HomeMy WebLinkAbout1446 KEARNEYIn Re: Gary Kearney,
Respondent
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Louis W. Fryman, Chair
John J. Bolger, Vice Chair
Donald M. McCurdy
Paul M. Henry
Raquel K. Bergen
Nicholas A. Colafella
Reverend Scott Pilarz
06 -027
Order No. 1446
10/23/07
11/7/07
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission conducted
an investigation regarding a possible violation of the Public Official and Employee Ethics
Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., by the above -named Respondent. At the
commencement of its investigation, the Investigative Division served upon Respondent
written notice of the specific allegation(s). A Stipulation of Findings and a Consent
Agreement waiving an evidentiary hearing were subsequently submitted by the parties to
the Commission for consideration. The Stipulation of Findings is quoted as the Findings in
this Order. The Consent Agreement has been approved.
This adjudication of the State Ethics Commission is issued under the Ethics Act and
will be made available as a public document thirty days after the mailing date noted above.
However, reconsideration may be requested. Any reconsideration request must be
received at this Commission within thirty days of the mailing date and must include a
detailed explanation of the reasons as to why reconsideration should be granted in
conformity with 51 Pa. Code § 21.29(b). A request for reconsideration will not affect the
finality of this adjudication but will defer its public release pending action on the request by
the Commission.
The files in this case will remain confidential in accordance with the Ethics Act. Any
person who violates such confidentiality commits a misdemeanor and, upon conviction,
may be subject to a fine of not more than $1,000 or imprisonment for not more than one
year. Confidentiality does not preclude discussing this case with an attorney at law.
Kearney, 06 -027
Page 2
I. ALLEGATIONS:
That Gary Kearney, a public official /public employee, in his capacity as a Member
and Chairman of the Housing Authority of Venango County, violated Section 1103(a)
provision of the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. §1103(a) when he used the
authority of his public position as Chairman and a Member of the Authority and as a
Director of the Authority's subsidiary, Venango Housing Corporation, to participate in the
authorization of payments to himself which were not authorized by the Authority; and when
he used the authority of his public office to receive compensation not provided for by law
when he was employed by the Authority while simultaneously serving as a Board Member.
II. FINDINGS:
1. Gary H. Kearney served as a member of the Housing Authority of the County of
Venango (hereafter Authority) Board of Directors from December 18, 1982, through
December 31, 2004.
a. Kearney served as the Chairman of the Authority board from March 18,
1987, through December 31, 2004.
2. Kearney also served as a member of the Venango Housing Corporation (hereafter
Corporation) Board of Directors from at least March 2, 2000, through December 31,
2004.
a. Kearney served as the Vice - President of the Corporation board from at least
March 2, 2000, through December 31, 2004.
b. Kearney served as a financial advisor to the Corporation from May 30, 1990,
through December 31, 2004.
3. Kearney's duties and responsibilities as the Authority Chairman were set forth in the
Authority By -Laws.
a. The individual holding the position of Chairman was responsible for the
following.
1. Presiding at all meetings of the Authority;
2. Signing all contracts, deeds, and other instruments made by the
Authority; and
3. Submitting at each meeting recommendations and information
he /she may consider proper concerning the business, affairs, and
policies of the Authority.
4. Kearney's duties and responsibilities in relation to his position as the Vice- President
of the Corporation Board of Directors were established in the original By -Laws of
the Corporation.
a. The individual holding the position of Vice - President was responsible for the
following:
1. Performance of duties as prescribed by the board or President.
2. Performance of all duties of the President in [the] President's
absence.
Kearney, 06 -027
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5. The Venango County Commissioners created the Authority via Resolution
presented at the May 31, 1977, regular Commissioner's meeting.
a. The County Commissioners created the Authority pursuant to the authority
granted them in the Pennsylvania "Housing Authorities Law."
6. The objective of the Authority is to provide decent, safe, and affordable housing for
low to moderate income families in Venango County with the exception of the Oil
City and Franklin areas.
a. The Authority accomplishes this objective through the operation of the Public
Housing Program, the Section 8 Choice Voucher Program, and the Section 8
New Construction Program.
1. The Public Housing Program operated by the Authority consists of a
twenty unit complex located at 19 Rockwood Ave, Oil City, PA known
as Cherry Hill Apartments.
2. From April 2001 through January 2005, the Authority was approved
by HUD for the issuance of vouchers for approximately 394 units in
Venango County in association with the Section 8 Choice Voucher
Program.
3. The Section 8 New Construction Program operated by the Authority
consists of a one hundred unit, privately owned complex located at 10
Arbor Circle, Franklin, PA known as Evergreen Arbors Estates.
b. The Oil City and Franklin areas operate independent housing authorities.
7 A five - member Board of Directors governs the Authority.
a. Authority board members are appointed to five -year terms by the Venango
County Commissioners.
8. The Housing Authorities Law mandates that board members may not be
compensated for their service.
a. Authority board members are entitled to receive necessary expenses,
including traveling expenses incurred, in the discharge of their duties.
9. The Housing Authorities Law states, in part, that, No member or employee of an
Authority shall acquire any interest, direct or indirect, in any housing project or in
any property included or planned to be included in any project, nor shall he have
any interest, direct or indirect, in any contract or proposed contract for materials or
services to be furnished or used in connection with any housing project."
a. Any member or employee of an Authority that has any such interest in any
contract for material or services to be furnished or used in connection with
any housing project must immediately disclose the same in writing to the
Authority.
b. The required disclosure must be entered in writing in the Authority minute
books.
