Elected auditor Brock sics law enforcement on 2012 political challenger over housing grant
Elected auditor Brock sics law enforcement on 2012 political challenger over housing grant as critics cry political payback and abuse of office
Naples City Desk investigation: Internal documents show Brock allegations false, misleading
Feb. 11, 2014
By Gina Edwards
Naples City Desk
With TV cameras rolling at a January County Commission meeting, Collier Clerk of Courts Dwight Brock called on law enforcement to investigate his 2012 political opponent John Barlow and volunteer board members of the non-profit he founded, in connection with a federal housing grant. Brock’s targets: Two high-profile Collier business leaders, the CEO of one of Collier’s largest local construction companies and Commissioner Georgia Hiller’s 2010 political opponent.
Internal documents examined by Naples City Desk raise questions about whether Brock’s office buried or ignored evidence favorable to H.O.M.E. and whether Brock abused the power of his office to unjustly smear private citizens and his political rivals.
“I can assure you I’m going to law enforcement,” Brock, a former state prosecutor whose brother is a state attorney, told commissioners at their Jan. 14 meeting. “I would like this board to put on some big boy pants and go with me.”
Commissioner Georgia Hiller added: “I agree with you we need to go after these people. And if you need to go to law enforcement, I’ll go with you.” (See video at bottom.)
Political adversaries immediately called Brock’s televised performance and allegations a chilling and blatant political payback. Brock, in an interview, said he’s not on a witch hunt, and anyone who accepts taxpayer grant money should expect intense scrutiny.
Housing Opportunities Made for Everyone Inc., or H.O.M.E., was formed by retired CEO Barlow as a charity that bought 12 foreclosed houses, mostly in Golden Gate City, and remodeled them and sold them to low-income families. In 2008, H.O.M.E. received a one-time federal grant for $427,472 and used all of the money to purchase 7 houses. H.O.M.E. put up private money to buy the rest of the houses.
Members of H.O.M.E.’s Board of Directors said in a statement that they are shocked by Brock’s allegations, particularly accusations that construction work was billed and not done.
H.O.M.E.’s board said it welcomes scrutiny by law enforcement and federal Housing and Urban Development officials from the inspector general’s office.
“Perhaps this is the only way we will learn why the County Clerk is spending taxpayer money on the repeated audit of a grant that County staff closed out successfully over 3 years ago and upon which the Clerk completed and presented his own audit to the Board of County Commissioners two years ago — a grant which met its goals and objectives by providing newly renovated homes to 12 deserving families in our community,” H.O.M.E. board members said in a written statement to Naples City Desk provided through their attorney, Nicole Waid, a former federal prosecutor now with the firm Roetzel & Andress.
“The efforts of all the volunteers who helped to acquire and renovate these homes should be applauded, not maliciously attacked with false allegations made pursuant to what appears to be an unfortunate political vendetta.” Naples City Desk sought to fact check Brock’s allegations and follow the money — and the politics.
Brock initially granted Naples City Desk a two hour interview, but later he declined to grant a follow-up interview or answer follow-up questions submitted in writing after Naples City Desk had an opportunity to view internal audit work papers compiled by his office. Brock’s Office stalled and delayed access by Naples City Desk to the full set of public records over the course of three weeks. Appraisal reports this reporter remembers reviewing on Jan. 22, later could not be located in three-ring binders or in scanned files provided. Brock’s spokesman said no one tampered with the files or removed the appraisal reports. (See related story: “Appraisals reviewed by Brock’s own staff two years ago document construction Brock says not proven.”)
Brock told Commissioners he stepped out of the audit process because issues involved his former political opponent.
“In order for me to avoid even so much as the appearance of impropriety, I chose to stay out of the process and hire a purely independent auditor to review it,” Brock told commissioners when he presented them with a report by the firm Clifton Larson Allen.
But internal documents reviewed by Naples City Desk showed Brock’s staff had significant input and influence over the report by Clifton Larson Allen, which was hired in a consulting role, not as an auditor. Auditors have much stricter standards for independence. Clifton Larson Allen opined that H.O.M.E. owes Collier County $75,000.
A Naples City Desk analysis of more than 65 deeds, mortgages, and notes, and a review of hundreds of pages of documents submitted to Brock’s office by H.O.M.E., building permits and other public records shows that Brock’s inflammatory public accusations that H.O.M.E. fleeced taxpayers and that H.O.M.E. board members potentially committed crimes are not supported by documented facts.
Brock’s public presentation contained false allegations, exaggerations and omissions about H.O.M.E. Key allegations weren’t corroborated by the findings of his audit staff in a broad-based February 2012 audit which sought to determine whether H.O.M.E. complied with its grant, contract and program requirements.
