Montgomery County may have violated its own contracting requirements last month when it renewed a contract with a body-hauling business that was delinquent on hundreds of thousands of dollars in federal and state taxes, a Dayton Daily News investigation found.
The debt — more than $215,523 in past due federal and state income taxes, and workers’ compensation premiums — would appear to put the Dayton-based company GSSP Enterprise Inc. in violation of its contract with the county, which requires payment of “any and all” taxes.
Owner Brian E. Higgins, 40, also never disclosed that he had a business relationship with Ken Betz, who is director of the coroner’s office and over the years has been heavily involved in the bidding process and monitoring of the GSSP contract, according to county documents and Purchasing Director Roy Sigritz.
“We rely on our vendors to honestly complete all information and disclosures,” said Cathy Petersen, spokeswoman for Montgomery County.
“No relationships were disclosed to the purchasing director by any of these parties,” she said.
Disclosure of such relationships is not only a requirement of the contract, Ohio’s ethics law restricts business relationships between government employees and contractors.
“This is very troubling,” said Rob Nichols, spokesman for Gov. John Kasich when informed about the details of the county’s contract with GSSP.
Betz and Higgins say their business, BRK Enterprises LLC — founded in 2001 when GSSP was under contract with the coroner’s office — never got off the ground after the two partners explored the idea of opening a jazz bar in downtown Dayton. They later decided against opening the bar, and both said they didn’t realize BRK was still listed as an active business by the Ohio secretary of state. Last week Betz filed paperwork to dissolve the company.
Susan Willeke, spokeswoman for the Ohio Ethics Commission, would not comment directly on the Betz and Higgins business connection, but said, “If someone uses their public position to secure a public contract for themselves, their family or a business associate, it is a fourth-degree felony.”
“If I am in a business relationship with someone and I use my public position to get a public contract for that person, that would be a fairly clear violation of the public contract provision,” Willeke said of the law.
Higgins described Betz as a friend, and both Higgins and Betz said their business partnership had no bearing on the county contract.
“I have had no contact with Mr. Higgins for the past few years other than when he delivers a body to the office,” Betz said.
Higgins’ GSSP has held the body-hauling contract with the county since 1996 and been paid $1.1 million over that time period. He would have received more, but state and federal governments garnished $127,989.19 of Higgins’ payments for past due taxes, the Daily News investigation found.
The county commissioners on March 20 extended the existing 2008 GSSP contract for another two years. Although there were other bidders, Betz and Sigritz said the extension offered the best deal for the county at $127.99 per body. The contract is worth up to $128,000 annually.
“They were our current vendor and they were doing an excellent job,” Sigritz said. “We didn’t require they share any further proof of financial stability.”
The Dayton Daily News checked records at the county recorder and common pleas court and found that 18 federal tax liens and eight state tax liens, unemployment compensation liens or tax judgments have been filed against GSSP since 2001. Fifteen of them were released after payment was made, several through garnishments of county payments to the company. The most recent lien against GSSP, for $74,163 in past due federal taxes, was filed March 2, less than three weeks before the commissioners voted to extend GSSP’s contract.
Petersen said Friday the commissioners acted based on information given them by Higgins and the coroner’s office, and were not fully aware of GSSP’s tax delinquencies. She also said state law doesn’t require the county to consider outstanding federal tax liens when awarding bids.
Kevin Holtsberry, president of the conservative think tank Buckeye Institute for Public Policy Solutions in Columbus, expressed outrage that someone who is consistently delinquent on taxes would benefit from taxpayer-funded contracts.
Such deals undermine public faith that taxpayer dollars are being well spent, he said.
“It’s bad for taxpayers. It’s bad for the business community. It’s bad for everybody involved that the system is not being used properly and people are not being given a fair chance to compete,” said Holtsberry. “I don’t think this is a case where the law is not there. I think this is an area where we have to have accountability and transparency.”
One of the unsuccessful bidders, Dayton Mortuary Services, filed a lawsuit on March 27, seeking to reverse the award to GSSP. A request for a restraining order was withdrawn, but the lawsuit is set for trial before a Montgomery County magistrate on Sept. 17.
