Auditor’s office: Bay’s misuse of DOJ funds ‘impermissible,’ but not illegal
By Cassandra Favre
Mar 10, 2017, 18:17
Bay St. Louis City Attorney Trent Favre on Tuesday gave the city council a letter from the Mississippi State Auditor's office which effectively absolves the city's administration of illegal activity in the use of the Department of Justice drug forfeiture account.
The letter, dated Feb. 21, 2017, was posted to the city's website on Wednesday. In the letter, Deputy State Auditor Patrick Dendy addressed the city's Equitable Sharing Program/Department of Justice fund.
Favre on Tuesday told councilmen he received a report from the auditor's office and asked if they wanted to handle it in executive session or during open session.
Mayor Les Fillingame said he didn't think the matter called for an executive session and said he would like to read it aloud.
Councilman Joey Boudin and Councilman Lonnie Falgout asked Favre to forward his correspondence dated Jan. 30, 2017 to the state auditor's office to council members.
The letter was not read aloud Tuesday.
According to the letter, the OSA said it is unable to offer an opinion on whether the council should pursue redress from the people involved in either the commingling or the expenditure of the funds.
It is the council's decision to pursue the funds and seek advice from a licensed attorney, the letter states.
The information provided by OSA is intended "only to provide the city with OSA's thoughts on the issues rather than legal advice to the council," the letter states. The letter said that OSA is also unable to provide commentary on the prospect of success of claims made against the bonding agency or individuals.
Based on OSA's understanding of facts, the letter states that the "DOJ money, which was incorrectly commingled with the city's operating funds, was spent for a legitimate government purpose....the money was not embezzled, stolen, or used for personal gain of any members of the city's government. An error, whether purposeful or accidental, has occurred. DOJ has not forced the city to pay any additional money due to the error."
According to the letter, the DOJ funds were spent on other "proper governmental functions," thereby making those expenditures impermissible, rather than illegal. The OSA does not view the expenditures as illegal, but the letter states that only a court of law can make that determination.
The letter further states that "using the money on an impermissible purchase probably does not result in a loss to the city. Our understanding of the situation is that the city was allotted roughly $300,000 to pay for items for its police department. Instead, the city bought other legitimate government items. The city, then, effectively took a loan from the federal government to pay for the other legitimate government items. Repaying the money results in the city using its own funds to pay for the other legitimate government items already purchased via federal dollars. Alternatively, the situation could be viewed as the city returning the grant to the federal government."
According to the letter, OSA cannot definitively say whether a loss occurred or if a recovery is possible.
"Any suggestion made in prior draft reports by OSA regarding repayment of funds is entirely inapplicable to the current facts. In addition to being contained only in a draft report and subsequently removed for the final copy, the circumstances have changed to the point any inference drawn from the draft report regarding repayment funds is invalid. Segregating the funds does not result in the city paying twice for any expenditures," the letter states.
Council President Mike Favre said Thursday the council was under the impression from legal counsel that the correspondence was confidential and required an executive session.
"The council was unaware of the contents of the letter and did not know that the mayor received a copy previously that day," Favre said. "I believe the council would intend to share the contents of this document as long as permissible."
Favre said some people are of the opinion that the council's actions were a "witch hunt" against the administration.
"It is a fundamental role of the city council to insure that monies bestowed upon them from federal sources are spent in accordance with their required purpose," he said. "This council has a responsibility to oversee this spending and set out to ensure that the administrative branch properly spent these funds. There was never a belief that money was stolen or embezzled, but instead we believed that the money was not spent as intended."
Favre said recent guidance from the DOJ and OSA has served the council's intended purpose, which he said is "to make sure that money earned through the efforts of law enforcement was spent for the betterment of law enforcement."
"Personally, I believe this is a huge win for the Bay St. Louis Police Department and will provide much needed funding to our public servants so that they can continue to provide high quality law enforcement service to our citizens."
Fillingame said Thursday this is yet another professional opinion on the entire "gamut" of DOJ issues. For up to 20 years, Fillingame said, the funding accumulated in the general fund had not been spent according to the program's guidelines, except in 2010 when the city purchased tasers for the police department.
The money granted to Bay St. Louis through the program has to be spent by permissible guidelines, Fillingame said. He said the OSA letter states that the funds were spent on impermissible, not illegal expenditures.
"There been a lot of negative press suggesting money was missing and accounts were moved," he said. "The letter very clearly stated they were no city employees implicated. None of the agencies reviewing it or the DOJ suggest anything was done illegally. This is yet another review and report from a respected authority and dispute the claims about liability on any particular person. It's time to put this behind us. The council has spent tax money chasing a claim that doesn't exist and also tapped city resources over and over again. The reports have been the same."
Fillingame said the money has now been moved to the city's DOJ account in the amount suggested to be spent on the police department, by the police department, with "blessings from the city council, myself and the police chief."
"The DOJ has given us clear indication that the city can continue working in the program," Fillingame said. "They have given us specific guidelines on how the money is spent. They have gone out out of their way to make sure Bay St. Louis spends the money in the proper way and stay in the program."
A full copy of the OSA letter can be obtained through the city's website at www.baystlouis-ms.gov/.