Among the Naples City Desk findings:
■ Brock falsely accused Boran Craig Barber & Engel, the general contractor for the rehab work, of submitting bills for work that couldn’t be substantiated with proof. Brock said that his office had little to go on to corroborate the work on the houses was done.
Internal audit work papers show Brock’s own audit staff reviewed appraisal files with photos that show major remodeling work occurred and appraisers’ notes that document significant work including new kitchen cabinets and countertops, new roofs, new flooring, new bathrooms, new windows, new paint, new A/C units and new wells; Brock’s internal audit employee didn’t question the construction bills in a February 2012 audit.
■ Brock failed to tell commissioners and the public that H.O.M.E. gave $427,473 in notes — totaling the full amount it received in federal grant money — back to Collier County government in March 2011 after H.O.M.E. closed down operations. The $427,473 from those notes will flow back to Collier County as the 11 houses resell, or in 30 years, whichever is sooner.
That pay back puts Collier County taxpayers far in the black in terms of any profits from H.O.M.E.’s housing program that may be due back to the county — and hundreds of thousands beyond the $75,000 Brock’s consultant says is owed under a narrow profit calculation that doesn’t account for $100,000 in private donations contributed by H.O.M.E.
When questioned about the notes in an interview, Brock said even though H.O.M.E. gifted the notes to the county, the county hasn’t officially accepted them. Documents show Brock’s Office pulled acceptance of the notes from the Board of County Commissioners agenda in January 2011.
■ Brock told Commissioners in January 2014 that H.O.M.E. misspent federal money in violation of its county contract by providing $427,473 in down payment assistance to buyers — in the form of the 30-year, zero interest notes —to make the houses affordable. Brock’s consultant, Clifton Larson Allen, wouldn’t side with Brock on that allegation. Internal documents show the consultant told Brock’s staff that he couldn’t opine it was a violation;
The down payment assistance plan was part of H.O.M.E.’s original grant application and its contract with the county said it had to submit a plan to County Housing Department staff on how it planned to use profits from home sales. H.O.M.E. submitted the plan and the county’s housing director signed off before H.O.M.E. sold the first house under the federal grant.
In addition, Brock’s own internal audit staff didn’t raise the down payment assistance as a contract violation in its February 2012 audit report, but said onlythat better coordination was needed when the notes were transferred to Collier County.
■ Brock alleged that H.O.M.E. repeatedly failed to comply with records requests and that his office was justified in re-opening the February 2012 audit in April 2013 because his auditors didn’t have sufficient records;
Internal documents show Brock had the primary records used by the consultant to produce the report released in January 2014 — including closing statements for the house sales and construction and remodeling invoices — as early as September 2011. County housing staff gave Brock’s staff the closing statements for 11 houses within two weeks of opening the audit in March 2011. Barlow had submitted more than 700 pages of bills and other records to Brock’s office more than 2 years ago. An ongoing dispute over documents between H.O.M.E. and Brock involved whether Brock had authority to demand bank statements and bills for two houses that received no federal money.
■ Brock’s top lieutenant, Finance Director Crystal Kinzel, directed Clifton Larson Allen to change federal grant profit calculations to skew results against H.O.M.E. by adding in houses that H.O.M.E. paid for entirely with private money; Documents show Kinzel repeatedly misrepresented in discussions that H.O.M.E. bought houses with profits it made with federal grant money. In fact H.O.M.E. paid for 6 houses entirely with private funds, most of it personally financed by Barlow. Kinzel, through Brock’s spokesman, declined to comment.
■ Brock misleadingly called private money contributed by H.O.M.E. to the houses, including Barlow’s personal contributions, “co-mingled” funds. Private contributions do not violate federal grant rules. H.O.M.E. said Barlow personally contributed $85,000 to the project, and public records show he used his $6 million Park Shore condo to personally guarantee a $500,000 loan to front the money to buy 6 houses.
Collier County housing staff and a separate budget analyst noted in their reports that any calculated profits made by H.O.M.E. that might be owed to the county were offset by the estimated $100,000 in private donations H.O.M.E. contributed. Federal housing rules call for profits to be pro-rated if private money is contributed to a grant-funded project — an approach that Collier County staff followed in a 2011 review of the grant.
In an interview, Brock said his office has found extensive problems and poor oversight of county affordable housing programs in recent years. Some of the past problems included county officials telling contractors to submit bills for payment before work was complete, Brock said. He said H.O.M.E. failed to turn over records.
“If there’s nothing wrong with (H.O.M.E.’s grant), why would there be any hesitation in giving us the records?” Brock asked.