1. Failure to disclose the interest and document the disclosure in the
Authority minutes constitutes misconduct in office.
Kearney, 06 -027
Page 4
10. Under the Pennsylvania Sunshine Act, Housing Authorities are considered public
agencies and are required to take all official actions and conduct all deliberations
leading up to official actions at public meetings.
a. The Sunshine Act requires that written minutes be kept of all public
meetings.
b. Minutes must include the following:
1. The date, time, and place of the meeting;
2. The names of members present;
3. The substance of all official actions and a record of roll call votes; and
4. The names of all citizens who appeared officially at the meeting and
the subject of their testimony.
11. During Kearney's tenure, voting at Authority meetings occurred via individual roll
call vote after a motion had been properly made and seconded.
a. Any abstentions cast during [a] vote were specifically noted in the minutes.
12. Although Kearney as the Authority Chairman was to preside over Authority
meetings, Edwin Evans, Authority Executive Director, normally carried out these
actions.
a. Authority members did not normally question or challenge Evans's actions,
explanations, or suggestions at Authority meetings.
b. Authority members did not question Evans as a result of Evans's tenure with
the Authority and Evans reporting that annual audits conducted of the
Authority revealed no discrepancies.
13. Tamala Ross, Deputy Executive Director, or Robbi Terrill, Section 8 Program
Coordinator took minutes of the Authority meetings.
a. Drafts of meeting minutes were provided to Evans for content review prior to
presentation of the minutes at the upcoming Authority meeting.
b. Evans routinely altered the content of the minutes and returned them to Ross
or Terrill for correction.
c. The minutes were routinely approved for accuracy at the subsequent
Authority meeting.
14. From at least January 2001 to January 2005, Authority board members were not
provided with meeting packets for review prior to the actual meeting.
a. Authority members received a meeting agenda, the previous meeting
minutes, and various reports immediately prior to or during the actual
meeting for review.
b. Authority members were not supplied with bill lists or listings of checks
issued from Authority accounts for review nor were checks issued presented
to the Authority members verbally or physically.
Account
Number
Financial
Institution
Account
Name
677
National City Bank
Venango County Housing
Authority
651 -6
Citizens Bank
Housing Authority of Venango
County
39
Northwest Savings
Bank
Housing Authority of Venango
County
92
First National Bank
Housing Authority of the County of
Venango
Kearney, 06 -027
Page 5
15. From at least January 2001 to January 2005, no official motion or vote was taken by
the Authority members to formally approve checks issued from Authority accounts.
a. The Authority board routinely approved the Secretary /Treasurer's report
which included various financial information such as audits, five year plans,
etc.
b. The Authority board routinely approved Year End Financial Reports which
noted, among other things, the amounts of assistance payments issued and
administrative fees received during the fiscal year.
c. The Authority board routinely approved Program Budget reports on an
annual basis noting subsidies requested from HUD.
16. From at least January 2001 through January 2005 the Authority maintained various
accounts at the following financial institutions shown below:
a. Account No. 677 was the account utilized for the Public Housing Program
(Cherry Hill Apartments).
1. Funds received by the Authority from HUD for operation of the public
housing program were deposited electronically into the account.
2. Tenant rent received, if any, was also deposited into the account.
b. Account No. 651 -6 was the account utilized for the Section 8 Choice
Voucher Program and the Section 8 New Construction Program (Evergreen
Arbors).
1. Funds received by the Authority from HUD for operation of both
programs were deposited electronically into the account.
aa. Funds received for each Program were deposited separately
into the account.
c. Account No. 39 was the account utilized to segregate HAPS and
Administrative Fees issued to the Authority for the Section 8 New
Construction Program from HAPS and Administrative Fees received for the
Section 8 Choice Voucher Program.
1. Checks from the account representing funds received for the Section
Eight New Construction Program were subsequently issued to
Evergreen Arbors Associates representative of HAPs due and to the
Venango Housing Corporation representative of Administrative Fees
received /due.
Account Number
Account Description
Statement Addressed To
1001
Corporate Gold Card
Edwin A. Evans /Housing Authority
Venango
Kearney, 06 -027
Page 6
d. Account No. 92 was initially utilized as an interest generating account for the
Authority.
1. After June 28, 2002, the account was utilized as a general checking
account.
17. From at least January 2001 through approximately January 2005, Kearney and
Evans maintained sole signature authority over Authority accounts.
a. Checks issued from Authority accounts required two signatures.
b. Facsimile signature stamps were utilized to authorize Authority checks.
18. At least three sets of facsimile stamps existed in the name of Kearney and Evans
for the authorizing of Authority checks.
a. Kearney maintained a set of stamps at his home.
a. Tamala Ross, Authority Deputy Executive Director, maintained a set in her
office until approximately November 2004.
1. Ross returned the stamps to Evans at or about that time.
c. Evans maintained one set of stamps in his office at the Authority.
19. In addition to the Authority accounts maintained at National City Bank, Citizen's
Bank, Northwest Savings Bank, and First National Bank, the Authority maintained at
least one account with American Express as shown below:
a. Credit card /line of credit accounts are viewed as cash accounts for auditing
purposes.
b. No activity occurred on the card between the dates of October 2001 through
January 2005 with the exception of annual membership fees incurred.
