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A company owned by thechairman of the Metropolitan Sewer District board has been paid nearly $600,000 for work done for the agency over thepast five years — none of it ob-tained through competitive bid-ding.
In addition, MSD has hiredbusinesses owned by the MSD
board vice chairman and oneother board member, payingthem a combined $49,000 since
July 1, 2006, according to docu-ments obtained by The Courier-
Journal through a KentuckyOpen Records request. Onlypart of that work was competi-
tively bid.Those business deals would
be violations if MSD were for-mally part of Louisville metro
government, which it isn’t, even thoughits board is appointedbythe mayor and its two top staff members arehired bythe mayor.
But since its creation by theKentucky General Assembly in the 1940s, the district’s businessdealings with board membershave been legal — yet troubling,ethics experts say.
“While it may be legal, it ismost disturbing ethically,” saidEdward L. Queen, director of leadership education programsat Emory University’s Center forEthics in Atlanta.“Atabaremini-mum, it generates a level of sus-picion that cannot be helpful to
doing the public’s business.”Details of the payments aredocumented in records TheCourier-Journal obtained aftera state audit of MSD was finishedin February. It cited the relation-
Expert questions ethics of using board members’ companies
Wheatley Hoehler Helton
By James Bruggers [email protected] Courier-Journal
Chairman AudwinHelton is founder of Spatial Data In-tegrations Inc.,
which was paid$584,899 by MSD.
Board Vice Chair-man Marty Hoehlerco-owns Market-graphics of Louis-
ville, which MSDpaid $23,700.
MSD board mem-ber BeverlyWheatley ownsWheatley Roofing
Co. Inc., whichwas paid $25,035.
Dealings by MSD ‘disturbing’
See MSD, A8, col. 1
Only about 10 percent of 145 Neighbor-hood Development Fund grants handed outby the Louisville Metro Council in the pasttwo years have spending reports filed with the city’s budget office, according to recordsinspected by The Courier-Journal.
Those grants, each of which exceeded$5,000, collectively total more than $1.9 million, andthe lack of financial report-
ing underscores a prob-lem identified in an au-dit of the city last year— that the budget of-fice had no system toensure that grant recip-ients filed expenses orfor checking that thespending was proper.
Mayor Greg Fisch-er’s administration re-
cently announced that it will assign a staff person in the Office of Management andBudget to monitor all neighborhood grants,regardless of the amount.
The Courier-Journal contacted nearly a dozen agencies that were grant recipients,and several said there were legitimate rea-sonswhythe citybudget office hasno recordof their expenses.
Some said they filed expenses with theirMetro Council representative or the councilclerk; others said they haven’t received theirfunding yet, so they have no expensesto file.
The Louisville Metro Parks Foundation,which is approved fora $10,000grantthis fis-
Giant gapfound incity grant
reportingNeighborhood fund datafell through metro cracksBy Dan [email protected] Courier-Journal
SUNDAY PRINTEXCLUSIVE
Available onlyin your print edition
today.
See GRANTS, A5, col. 1
MORE THAN
$150in coupons
in today’s paper
BENGHAZI, Libya — TheU.S. and European nationspounded Moammar Gadhafi’sforces and air defenses with cruise missiles and air strikesSaturday, launching the broad-
est internationalmilitaryeffortsince the Iraq War in supportof an uprising that hadseemedon the verge of defeat.
The Libyan leader vowed todefend his country from whathe called “crusader aggres-sion” and warned the involve-ment of international forceswillsubject the Mediterranean and North African region todanger andput civiliansat risk.
Libyan state TV claimed 48people had been killed in theattacks, but the report couldnot be independently verified.
The U.S. military said 112Tomahawk cruise missileswere fired from American andBritish ships and submarinesat more than 20 coastal targetsto clear the way for air patrolsto ground Libya’s air force.French fighter jets fired thefirst salvos, carrying out sever-al strikes in therebel-heldeast.
President Barack Obama said militaryaction was nothisfirst choice and reiterated thathe would not send American ground troops to Libya.
ALLIES ATTACK
LIBYA DEFENSES
Patrick Baz, AFP/Getty Images
A parachute, left, is ejected from a Libyan jet as it crashes after being hit over Benghazi on Saturday asLibya’s rebel stronghold came under attack from Moammar Gadhafi’s forces.