Barlow, in repeated letters to Brock’s office, said Brock was seeking documents that had already been provided to Collier County before the grant was closed out or documents involving houses only funded with private money. Records reviewed by Naples City Desk turned over by Barlow were extensive — including QuickBooks files, profit and loss statements, check register files, invoices, tax returns for all the years that H.O.M.E. was in existence, and cancelled checks.
“Is it political to refer an issue to law enforcement to determine if a crime was committed?” Brock asked, adding that, if there’s no crime, there shouldn’t be anything for H.O.M.E. board members to be worried about. “I did not make the statement that I think crimes were committed. I’ve not made that determination.” He added: “I’ll let law enforcement make that call.”
Brock, in his public presentation, reported findings by Clifton Larson Allen that some H.O.M.E. board members had potential conflicts of interest — which Brock described as as “incestuous” and “self dealing” arrangements. H.O.M.E.’s contract with Collier County prohibited conflicts of interest among officers and employees with decision making authority over grant spending or by directors who might gain financially.
H.O.M.E. volunteer board members may have had potential conflicts of interest. Barlow contended in a letter to Brock’s office that volunteer board members had no decision-making authority. The company owned by the husband of one volunteer board member, Julie Schmelzle, was paid by H.O.M.E. an estimated $15,000 for insurance coverage. Volunteer H.O.M.E. board member Russell Budd was also on the board of Bank of Florida Southwest that provided all but one of the loans to the low-income home buyers. Bank of Florida Southwest was taken over by regulators in 2010 when the bank became a casualty of the recession.
Internal documents show that after an initial draft of the Clifton Larson Allen report came back, Kinzel asked the firm to go back and look at conflicts of interests by board members.
It’s unclear when Brock’s staff knew about potential conflicts of interest by H.O.M.E. and why those concerns weren’t addressed in the first audit.
Internal documents in possession of Brock’s audit staff for 2.5 years showed legal bills for H.O.M.E.’s attorney who reviewed conflict of interest questions and suggested that H.O.M.E. board member Mel Engel, the CEO of construction firm Boran Craig Barber & Engel, step down from H.O.M.E.’s board. The resignation came within weeks after H.O.M.E.’s contract with Collier County for the federal money was approved. Engel resigned and later he rejoined the board after all work on the houses was complete. Engel’s firm was low bidder on the construction management contract, and his firm provided the lowest bid for rehab work on H.O.M.E.’s first house project. Brock said construction contracts should have been signed off on by county staff but weren’t.
Brock, in an interview, said all of the money paid to Boran Craig Barber & Engel for the construction should be returned to Collier County because a conflict of interest by Engel made all the payments illegal.
Whether or not HUD officials would side with Brock’s extreme position remains to be seen.
At the Jan. 14 Commission meeting, Brock said regular HUD staff would not likely be interested in his findings because they are content to let grant recipients slide by with “C” grade paperwork versus “A” grade compliance.
Hiller, in the meeting, said she believed H.O.M.E. owes the federal government $635,000. She arrived at that total by adding $410,000 that H.O.M.E. paid to Boran Craig Barber & Engel, $75,000 in profits the consultant said H.O.M.E. made, and $150,000 Brock said H.O.M.E. “stole” by spending it on administrative expenses that weren’t specified in the county contract.
Commissioners Hiller, Tom Henning and Tim Nance voted to send a joint letter from the Board of County Commissioners and Brock’s Office to HUD’s inspector general. Commissioner Donna Fiala dissented. Commissioner Fred Coyle walked out of the Jan. 14 meeting and refused to sit through Brock’s public presentation.
“John Barlow ran against Dwight Brock and Dwight Brock intends to teach John Barlow a lesson,” Coyle said in an interview.
He said Brock is engaging in exaggeration, character assassination and innuendo. The bad political blood between Coyle and Brock has been thickening for years: Coyle was among commissioners who fought to strip Brock of his auditing authority in a legal battle that dragged on for years, ran up more than $2 million in legal fees and went all the way to the Florida Supreme Court, which affirmed Brock’s role as auditor and custodian of county funds.
Critics like Coyle say Brock’s political supporters and campaign donors get little scrutiny in Brock’s audit process while political opponents get harassment and public smear campaigns.
Downs, a board member of Barlow’s non-profit H.O.M.E, ran against Commissioner Hiller in 2010 for the District 2 Commission seat, and Hiller stands unopposed in her 2014 re-election bid. Both Downs and Barlow filed a successful state Ethics Commission complaint against Brock ally Commissioner Tom Henning that was made public in March 2013.
One month later, on April 24, 2013 Commissioners Hiller, Henning and Nance voted to direct the county manager to demand more financial records from Barlow and H.O.M.E. — at Brock’s request. The demand came almost a year after Brock had closed an audit of H.O.M.E.