20. From January 2001 through January 2005, Ross or Terrill received and processed
invoices /bills (including HAPs) requiring payment by the Authority.
a. Once processed, checks were generated for payment via Authority
computers or typewriter.
1. Checks issued from the Citizen's Bank account, including typical
monthly bills, Section 8 voucher payments, and transfers of funds
associated with the Section 8 New Construction Program into the
Authority account at Northwest Savings Bank were generated via
computer.
2. Checks issued from the National City account, including checks
issued in association with the Public Housing Program (expenses,
wages paid, etc.), were generated via typewriter.
21. Ross and Terrill generated Authority checks at Evans's direction.
a. Evans had ultimate supervisory responsibility over Ross and Terrill.
Kearney, 06 -027
Page 7
22. Ross and /or Terrill affixed Kearney's and Evans's names via the facsimile stamps to
the checks they generated per Evans's direction.
a. Ross and /or Terrill generated checks only from the Citizens Bank Account
(No. 651 -6) and the National City Bank Account (No. 677).
1. Ross and /or Terrill stamped the checks only until Ross turned in her
set of facsimile stamps to Evans in November 2004.
b. Evans maintained sole custody over Northwest Savings Bank Account (No.
39) and First National Bank Account (No. 92).
23. Ross and /or Terrill did not affix the facsimile stamps to checks representing
transfers of funds for the Section 8 New Construction Program from the Citizens
Bank account into the Northwest Savings Bank account.
a. Evans routinely took possession of checks representing transfers of funds
for the Section 8 New Construction Program immediately after production,
affixed the facsimile signatures, and deposited the funds.
24. Pennsylvania Department of State, Corporation Bureau records note the formation
of the Venango Housing Corporation (hereafter Corporation) under entity number
759497 on July 9, 1982.
a. The purpose of the Corporation per Corporation Bureau filings notes,
"housing project."
25. Mandates of the Articles of Incorporation include, among others, the following:
a. Section 7: If the Corporation is ever dissolved, title to or other interest in any
real or personal property owned by the Corporation shall vest in the
Authority for use by the Authority as approved by HUD or its successors and
assigns (HUD) or be transferred to or vested in another entity approved by
HUD.
b. Section 10(f): The Corporation shall not be entitled to receive any
compensation in connection with the financing of any project, except for its
expenses and any such expenses shall be subject to the approval of HUD.
26. A three - member Board of Directors governs the Corporation.
a. Directors are appointed to the Corporation board by the Authority board.
b. Directors are not compensated for their service on the Corporation board.
27. During Kearney's tenure, the Corporation did not hold regularly scheduled
meetings.
a. All documented meetings of the Corporation board have occurred at the
Venango Human Services Center, Route 322, Franklin, PA.
28. Section 3.8 of the Corporation By -Laws in effect during Kearney's tenure allow that
any action that may be taken by the board of directors at a meeting may be taken
without a meeting provided that written consent setting forth the action to be taken
is signed by each director and filed with the Secretary.
Kearney, 06 -027
Page 8
a. No such written consents exist to substantiate that any official action was
taken by the Corporation outside of a meeting setting.
29. Section 4.1 of the Corporation By -Laws effective during Kearney's tenure
addresses the choosing of officers for the Corporation.
a. Officers are elected from the board of directors from their own number.
b. Two or more offices may be held by the same person provided that the
duties of the President and Secretary may not be performed by the same
person.
30. Section 4.4 of the Corporation By -Laws effective during Kearney's tenure set forth
the duties and responsibilities of the Corporation Secretary as shown below:
a. The Secretary is responsible for among other duties, attending all meetings
of the board of directors and recording all votes and minutes of the
proceedings in a book to be kept for that purpose.
31. Section 4.7 of the By -Laws effective during Kearney's tenure mandate that officers
are not to receive any stated salaries for their services to the Corporation.
a. Corporation By -Laws in effect during Kearney's tenure do not prohibit
directors from serving the Corporation in any other capacity and receiving
compensation.
32. Section 5.4 of the Corporation's By -Laws in existence during Kearney's tenure
states the following in association to the Corporation's relationship to the Authority:
a. The Corporation must receive the approval of the Authority of each low -
income housing project to be assisted by the Corporation and of the
projected program and projected expenditures of the Corporation;
b. The Corporation must receive the approval of the Authority of each issue of
obligations of the Corporation not more than sixty days prior to the date of
the issue and approval of any amendments to the terms thereof prior to the
issuance thereof;
c. The Authority shall have the right of access at any time to all books and
records of the Corporation; and
d. The Corporation shall have an annual financial audit by an independent
certified accountant, which audit and the Corporation's activities shall be
subject to review by the Authority, at such times as required by HUD.
e. The Corporation had the authority to engage in or assist in carrying out the
development or operation of low- income housing projects (including, without
limitation, assistance by borrowing and lending funds, and refunding of prior
loans) which had been approved by the Authority.
f. The Corporation is to act in the best interests of the Authority in executing
the duties of the Corporation.
33. Expense or transfer of Corporation funds is required to be approved at an open and
public meeting.
