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City audit report says purchasing office employee risky for city

Monday, July 19, 2010 by Josh Rosenblatt

In response to a request from a City Council member, the city auditor’s office has determined that the reinstatement of a previously terminated Purchasing Office employee presents a risk to the city. That information came out Friday in the form of a memo from the auditor’s office to the members of the City Council, the city manager, and other officials.


Last month, Council Member Bill Spelman, acting on a conversation with a constituent, asked the auditor’s office to determine if an allegation regarding the reinstatement of Purchasing Department Buyer II Roy Rivers, who was terminated on April 24, 2009, was true. The allegation claimed that Rivers was reinstated as a buyer for the city despite having been convicted of mortgage fraud while he was a city employee. In Friday’s memo, the City Auditor’s Integrity Unit (CAIU) substantiated the allegation and provided the Council with conclusions concerning the risks and inefficiencies involved with keeping Rivers in his current position.


Those who hold the title of Buyer II in the Purchasing Department are responsible for managing bids and solicitations, awarding contracts with the city, writing and executing purchase contracts, etc.


There is no evidence that Rivers has been involved in any wrongdoing related to his city position or any other matter not related to the charge for which he was convicted.


Rivers was most recently in the news for his involvement in the decision to disqualify Texas Disposal Systems from the request for proposal process (RFP) for the future Materials Recovery Facility (MRF). Ultimately, the City Council canceled the RFP and instructed city staff to negotiate directly with both TDS and competitor Balcones Resources. Rivers also interpreted contact between Greenstar (Mid-America Recycling) and City Attorney David Smith as a violation of the city’s anti-lobbying ordinance. The city consequently decided to disqualify Greenstar from the RFP to build the new facility, but Greenstar was reinstated as a bidder on the recommendation of a hearing officer.


Rivers, who started working for the city in August 2007, was convicted of mortgage fraud in June 2008. He pleaded guilty to one count of Conspiracy to Provide False Statements Related to a Loan and was sentenced to one year of probation for his role in a conspiracy that involved 16 named defendants, $4.5 million in claimed losses, and at least 33 properties in the Austin and San Antonio areas, according to a Department of Justice report. Later that year the city expanded its criminal background investigation (CBI) process – previously reserved for positions dealing with “vulnerable populations,” including children, the elderly, and the disabled — to include cash handlers and financial positions.


According to Assistant City Auditor Jason Hadavi, whose Integrity Unit conducted the recent investigation, this expansion of the CBI process was a coincidence and wasn’t done in response to Rivers’ conviction.


“During 2008 and 2009,” Hadavi told In Fact Daily, “the city was in the process of expanding the CBI policy to include cash handlers and financial positions, people that are working with our petty cash, people that are involved in purchasing and contracts. In that expansion they conducted the CBI (background check) on Roy Rivers, but he wasn’t the only one.”


In November of 2008, Rivers received a memo from the Human Resources Department stating that, due to his financial responsibilities, he would have to pass a CBI to continue employment.


In January 2009, Rivers failed the background check as a result of his conviction, and on April 24, 2009, the Purchasing Office terminated him. Rivers’ criminal violation constituted what is called an “adverse offense” in the city’s CBI guidelines.


However, after Rivers filed a complaint citing wrongful termination in May 2009, the hearing officer, Pamela Lancaster, recommended reinstating Rivers because the “CBI policy for cash handling/financial positions was not officially approved by the Department Director or City Manager and was therefore not an official policy.” According to the memo, the auditor’s office “verified that the CBI policy was not formally approved in writing by either the (Human Resources Department) Director or the City Manager.”


In her fact-finding report for the termination grievance, Lancaster wrote, “City of Austin employees are employed ‘at will,’ but that does not mean action can be taken against employees without reference to the existing rules and guidelines under which it has agreed to operate … (t)his CBI scheme is without authority to justify termination when it has not been reviewed or officially approved by Director, City Manager, or Council.”


So the city manager’s officer overturned Rivers’ termination, stating that he had been hired before the revised CBI policy was drafted, and on August 28, 2009, issued a memo reinstating Rivers and granting him back pay for the months he was out of work.


Adding to the controversy is the fact that Rivers was reinstated to his Buyer II position, despite the fact that the assistant city manager that reviewed the file and the director of the Human Resources Department stated that he could have been transferred to another position in the city. The Financial and Administrative Services Department, of which the Purchasing Office is a part, informed the City Auditor’s Integrity Unit that they believed Rivers had to be reinstated to his original position.


“Consequently,” says the memo, “it appears a lack of communication between the three parties resulted in Rivers being placed in the Buyer II position he was terminated from.”


According to Hadavi, “The city manager decided to reinstate Rivers, and there was still concern at the departmental level that there was a risk in that decision. Yet those concerns weren’t discussed, at least to our knowledge, between city management, the HR department, or the Purchasing Department.”


In the memo, the auditor’s office concludes that “Rivers’ criminal history presents a risk to the City given his job duties.” The Purchasing Department apparently agrees with that assessment as they have instituted a “compensating control in the form of enhanced management oversight.” Two managers in the department review all the contracts Rivers deals with to ensure city “resources are not mismanaged,” which, according to the auditor’s office, is an “inefficient and wasteful use of City resources” in and of itself.


Spelman told In Fact Daily that keeping Rivers in his current position isn’t doing “anybody any favors. “There’s a potential risk to the city itself if Mr. Rivers decides to stick his thumb on the scales on behalf of one contractor or another,” he said. “Contractors might be at risk if they decide that there might be a way of getting Mr. Rivers to stick his thumb on the scales on their behalf, or if they believe somebody else has already done that, they may be screwed out of the contract. But we’re also not doing Mr. Rivers any favors because we’re putting him in a position where contractors might reasonably believe they can bribe him and expect that he would stick his thumb on the scale.”


“With three percent of the Texas population on probation or parole,” Spelman continued, “so long as we’re not giving anyone the keys to the safe, as long as we’re not dealing with a position where any previous criminal activity is likely to be an issue for the job the person’s holding, then I think it’s perfectly legitimate for us to hire former felons. But the purchasing department handles hundreds of millions of dollars in city contracts every year, and I think we need to hold the people who are purchasing for the city to a very high standard. And a guy who’s been recently convicted of federal fraud is posing a risk to himself, to contractors, and to the city by being in that position.”


Rivers could not be reached for comment this weekend.

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