” Dickstein said.

Role of Human Relations Council

The city’s Human Relations Council (HRC) plays a key role in contract awards, including setting the goals for minority and other disadvantaged business participation and certifying and monitoring companies that have won designation under those programs that allow small businesses to get a portion of a larger contract.

Dickstein said the city has added a new layer of review to the HRC award process for any contract being awarded for more than the lowest bid.

Earlier this year the city also began a retraining process for employees, said City Law Director Barbara Doseck in an interview in July.

“I know that they are doing procurement information sessions, updated training throughout the organization or anybody who’s involved in that process. We are reviewing the ethics training for new employees,” Doseck said.

But she cautioned that policies and procedures won’t always stop criminals and every organization has to contend with that reality.

“I’m cognizant as an attorney of the inability to create policy that stops a criminal intent,” Doseck said. “So there has to be a very thoughtful review that considers having strong policy that works and understanding that even the strongest policy is not going to always stop bad actors.”

Dickstein said people who defraud the city hurt everyone.

“When individuals make the choice to commit fraud and line their pockets with taxpayer dollars there are many victims, including those who are rightly entitled to these opportunities, such as the truly disadvantaged businesses these programs are so thoughtfully designed to assist,” Dickstein said.

She noted that Glassman’s announcement of indictments Tuesday did not allege wrongdoing by the city or its employees.

SEE: Indictment lays out allegations against Rauch and Camerons

The indictment announcements in April and on Tuesday both included comments by FBI Acting Special Agent in Charge Joe Deters that they resulted from an investigation of “a culture of corruption in Dayton area politics.”

“I stand by those comments,” said Deters, who heads the Cincinnati FBI office. “Having a significant number of business people and government officials in one city alleged to be engaged in corruption criminally charged should serve as a warning sign of a larger problem. That problem should not be brushed aside or ignored.”

Explore

Dayton Mayor Nan Whaley took issue with Deters’ characterization.

“I believe we have bad actors, much like Gov. DeWine said in May as well,” Whaley said. “We are being completely willing to help through this process and we are going to have to respect this process as the investigation is ongoing.”

Glassman said the investigation continues and he said he welcomes “tips and information from the public regarding any aspect of fraud or corruption occurring in the greater Dayton area.”

Tips are important tools, said Ohio Auditor Keith Faber in an interview this summer. He said state audits cannot always catch wrongdoing in contracting and he encourages employees, businesses and members of the general public to report suspicious activity to his office.

“The most important thing to prevent fraud, corruption in government is transparency. Having people watch what’s going on, watch the transaction, know what the transactions are,” Faber said. “If transactions look too cozy and too sweetheart, that you have too many closely affiliated people getting certain lines of work, almost to the exclusion of other people, generally those can be some red flags.”

“But the sunshine is a great disinfectant,” Faber added. “Sunshine in the bid process.”

Indicted in Dayton region federal public corruption probe

One count of conspiracy to commit mail fraud and six counts of mail fraud:

- Steve Rauch, 64, of Germantown, owner of Steve Rauch Inc., pleaded not guilty.

- Joyce Sutton Cameron, 71 of Trotwood, owner of Green Star Trucking Inc. and former mayor of Trotwood, has not entered a plea.

- James Cameron, 80, of Trotwood, an employee of Green Star and Cameron’s husband, has not entered a plea.

One count corruptly soliciting a bribe:

- Former Dayton City Commissioner Joey D. Williams, 53, pleaded guilty and awaits sentencing.

One count of mail fraud:

- Former State Rep. Clayton Luckie, a Democrat who represented Dayton, pleaded guilty and awaits sentencing.

Three counts of honest services wire fraud, two counts of corruptly soliciting a bribe and one count of making a false statement to the FBI:

- Former Dayton business and technical assistance administrator RoShawn Winburn, 45, pleaded not guilty.

Three counts of mail fraud and one of wire fraud:

- Dayton businessman Brian Higgins, 48, pleaded not guilty

Source: U.S. District Court for the Southern District

How to spot fraud and theft in government offices

Ohio Auditor Keith Faber said there are "red flags" that could be signs of fraud, which can be reported by calling his Fraud Hotline at 866-FraudOH or emailing fraudohio@ohioauditor.gov

Employee lifestyle changes such as owning expensive cars, jewelry, homes or clothes.
Refusing to take a vacation or sick leave.
Poorly defined job duties and inadequate monitoring.
Excessive and/or unauthorized voided receipts.
Inordinate volume of manual checks.
Unsupported financial transactions or adjusted journal entries.
Photocopied or missing documents.

Source: Ohio Auditor's office