Account
Number
Account Name
Account
Address
901
Venango
Corporation
Housing
PO Box 988
Oil City,
16301
PA
411
Venango
Corporation
Housing
PO Box 988
Oil City,
16301
PA
Kearney, 06 -027
Page 9
34. Per minutes of the two official Corporation meetings held over the existence of the
Corporation, voting at Corporation meetings occurred via a combination of group
"aye /nay" vote and individual roll call vote.
a. Examples of both voting methods are present in Corporation minutes.
b. Minutes reflecting roll call votes note the specific vote of each individual
director.
c. Kearney did not serve on the board when either of the two official
Corporation meetings were held.
35. The Corporation had no overhead or operational expenses associated with its
existence.
a. The Corporation had no employees.
b. The Corporation operated from the same physical address as did the
Authority.
36. No official motion or vote was taken by the Corporation directors to formally
approve checks issued from Corporation accounts.
a. No bill lists, invoices received, or checks issued were presented for review or
approval at any Corporation meetings or at any Authority meetings at which
Corporation business was discussed.
37. From at least January 2001 through January 2005 the Corporation maintained
accounts at National City Bank as shown below:
a. Account No. 901 was initially established by Evans to serve as a checking
account to be utilized in association with the refinancing of Evergreen
Arbors.
1. Account No. 901 was the Corporation's primary account.
b. Account No. 411 was a secondary account with minimal activity.
1. During the above referenced time frame only three deposits totaling
$590.57 were entered into the account.
2. All debits from the account during the above - referenced time frame
were attributed to monthly service charges and inactive account fees.
38. From at least January 2001 through approximately January 2005, Kearney and
Evans maintained sole signature authority over Corporation accounts.
a. Checks issued from Corporation account (account no. 901) required two
Account
Number
Account Description
Statement Addressed
To
11000
Corporate Platinum Card
Edwin A. Evans/Venango
Housing
12005
Corporate Optima
Account
Edwin A. Evans/Venango
Housing
81008
Business Capital Line
Edwin A. Evans/Venango
Housing
Kearney, 06 -027
Page 10
signatures.
b. Facsimile signature stamps were utilized to authorize Corporation checks.
39. Evans, as the Corporation President, authorized, approved, and issued Corporation
checks of his own volition.
a. Evans utilized Kearney's facsimile stamp with Kearney's permission.
b. Kearney did not object to Evans's use of Kearney's facsimile stamp.
40. Evans had sole control of the checks and check registers for the Corporation
accounts.
a. Evans prohibited Ross and Terrill access to Corporation checks and
financial records.
b. All Corporation checks issued from April 2001 through January 2005 with the
exception of check numbers 2185, 2283, 2824, and 2825 bear handwritten
information in the "Date," "Pay To The Order Of," "Amount," etc. sections of
the checks.
1. The handwriting on checks issued is Evans's.
41. In addition to the Corporation accounts maintained at National City Bank, the
Corporation maintained three separate accounts with American Express as shown
below:
a. Credit card /line of credit accounts are viewed as cash accounts for auditing
purposes.
b. No activity occurred on the card ending in Account No. 11000 between the
dates of October 2001 through November 2004 with the exception of annual
membership fees charged.
42. At the June 16, 1982, regular Authority meeting, Matthew Domber, a private citizen,
presented a proposal to the Authority board regarding the construction of a low to
moderate income family housing complex (eventually known as Evergreen Arbors).
a. The nine building, one hundred living unit complex was to be constructed on
a thirty -acre tract of land on what was known as Gurney Hill.
b. The project was to be financed through HUD Section 11(b) funding.
1. Section 11(b) funding consists of tax - exempt revenue bonds backed
by the Federal Housing Administration.
2. In order to receive tax - exempt status, a certified housing authority had
Kearney, 06 -027
Page 11
to agree to act as the financing agency.
c. The Authority was to have no financial responsibility for the bonds or the
project in the event of financial difficulty.
1. The Authority was to be responsible for acting as the financing
agency in the issuance of the tax - exempt bonds.
2. The Authority was to be responsible for administrating the ACC,
enforcing the terms of the contract, making monthly Section 8
payments to the owner, reviewing the owner's determination of tenant
income and eligibility, and making annual physical inspection of the
project.
43. At the July 14, 1982, Authority regular meeting, the development of the Corporation
as an instrumentality of the Authority to issue the Section 11(b) bonds was
discussed and approved by the board.
a. The board unanimously authorized, via Resolution at the July 14, 1982,
meeting, the development of the Corporation (a non - profit entity) to act as an
instrumentality of the Authority for the purpose of assisting and financing
housing facilities for eligible tenants in the project and to cooperate with
HUD pursuant to its program under Section 8 of the Act.
44. The Corporation Articles of Incorporation and By -Laws were approved by the
Authority board at the July 14, 1982, [sic] via the same Resolution.
a. The Articles of Incorporation for the Corporation document the appointment
of Evans, Edward Albert, and Beverly Snyder as the initial directors of the
Corporation.
1. Albert and Snyder were Authority board members at that time.
2. Evans signed the Articles of Incorporation as the incorporator of the
Corporation.
b. Evans, Albert, and Snyder signed the Corporation By -Laws on July 14, 1982.
