NewsChannel 5 Investigates: Friends in High Places
Audit Confirms Questionable Spending
(Story created: 1/21/04)
NASHVILLE (AP) - The state Department of Economic and Community Development under former Gov. Don Sundquist repeatedly violated state laws and policies regarding expenditures and contracts, an audit released Wednesday by the state comptroller's office shows.
The department also:
‘‘concealed questionable transactions'' including the purchase of $17,523 worth of sport shirts and $2,300 worth of luggage;
awarded two sole-source (no-bid) contracts for the same service at the same time;
circumvented state law in the way it let $2.8 million worth of infrastructure improvement contracts to the city of Smyrna for an expansion of the Nissan plant there; and
awarded job skills grants without getting proper applications.
The audit covers the period of July 1, 2000, through March 31, 2003. Gov. Phil Bredesen took office on Jan. 18, 2003.
In its response to the audit, the department concurred in all the findings and said it had taken steps to correct the lax accounting procedures that led to the problems.
‘‘We worked very closely with the comptroller's office not only to address the internal and external accounting control issues, but also very aggressively have tried to ferret out the problem areas and deal with them,'' said assistant ECD commissioner Mike Kopp.
‘‘When we came on board there were few if any internal accounting controls.''
Kopp said that ‘‘within a very short time of getting here'' the new administration ‘‘started putting those processes into place because they didn't exist and we felt they needed to.''
‘‘We feel very good about where we are today versus where we were when we came into office a year ago,'' he said.
‘‘Also, these accounting controls have allowed us to be more efficient with the tax dollars available to us.''
During the period of the audit, except the last two months when the Bredesen administration was in place, the commissioners of ECD were:
Knoxville businessman Bill Baxter, now one of three directors for the Tennessee Valley Authority;
Alex Fischer, now director of technology transfer at the Oak Ridge National Laboratory; and
Tony Grande, who went to the Corrections Corporation of America when the administrations changed.
Comptroller John Morgan said the findings would be referred to the state Attorney General and the Davidson County district attorney for their determination of whether any charges should be brought, which he said is doubtful.
Morgan said it is rare for such audit findings to lead to criminal prosecution, even though it appears some laws were broken.
‘‘As we have just recently seen with the University of Tennessee, it's difficult to prove intent,'' Morgan said, referring to the decision this week by Knoxville prosecutors not to pursue criminal charges against former UT President John Shumaker.
‘‘But the fact that things went on that were apparently not in conformance with the statute is good for everybody to know.''
The audit points out that in awarding the $2.8 million worth of TIIPS grants to Smyrna, the purpose may have been legitimate. However, the contract was broken into four smaller amounts so that it did not have to go through the approval process of the State Building Commission.
Morgan said it appeared the new regime of ECD Commissioner Matt Kisber has changed the accounting processes since taking office. Kisber was out of town Wednesday and could not be reached for comment.
‘‘It was clear that soon after (Kisber) hit the door over there he started making some changes in the way things worked, because he didn't think the way things were was really the best way to accomplish their mission,'' Morgan said.
‘‘I think many of the things we pointed out in the audit were things they noticed and changed.''
Baxter, who was commissioner during the first five months of the audit period, could not be reached immediately for comment through TVA headquarters in Knoxville.
Fischer, who was ECD commissioner from December 2000 to September 2001, also could not be reached.
A phone message left at Grande's office was not immediately returned.