Higgins is well-known locally as the owner of the Sidebar 410 bar and restaurant in the Oregon District. On Friday Dr. Michael E. Ervin, owner of the Sidebar building, sued Higgins and Sidebar 410 LLC for $34,723 in rent and other costs. Higgins said late Friday afternoon that he had paid his obligations to Ervin in full on Thursday.
Last October Higgins opened another restaurant, Sidebar 122, in Columbus. There are no outstanding state taxes on that restaurant, according to Lisa Hackley, spokeswoman for the Ohio attorney general.
‘Things are very challenging right now’
The first body-hauling contract for Higgins’ GSSP was in Montgomery County, which contracts for the removal of bodies from crime scenes and other locations and delivery to the coroner’s office. He later expanded to contracts with Chicago, the Ohio counties of Cuyahoga, Lucas and Hamilton, and a city in Logan County.
Both Cuyahoga and Hamilton counties terminated the contracts early and Chicago last year contracted with a different vendor when Higgins’ contract ended.
The only current GSSP contract is in Montgomery County.
The Chicago contract resulted in a great deal of controversy that included disputes over the size of the contract, a body mix-up (which Higgins said wasn’t his fault) and unpaid pension and benefits contributions to a Chicago-based Teamsters Local.
GSSP was awarded the Chicago contract in 2006 with references from Betz and Dr. Kent Harshbarger, then Montgomery County’s deputy coroner, said Shannon E. Andrews, deputy procurement officer for the city of Chicago. Betz also provided a reference letter in 2010.
GSSP received $13.7 million in payments since 2006 in Chicago and is now suing the city in Cook County Circuit Court to overturn the city’s 2011 contract award to another company.
“GSSP performed the services required under the contract and the city does not have any comment on GSSP’s performance (on the contract),” Andrews said in an email. “While GSSP submitted a proposal in response to the RFP, it was found to be less qualified than the winning respondent.”
Higgins still faces an outstanding $288,153.61 judgment issued after GSSP failed to make required employee pension and benefits contributions to Chicago-based Teamsters Local 727, records show.
Credit: HANDOUT
Credit: HANDOUT
In an interview, Higgins acknowledged, “I would be the first to admit that things are very challenging right now.”
But he disputed criticisms of his work in other counties and said he’s always done good work in Montgomery County, an assessment shared by Harshbarger.
“He picks up bodies perfectly fine,” said Harshbarger, who was appointed coroner last year when Dr. James H. Davis retired.
Higgins blamed his accountant of five years for the unpaid taxes and other judgments against him.
“If there was anything I have erred on, I have erred on the fact that I paid a professional to do work and to ensure things were being taken care of and they were not,” Higgins said.
Multiple businesses
A Dayton Daily News review of county recorder and court documents found $819,978.24 in outstanding debt, liens and judgments against GSSP, the Dayton Sidebar restaurant and a closed Sidebar in Dayton, Higgins individually, and Higgins and his ex-wife, Chonda Higgins.
That debt includes:
• $216,523.14 in past due federal and state taxes for GSSP — an amount that is nearly twice the annual value of his county contract extension. It is unclear how much, if any, of that amount was reduced by the $25,898.75 the state garnished from his county payments.
• $257,301.49 in unpaid state and federal taxes that Higgins owes individually and on the Sidebars in Dayton. Higgins said he recently paid $41,929.13 in past due sales taxes, but the Ohio Attorney General’s Office shows those liens remain open.
• $58,000 in a judgment against Higgins in Montgomery County Common Pleas Court for land leased from Dragon Plaza Inc. The Chicago Teamsters also filed notice in Montgomery County last month seeking payment of the more than $288,000 they say is owed them for unpaid pension and benefits contributions.
• $36,314.75 in a 2009 tax lien against Higgins for unpaid personal income taxes, and a 2010 federal tax lien against Higgins and his ex-wife for $100,845.46.
In addition, Higgins owes $6,412 in property taxes for a residence at 401 Otterbein Ave., Day-ton, which he frequently used as the business address for GSSP. The county also sold tax liens on Higgins’ unpaid taxes on that property to American Tax Fund Inc. That bill now totals $16,769.
Harshbarger said he raised questions about GSSP’s financial issues when the contract rebidding was discussed. Also, Betz pointed out, the unpaid taxes were “no secret” as garnishment orders were sent to the coroner’s office.