45. Immediately following the adjournment of the July 14, 1982, Authority meeting, the
first meeting of the Corporation Board of Directors was held.
a. The Corporation directors approved and adopted the Corporation By -Laws
as approved and submitted by the Authority.
b. The Corporation directors unanimously approved a motion that the
Corporation's bond counsel make all filings with HUD which were or might
become necessary to obtain HUD's designation of the Corporation as an
instrumentality public housing agency.
c. Evans was elected as President of the Corporation at said meeting.
46. On October 7, 1982, the Authority entered into an Annual Contributions Contract
(ACC) with HUD regarding the Evergreen Arbors project.
a. The ACC between the Authority and HUD established the Authority's role as
the Contract Administrator for the Evergreen Arbors project.
1. Under the ACC, HUD agreed to provide financial assistance to the
Kearney, 06 -027
Page 12
Authority for the purpose of making HAPs.
b. The ACC was signed by Albert as the Authority Chairman.
47. At the October 20, 1982, Authority regular meeting, Evans reported on the ACC and
the closing regarding the Evergreen Arbors Project.
a. The ACC entered into between the Authority and HUD was for a term of
twenty years.
b. The closing on the project occurred on October 6 th and 7 t ", 1982, in
Pittsburgh, PA.
1. Construction notes totaled $4,974,500.00.
2. Mortgage Insurance Bonds totaled $5,295,000.00.
c. Evans and Authority Solicitor Terry Whitling were present at the closing to
represent the Authority.
48. Construction of the Evergreen Arbors complex began during or about the fall of
1982.
a. The project was completed during or about the fall of 1983.
49. Evergreen Arbors Associates (the project owner) utilizes the services of Arbors
Management, Inc. for the management of the Evergreen Arbors project.
a. Arbors Management is a full service property management company.
b. Arbors Management is responsible for approving bills, preparing HAP
requests, rent input, accounting, etc.
50. Arbors Management utilizes the services of an on -site manager at the Evergreen
Arbors project to address day -to -day operational issues.
a. The on -site manager is responsible for marketing of the units, renting the
units, interviewing applicants, addressing tenant complaints, performing
tenant certification, and determining tenant eligibility among other duties.
51. The responsibility of the Authority as the contract administrator is limited to
issuance of the monthly HAP to Evergreen Arbors and conduction of annual
inspections.
a. Annual inspections include actual unit inspections and inspections of
required forms /documentation regarding tenant certification, eligibility, etc.
52. From its inception in July 1982 until May 1990, the Corporation received /generated
no consistent income from any source as a result of issuing the 11(b) bonds which
financed the construction of Evergreen Arbors.
a. The Corporation accounts at National City Bank, Account Numbers 901 and
411, were opened in May 1990 and March 1996 respectively.
53. On or about July 3, 1989, James E. Schoenberger, General Deputy Assistant
Secretary for Housing -HUD, issued a memorandum for all State Housing Finance
Agencies and Public Housing Agencies and all HUD Regional Administrators,
Category A, B, and C Office Managers regarding the refunding of bonds issued to
Kearney, 06 -027
Page 13
finance Section 8 Financing Adjustment Factor Projects.
a. The memo noted that long -term tax - exempt interest rates continued to be
highly favorable to advance refunding which would provide substantial
Section 8 subsidy savings to the government and lock in future low mortgage
rates for the project owner.
b. The memo additionally noted HUD's interest in working with entities to
complete the refunding initiative promptly while market conditions were
feasible.
54. Evans took steps as the Corporation President to initiate the refunding /refinancing
requested by HUD.
a. Evans contacted Sanwa -BKG and requested a proposal be drawn for the
possible refinancing.
55. In or about August 1989, Evans requested advice from HUD concerning the
proposal of Sanwa -BGK to act as the exclusive agent of the Corporation to organize
the refinancing of the original 11(b) issue associated with Evergreen Arbors.
a. The request from Evans was in response to the July 3, 1989, memorandum
issued by Schoenberger.
56. Suzanne S. McLaughlin, Attorney- Advisor, Office of Chief Counsel -HUD, issued
correspondence to Evans dated August 24, 1989, which addressed the proposed
refinance of Evergreen Arbors.
a. McLaughlin advised that Schoenberger's memo suggested that HUD would
be "pretty flexible" in considering various possible approaches to achieve
refinancing.
b. McLaughlin further advised that Schoenberger's memo indicated that HUD
would not participate in a Public Housing Agency's selection of an
underwriter or consultant.
1. Due to this clause, McLaughlin advised that she could not assist
Evans in evaluation of the Sanwa -BGK proposal.
57. Minutes of the September 20, 1989, Authority board meeting documents Evans's
disclosure of the proposed refinancing for Evergreen Arbors to the Authority Board.
a. Evans reported that he had received written notice from HUD mandating that
Evergreen Arbors be refinanced and that refinancing would reduce the
original interest rate obtained.
b. Evans reminded the board that the Corporation had been formed to bond
finance the project.
1. Evans advised that the Corporation board (at that time) was
composed of himself as President, Beverly Snyder as Vice- President,
and Albert as Secretary.
c. Evans stated that the refinancing would not [affect] or change in any way the
duties performed or monies received by the Authority.