And the vote came the same day — during the same agenda item — when Coyle challenged Brock and accused him of conducting a sloppy and lax audit of a political ally. Coyle asked why Brock didn’t require Hiller’s political supporter, Jerry Blocker, to provide written documentation like cancelled checks to prove Blocker had paid legal fees that were part of a $540,000 legal settlement. Brock documented his review of more than $500,000 in spending in two pages of handwritten notes that Coyle obtained in a public records request. Collier County paid the legal settlement to Blocker over a controversial zoning dispute involving Blocker’s migrant farm worker trailer park in Immokalee. The settlement passed by the Commission said the Clerk, Brock, would review legal fees covered under the agreement and his opinion would be final.
Brock said he didn’t need to require more proof of payment from Blocker because he was satisfied during a one day review that the Blocker’s legal bills were valid and that he didn’t see anything to arouse suspicion.
The circumstances under which Brock went after Barlow for more records — during the tense public exchange between Brock and Coyle — cast a political taint, Coyle said.
According to Steven Goodson, a public auditor who sits on the education and research committee of the national industry group, the Institute of Internal Auditors, industry standards and professional codes of ethics require auditors to conduct audits at arms length from politics.
“I would think it would be nearly impossible for an auditor to be objective regarding someone he’s run against in a political race,” Goodson said.
Many public auditing organizations follow what’s know as the “Yellow Book,” which sets out best practices regarding ethics, independence and quality assurance. Included in the Yellow Book are procedures and standards by which auditors determine the focus of audits and also standards to determine when to re-open or initiate an audit. A request for the Brock’s Internal Audit Department policies and procedures was not provided by publication time in response to a public records request. A spokesman for Brock’s Office said staff wouldn’t be available to answer questions about audit policies and procedures until Wednesday.
If Brock’s internal audit staff wanted to re-open H.O.M.E.’s audit or had lobbied for more review, there were no documents or correspondence in the audit work papers reviewed by Naples City Desk that show it.
Brock’s office paid Clifton Larson Allen $8,000 to conduct the H.O.M.E. review. Brock declined to answer questions about how much in staff time by his office has been spent on the H.O.M.E. audits.
Correspondence files in the audit work papers show tense and emotional exchanges between Brock’s staff and county employees who defended Barlow and H.O.M.E. over the course of three years. Key county Housing department employees who answer to the county manager, and not to Brock, have been fired or resigned in the past three years. Scrutiny by Brock’s Office has made the department a pressure cooker. The county’s former housing director, Marcy Krumbine, was fired after a Brock audit found loose controls over federal grant money given to buy houses in the Neighborhood Stabilization Program. The division administrator over Krumbine later resigned.
A county grants compliance manager, and former auditor for a multimillion dollar construction company, defended Barlow and H.O.M.E. in an analysis showing H.O.M.E. made less than $25,000. She pro-rated profit calculations to account for private money H.O.M.E. contributed. She resigned last year.
The audit issued by Brock’s office regarding H.O.M.E. in 2012 took aim at county staff, saying the county needed better housing grant monitoring procedures. That audit contained none of the inflammatory allegations by Brock, even though documents reviewed were substantially the same. Internal auditor Allison Kearns, who is no longer with Brock’s office, said ineligible expenses she discovered would have been off set by the $100,000 in donations H.O.M.E. contributed.
County grants manager Kimberly Grant said ultimately it is Collier County’s responsibility to make sure grant recipients follow federal rules.
“This is not Collier County’s audit,” Grant said. “I do have the responsibility to make sure that (grant recipients) are treated fairly.”
She said her office has stepped up training for grant recipients and has been communicating with HUD officials about H.O.M.E.
“If HUD does put a hammer down it will not be to John Barlow,” she said. “It will be to Collier County. What I want at the end of the day is that we’re running a compliant department.”
H.O.M.E. said it welcomes a review by HUD’s inspector general. Although Commissioners voted to co-write a letter to HUD’s inspector general with Brock’s Office, no letter had been written almost a month after the vote.
“The H.O.M.E. Board of Directors, through its counsel, looks forward to addressing each of the false allegations made by the County Clerk and the audit. Our community deserves better. Our community deserves the truth,” the board said.
This story was originally published on Feb. 11, 2014.
Contact Gina Edwards at 239-293-3640 or by email at firstname.lastname@example.org
Full Disclosure: Nine years ago, Gina Edwards worked in the Clerks of Courts Office as the Community Outreach Director for approximately 6 months. Watchdog City's Code of Ethics policy requires disclosure where potential conflicts may be unavoidable.
Notes from appraisal reports
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