U.S., Europeans strike to enforce no-fly zone, blunt GadhafiBy Ryan Lucasand Hadeel Al-ShalchiAssociated Press
See LIBYA, A2, col. 1
NCAA ACTION IN SPORTS | C1
KENTUCKY WINS,MOREHEAD STATE
COMES UP SHORT
Full-page graphic. A6Radiation found in milk,spinach, officials say. A7
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KY-A8 | SUNDAY, MARCH 20, 2011 | THE COURIER-JOURNAL FROM PAGE ONE | courier-journal.com
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ships but couldn’t concludewhether conflicts existed.
The records provided byMSD show:Spatial Data Integra-
tions Inc. was paid $584,899
between July 1, 2006, andFeb. 22, 2011, for helpingMSD with computerizedmapping. The company’sfounder, president and chief executive officer, Audwin Helton, has been on theMSD board since 2003 andserves as chairman. His term ends in July 2012.Marketgraphics of
Louisville was paid $23,700between Aug. 3, 2007, andDec. 13 for providing MSDwith information about realestate trends. The businessis co-owned by MSD ViceChairman Marty Hoehler,who has been on the boardsince 2002.His term ends in
July.Wheatley Roofing Co.
Inc.was paid$25,035by MSDbetween April 21, 2008, andDec. 14, 2009, for roofingwork. The company isowned by board memberand former MSD Chairwo-man Beverly Wheatley, whostarted with the board in 1998 and whose term ex-pired last year. State law al-lows herto continueservinguntil reappointed or re-placed.
Only Wheatley Roofingwent through competitivebidding, the records show.State lawallowsgovernmentagencies to avoid competi-tive bidding for professionalservices, according to LarryZielke, a Louisville attorneywho advises the MSD boardandhandles litigation for theagency.
Helton, Hoehler andWheatley have said theirwork for MSD was above-board. MSD officials say nolaws were broken and thereare safeguards to protectagainst abuse, including a conflict-of-interest policythat requires disclosure.
“It is all done in the pub-lic,” Zielke said. “No one ishiding (the contracts).”
He also said the agency’seight board members, whoapprove all MSD contractslarger than$50,000,must ab-stain from voting on anycontracts involving theirown companies. The posi-tions are essentially volun-tary but come with a $75-per-meeting allowancetocoverexpenses,MSD offi-cials said.
Possible conflicts
While no one has sug-gested that the three boardmembers or MSD broke anylaws, ethics experts say thepayments to board mem-bers’ businesses could beperceived as a conflict —
that could shake public con-fidence.“Itseemslikea conflictof
interest in a broad sense,evenif itmay nottechnicallyor legally be one,” said Ste-ven G. Koven, a professor of urban and public affairs atthe University of Louisville,director of U of L’s mastersin publicadministration pro-gram,and authorof the2008book, “Responsible Gover-nance: A Case Study Ap-proach.”
“I think public expecta-tions of government-run or-ganizations are that individ-uals working in the publicsector should not be lining
their own pockets at thesame time.”Queensaidhe was partic-
ularly troubledby the no-bidnature of some of the work.“Thisseemsto strikeme asa disturbing gapin the law,”hesaid. To the extent you can minimize those (ethics) ap-pearances, it will help im-prove the public’s confi-dence in government.”
Mayor Greg Fischer de-clined to be interviewed. Hisspokesman, Chris Poynter,said he “looks forward tolearning more about” work being done for MSD by thebusinesses of board mem-bers.
The state auditor citedthe relationships during a special audit of the agency.In September, the state of-fice asked MSD’s privateauditor, Crowe Horwath, tolook into allegations of fi-nancial and other irregular-ities within the sewer agen-cy, after allegations of mis-management were raised by
Future Fund, a land trustthat’s fighting a sewer lineextension in eastern Louis-ville.
While the auditors foundno evidence of “fraud orabuse” in MSD financialpractices, they wrote that
they weren’t able to deter-mine whether conflicts ex-isted with board members,because there is no account-ing standard defining whatconstitutes a conflict.
Helton, who was namedto the board by former May-or Jerry Abramson, said thatis “very sensitive to that is-sue (of conflict),” addingthat he has repeatedly askedMSD officials, includingZielke, whether he or hisbusiness wasdoing anythingwrong.
He said he has been as-sured his business could dowork for MSD, adding, “Ididn’t want to put MSD in
any sort of predicament.”He referred all other
questions to Zielke.Hoehler said there was
no competitive bidding on his company’s contact be-cause its service is a sub-scriptionand isn’toffered byany other business.