“I told people that, as I’m certainly aware of what you know, I told them that it was a political liability for me,” said Harshbarger, who is unopposed in the November election. “I was told he performs under the contract, and the contract was awarded as such.”
Harshbarger said he can’t remember who told him it was OK to overlook the tax issues, but he believes purchasing officials communicated it to him or to Betz.
“I don’t want the commissioners to think that I’m throwing them under the bus either because I’m not trying to do that,” Harshbarger said.
Betz said Sigritz told him, “It was performance that mattered, not what he (Higgins) owed in taxes. Therefore we could not exclude him from the contract.”
Sigritz said he relied on Betz and the coroner to tell him how GSSP performed, and they gave positive reviews in his quarterly discussions with them.
“In this case, GSSP is clean,” said Sigritz. “As far as the performance of GSSP for Montgomery County, he’s a saint. His other business interests, his personal finances may be a whole different story.”
Business ties
In a written statement released Friday, the county spokeswoman Petersen said there had been no instance where GSSP’s “credit or financial stability has affected their good faith performance.”
She said state law does not require the county to consider federal tax liens and/or garnishments in determining a successful bid proposal.
The decision to renew GSSP’s contract, rather than enter into a new contract following a formal bidding process, exempted Higgins from contracting requirements that he submit evidence of financial stability and post a 100 percent performance bond. But Petersen said such exceptions are not unique for proven county vendors.
Sigritz said he did not know that Higgins and Betz had a business relationship. If he had, he said, he wouldn’t have relied on Betz’s word in monitoring the contract.
“I would have contacted the Montgomery County Prosecutor’s Office to ask advice on how the contract should be monitored, because it could not be monitored in the traditional way by talking to the department head,” Sigritz said.
Harshbarger, however, said he has long known that Higgins and Betz had started a company together, and that he does not consider it a conflict.
“I knew in full about it,” said Harshbarger. “Nothing’s going on now.”
Harshbarger said before he became coroner he too had business dealings with Higgins and Betz.
Harshbarger owned two vans through his Illinois-based company, First Forensic Inc., and agreed to lease one and sell another to Higgins for use by GSSP during the early to mid-2000s; at least one of those vehicles was used by GSSP on the Montgomery County contract.
Harshbarger said he said got permission for the deal from then-coroner Davis.
Davis could not be reached for comment.
Harshbarger and Betz incorporated First Forensic of Ohio LLC in 2004. Harshbarger said the company is still listed as active but hasn’t done work since at least 2007.
On Friday Sigritz asked Betz to divulge any business relationships he or his family have had with any employee of the county or any vendor doing business with the coroner’s office or the Miami Valley Regional Crime Lab, which Betz also directs.
In a written response to Sigritz, which the newspaper obtained from the county, Betz said he has never conducted business with any vendor associated with the county or GSSP. He said First Forensic of Ohio never did business with a “vendor associated with the county,” GSSP or Pro-Tech Biohazard Recovery LLC, a Dayton cleanup company that Higgins owns but no longer operates.
In an April 4 memo to County Administrator Deborah Feldman, Betz also said BRK, the company he and Higgins incorporated, generated no revenue before it was abandoned.
Betz said his son Tom was a seasonal employee for Pro-Tech and for Higgins’ GSSP contract in Hamilton County, but never made body removals for GSSP in Montgomery County.
Higgins confirmed that Tom Betz did not do work for GSSP here. The Daily News did find a connection between Tom Betz and First Forensic, however. A document on file at the Montgomery County Auditor’s Office shows Tom Betz filled out a Montgomery County vendor application on Jan. 27, 2005, under the First Forensic of Ohio LLC name. The application was directed at Five Rivers MetroParks, and billing records show the company was paid $825 that year for two clean up projects for the park district, which is a separate entity from the county.
Tom Betz also operates TB Livery in Springboro, which has had a contract with Community Tissue Services since 2008 to transport donor bodies from the Montgomery County Coroner’s Office to the center for tissue recovery and then to funeral homes, said Amy Moeder, spokeswoman.
He did not return a call seeking comment. Harshbarger said last week that when he became coroner he told his staff that he would take responsibility for any issues that came up in the office
“I don’t want you to blame Ken,” Harshbarger said. “Anything that happens in my office is on me. I don’t think there’s anything that happened wrong.”
UPDATE: DDN report brought tax debt, questionable business ties to light
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