58. At the September 20, 1989, meeting, the Authority Board voted unanimously for
Evans to proceed with the necessary steps to refinance Evergreen Arbors in
Individual
Office
President
Position
Financial Coordinator
Evans
Sterrett
Vice - President
Financial Coordinator
Albert
Secretary
Financial Coordinator
Whitling
Solicitor
Attorney
Kearney, 06 -027
Page 14
accordance with the HUD mandate.
a. The minutes note no vote or approval by the board to increase Evans's
compensation or to grant Evans "allowable expenses" in association with
efforts taken to refinance Evergreen Arbors.
59. Minutes of the April 18, 1990, Authority Board meeting [document] Snyder's
resignation from both the Authority and Corporation Boards.
a. Authority Board member Mary Sterrett was appointed as the Vice - President
of the Corporation by unanimous vote at the April 18, 1990, Authority Board
meeting.
60. A meeting of the Corporation Board was held on May 30, 1990.
a. Minutes note the meeting attended by board members Evans, Albert and
Sterrett; Corporation Solicitor Terrance Whitling; and Kearney as a non -
board member.
61. Under the "President's Report" section of the minutes, Evans informed the board
that the Corporation had an agreement with Sanwa -BGK to complete the bond
refinancing.
a. Evans advised that, "... Sanwa -BGK and Venango Housing Corporation
entered into an agreement in writing where by [sic] they would do everything
that was necessary to refund the bonds...".
b. Evans noted that the re- financing was occurring as a result of the July 3,
1989, Schoenberger memo.
c. Evans identified parties involved in the refinancing as follows: Counsel -
Brown & Wood; Bond Counsel- Rogers & Wells; and Trustee -Chase Lincoln
First Bank National Association.
1. Additional parties involved in the refinancing but not noted in the
minutes included: Underwriter -BGK Securities Co., L.P.; Trustee's
Counsel- Nixon, Hargrave, Devans, and Dolye; and Escrow Agent-
Mellon Bank, N.A.
62. After discussion of the bond refinancing, the Corporation Board unanimously
passed a Resolution dated May 30, 1990, approving the refinancing of the
Evergreen Arbors project.
a. The Resolution was signed by Evans as the President of the Corporation.
b. The resolution acknowledged the Corporation Board's approval of the
entities involved to complete all tasks required to complete the refinancing.
63. At the May 30, 1990, Corporation Board meeting Board Members Evans, Sterrett,
and Albert, along with Kearney and Whitling, were approved to hold the positions
noted below:
Individual
Office
Position
Kearney
N/A
Financial Advisor
Kearney, 06 -027
Page 15
Minutes document on at least two separate occasions that Evans, Sterrett,
Albert, and Kearney are to serve in the positions noted above.
b. Minutes document on at least two separate occasions that Evans, Sterrett,
Albert, and Kearney are to be compensated for their services in said
positions.
c. Kearney had no background which would qualify him for a position as
Financial Advisor in the bond market.
a.
64. Evans subsequently called for a motion for Resolution that each member acting as
a Financial Coordinator, Financial Advisor, or Attorney be compensated for their
services.
a. The vote to approve the Resolution passed unanimously (3 -0) with no
abstentions noted.
1. Kearney was not serving as a Corporation board member at that time.
b. Minutes do not document actual services to be performed or the amount or
type of compensation to be received by any individual noted.
65. On May 30, 1990, an Emergency Meeting of the Authority was held immediately
after the adjournment of the Corporation meeting.
a. Authority board members in attendance at the meeting were Kearney,
Sterrett, [and] Albert.
1. Two positions were vacant on the Authority board at that time.
b. Also present at the meeting were Evans and Whitling.
66. Minutes note that prior to the adjournment of the May 30, 1990, Emergency
Meeting, an Executive Session was held to discuss personnel matters.
a. Typed minutes of the alleged Executive Session exist.
67. Although typed minutes of the alleged Executive Session exist, the authenticity of
the minutes is questionable.
a. No copy (original, official, or photocopy) of the existing Executive Session
minutes is present in the Authority minute book which contains the May 30,
1990, regular meeting minutes.
68. Minutes of the Executive Session document Evans's explanation that the resolution
to be discussed was in relation to the refinance of Evergreen Arbors.
a. Evans referenced the Board to his letter dated August 21, 1989, addressed
to John Bates, Chief Counsel, HUD - Pittsburgh Office and to HUD's alleged
response from Suzanne McLaughlin, Attorney- Advisor, Office of Chief
Counsel -HUD.
1. No copy (original, official, or photocopied) of the letter allegedly sent
to Bates is present in the Authority minute book which contains the
May 30, 1990, regular meeting minutes.
Kea�rne , 06 -027
Page 16
69. In the correspondence dated August 21, 1989, allegedly sent to Bates, Evans
outlined that since approximately $5,200,000.00 was anticipated to be refinanced
and that the Corporation was to be compensated one percent or $52,000.00, the
terms of Evans's agreement were that as Financial Agent and Coordinator, Evans
receive forty percent of the principal amount at closing and a continued $6,000.00
quarterly after closing until all responsibilities associated with Evans's functions
were complete.
a. The correspondence noted that Evans had recently spoken to McLaughlin
regarding the refinancing and his activity as refinancing agent as President
of the Corporation.
b. The correspondence noted that due to the magnitude of the requests on the
Corporation and Evans to accomplish the goals suggested by HUD, the
monetary terms of the agreement must be settled before Evans would exert
the additional time needed for the effort.