“I didn’t go solicitingthem,”he said of MSD.“I dohelp other sewer agenciesoutside of MSD. We have a productthat nobody elsehasin this market” by helping
government agencies plan their infrastructure needs.
Wheatley said that she’sdone “very little” businesswith MSD and that each shewas the low bidder. She saidboard members shouldn’tbeprecluded from competing
with others in the commun-ity for MSD business.
MSD staff members de-fended the hiring of theboard members’ companies,saying they followed theprovisions of state law thatallow them to contract forprofessional services with-out seeking competitivebids.
Each yearMSD puts outa request for qualificationsforareas of anticipated con-tracting work, said Brian Bingham, a senior MSD en-gineer. The companies pro-vide information abouttheircapabilities, and as the needarises, staff review the ap-
propriate businesses on thelist, he said.
Bingham said that if a board member’s company isinvolved,MSD staff fully dis-cusses any potential con-flicts “and asks if other op-tions exist.”
Hesaidhe made thedeci-sions that Helton’s andHoehler’s firms “were thebest companies” to do thework required.
Helton’s firm qualifies asa minority-owned business,
and Wheatley’s qualifies as a woman-owned business.MSD has annual targets forcontracting with minority-and women-owned busi-nesses and encourages such
businesses to seek contractswith them, said MarionGee,MSD’s finance director.
MSD, which had operat-ing expenses of about$125 millionlast year, has be-come the target of growingcontroversy and criticism.
It is carrying a debt of about $2.6 billion, includinginterest, with more borrow-
ing to come to pay for a 19-year, $850 million sewerrehabilitation program aspart of a 2005 settlementwith the U.S. EnvironmentalProtection Agency and Ken-tucky water-quality regula-tors.
Customers have seen rates rise 5 percent to 7 per-cent a year since themid-1990s — and 33 percentin 2007 — andMSD officialshave said they can expectmore ofthe same for yearstocome.
Sen. Dan Seum, R-Louis-ville, whotried tobring MSDunder the Kentucky PublicService Commission two
yearsago, calledfor a shake-up — because the MSDboard serves as the watch-dog for an agency thatspends a lot of money, setsrates and hasbuiltup a largedebt. “If they are enrichingthemselves and feeding atthe trough, they need to go,”Seum said.
Different standards
Potential conflicts wouldbe less likely to come up in other parts of local govern-
ment.Poynter said the differ-
ence is that MSD isn’t for-mally a part of metro gov-ernment. MSD doesn’t haveto follow the city’s ethicspolicies or its ethics ordi-nance, which he said “basi-cally means you can’t be do-ing business with the agen-cies of the board you sit on
or with metro government,”he said.
The city’s stricter ethicspolicies would apply toboards or commissions such as the Louisville Metro AirPollution Control Board, theLouisville Metro PlanningCommission, LouisvilleBoard of Health, theParkingAuthority of River CityBoard of Commissionersand the Transit Authority of River City Board of Direc-tors, Poynter said.
ZielkesaidthathowMSDoperates is based on whatthe agency is allowed to doby the law that created it.
Poynter said Fischer
hasn’thadtime toreviewtheMSD board’s composition.By July 31, five of the eightpositions will be eligible forreappointment or replace-ment.
“His managementstyle isall about transparency andnot having a perception of wrongdoing,” said Rebecca Fleischaker, another Fischerspokesman.
Reporter James Bruggers can bereached at (502) 582-4645.
MSD | Board defends its use of firmsContinued from A1
MSD BOARD
Members are appointed by themayor:Beverly Wheatley, ownerof Wheatley Roofing Co.;started with the board in 1998;term ended June 30; can serveuntil replaced or reappointed.Arnold J. Celentano,retired wastewater engineer;started with the board in 2007;term ended July 31; can serveuntil replaced or reappointed.Martin Hoehler, co-ownerof Marketgraphics of Louisville;started with board in 2002;term ends July 31.Ben Richmond, presidentof the Louisville Urban League;started with the board in 1990;term ends Aug. 31.Marvin D. Stacy, FordMotor Co. retiree; started withthe board in 2005; terms endsAug. 31.Jerome L. Clark , retiredelectrician; started with theboard in 2007; term ends July31, 2012.Audwin Helton, president
and chief executive officer of Spatial Data Integrations;started with board in 2003;term ends July 31, 2012.Charles E. Weiter, consult-ing engineer; started with theboard in 2006; term ends June30, 2012.
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