70. Correspondence received from McLaughlin dated August 24, 1989, was presented
to the Board as a response to Evans's August 21, 1989, letter allegedly sent to
Bates.
a. The correspondence from McLaughlin noted that Evans had requested
advice concerning the proposal of Sanwa -BGK to act as exclusive agent of
the Corporation to arrange the refinancing of the original Evergreen Arbors
11(b) bond issue.
b. Additionally noted was that while HUD was going to be "pretty" flexible in
considering various possible approaches to achieve refinancing, HUD would
not participate in PHA (public housing authority) selection of an underwriter
or consultant.
71. After referencing the Board to the August 21, 1989, and August 24, 1989,
correspondence, Evans requested that the Authority transfer the fees received as
Administrative costs to the Corporation to accomplish the requests of HUD per
Schoenberger's July 3, 1989, memorandum.
a. Executive Session minutes note that the intent of the transfer was to
compensate Evans for his responsibility as President and Financial Agent
and Coordinator of the Corporation in the amount as stated in the August 21,
1989, letter to Bates for the magnitude of responsibilities after the mentioned
meeting in New York.
72. The Board subsequently approved a resolution transferring the administrative fee of
the 11 b Evergreen Arbors to the Corporation to accomplish the requests of HUD for
compensation of Evans acting as President, Financial Agent, and Coordinator of
the Corporation for the continuous responsibility for the term of the refinanced 11 b
bonds after closing at $6,000.00 quarterly.
a. The vote approving the Resolution passed 3 -0 with Kearney, Sterrett, and
Albert voting affirmatively.
73. Although minutes of the May 30, 1990, Authority Executive Session document
approval for Evans to receive compensation in the amount of $6,000.00 quarterly
for services performed as President, Financial Advisor, and Coordinator of the
Corporation in association with the bond refinance, Evans did not receive checks
from either entity in the amount specified on a quarterly basis.
Kearney, 06 -027
Page 17
a. The amount referenced in the minutes was to represent compensation to be
paid to the Corporation quarterly.
b. Kearney participated in the vote approving the issuance of compensation to
the Corporation.
74. At his Civil Service hearing on July 18, 2005, Evans provided testimony under oath
regarding the August 21, 1989, letter to Bates and the May 30, 1990, Authority
Executive session as follows:
a. The letter Evans addressed to Bates requesting compensation represented
compensation to be paid to the Corporation, not Evans personally.
1. Evans's use of language including "1" and "my" in the letter to Bates
was in reference to his position as an officer of the Corporation.
2. Evans's intention in writing the letter was for the compensation to go
to the Corporation.
b. The resolution passed by the Authority during the May 30, 1990, Executive
Session was not approved for the purpose of paying Evans compensation.
1. Evans believed it was approved as payment to him as President of
the Corporation and indicated it could be interpreted as
compensation.
2. Evans was not paid the $6,000.00 quarterly amount.
75. Evans represented McLaughlin's August 24, 1989, letter to the Board as HUD's
approval to the terms and conditions set forth by Evans in his August 21, 1989,
[letter] addressed to Bates.
a. The Board approved the Resolution authorizing the transfer of the
administrative fees based on Evans's representation of McLaughlin's letter
as an approving response by HUD to the August 21, 1989, letter addressed
to Bates.
76. The August 21, 1989, letter Evans purportedly sent to Bates was never received at
the HUD Pittsburgh Office.
a. Each section /division of the HUD Pittsburgh Office, including the Office of
Chief Counsel, maintains a log documenting correspondence coming into its
respective section /division.
1. Noted in the log is the date received, the individual to whom the
correspondence is addressed, and a due date for response.
b. The correspondence log for the Office of Chief Counsel notes no receipt of
Evans's August 21, 1989, letter.
77. The August 24, 1989, letter to Evans from McLaughlin was not responsive to
Evans's August 21, 1989, letter allegedly sent to Bates.
a. McLaughlin did not view or review the August 21, 1989, letter to Bates.
1. The letter was not received at the Office of Chief Counsel for review.
b. The subject matter of the two letters did not agree.
Kearney, 06 -027
Page 18
78. Evans's factual misrepresentation of correspondence allegedly issued to and
received from HUD and Evans's misrepresentation of his responsibilities regarding
the actual refinancing prompted the Board to approve the transfer of administrative
fees received from HUD by the Authority to the Corporation.
a. Evans's misrepresentation of correspondence to and from HUD gave the
Board the impression that HUD approved Evans's terms and conditions
regarding compensation for the Corporation.
b. Evans's misrepresentation of his responsibilities regarding the actual
refinancing gave the Board the impression that Evans's workload would be
dramatically increased.
1. Evans's responsibilities regarding the refinancing were limited to
meeting with the Corporation Solicitor, choosing various entities to
complete the refinancing (i.e. the underwriter, investment banker,
bond counsel, etc.), organizing paperwork and documents regarding
the initial bond issue, and signing the actual refinancing documents.
2. Evans had no ongoing responsibilities regarding the refinancing after
the closing for the bond refinancing.
79. Evans generated two contracts between the Authority and the Corporation dated
March 20, 1990, and May 30, 1990, respectively regarding the refinancing of
Evergreen Arbors.
a. The contracts were to serve as evidence that the Authority would remunerate
the Corporation the ongoing administrative fee from HUD for the Evergreen
Arbors project for the consecutive years of the Refinancing Agreement
annually.
b. Both contracts were signed by Kearney on behalf of the Authority and by
Evans on behalf of the Corporation.
80. The contracts were duplicate documents with the exception of the contract date.
a. The initial contract signed by Kearney and Evans was dated March 20, 1990.
b. The second contract signed by Kearney and Evans was dated May 30, 1990.
1. The date of March 20, 1990, was deleted with correction fluid and the
date of May 30, 1990, was typed in its place.
81. Neither of the contracts generated were ratified at any meeting of the Authority or
the Corporation.
a. Neither the Authority nor the Corporation held meetings on March 20, 1990,
at which the initial contract could have been ratified.
b. Minutes of the Corporation and Authority Emergency Meeting of May 30,
1990, document no approval by either board to enter into such a contract.
82. The closing of the bond refinance was held on June 14, 1990.
a. Evans and Albert attended the closing in dual capacities with each individual
representing both the Authority and Corporation.
HUD Deposits
Citizen's Bank*
Transfers to Northwest
Savings Bank **
Payment From Northwest
Savings Bank to Evergreen
Arbors **
Admin Fee Transfer From
Northwest Savings Bank To
Corporation **
Date
Evergreen
Check
Date
Amt
Check
Check
Amt
Check
Check
Amt
91,215.00
Arbors`.
No
80,548.00
No
Date
No
Date
04- 01- 01
0.00
-
15,560.00
-
239
04 -01 -01
94,956.00
-
-
04 -01 -02
05 -01 -01
14,323.00
80538
05 -01 -01
14,323.00
240
05 -01 -01
76,901.00
-
-
-
06 -01 -01
91,215.00
80931
06 -01 -01
91,215.00
241
06 -01 -01
76,305.00
-
-
-
06 -29 -01
91,215.00
81329
07 -01 -01
91,215.00
242
07/01/01
79,744.00
243
07 -02 -01
7,425.00
08 -01 -01
91,215.00
81731
08 -01 -01
91,215.00
245
08 -01 -01
84,334.00
246
08 -22 -01
7,425.00
08 -31 -01
91,215.00
82181
09 -01 -01
91,215.00
247
09 -01 -01
82,795.00
-
-
-
10 -03 -01
91,215.00
82525
10 -01 -01
91,215.00
248
10 -01 -01
77,216.00
-
-
-
11 -01 -01
91,215.00
82893
11 -01 -01
91,215.00
249
11/01/01
75,135.00
-
-
-
11 -30 -01
91,215.00
82935
12 -01 -01
91,215.00
250
12 -01 -01
82,654.00
251
12 -11 -01
7,425.00
Total
652,828
11 -07 -02
74,239.00
652,828
11 -01 -02
83,853.00
730,040
11 -01 -02
5,000.00
22,275
01 -02 -02
91,215.00
83315
01 -01 -02
91,215.00
252
01 -01 -02
53,875.00
253
01 -18 -02
7,425.00
02 -01 -02
91,215.00
83665
02 -01 -02
91,215.00
254
02 -01 -02
80,548.00
-
-
-
03 -01 -02
15,560.00
84329
03 -05 -02
15,560.00
255
03 -01 -02
87,227.00
-
-
-
04 -01 -02
91,215.00
84736
04 -01 -02
91,215.00
256
04 -01 -02
75,904.00
-
-
-
05 -01 -02
91,215.00
84799
05 -01 -02
91,215.00
257
05 -01 -02
94,555.00
-
-
-
06 -01 -02
91,215.00
85180
06 -01 -02
91,215.00
258
06 -01 -02
83,384.00
-
-
-
07 -01 -02
91,634.00
85903
07 -01 -02
91,634.00
259
07 -01 -02
101,049.0
260
07 -01 -02
7,415.50
0
08 -01 -02
91,628.00
86245
08 -01 -02
91,628.00
261
08 -01 -02
89,294.00
262
08 -30 -02
7,415.50
09 -01 -02
91,628.00
86306
09 -01 -02
91,628.00
263
09 -01 -02
82,539.00
-
-
-
10 -01 -02
0.00
86649
10 -01 -02
91,628.00
264
10 -01 -02
94,154.00
-
-
-
11 -01 -02
74,239.00
87675
11 -07 -02
74,239.00
265
11 -01 -02
83,853.00
266
11 -01 -02
5,000.00
12 -03 -02
91,628.00
87726
12 -01 -02
91,628.00
267
12 -01 -02
87,466.00
268
12 -09 -02
7,415.50
Kearney, 06 -027
Page 19
83. From approximately July 1990 through at least January 2004, Evans transferred
administrative fees received by the Authority from HUD for administration of
Evergreen Arbors to the Corporation.
a. Evans transferred the entire HUD monthly subsidy received (HAPs and
Administrative Fees) from the Authority account at Citizen's Bank (aka
Mellon Bank) to the Authority account at Northwest Savings Bank via check
on a monthly basis.
1. Occasional transfers in excess of the total subsidy provided by HUD
were made regarding months in which HUD reduced the subsidy
provided to account for overpayment during the fiscal year.
b. Evans subsequently issued one check monthly from the Northwest Savings
Bank Account to Evergreen Arbors' representative of monthly HAPs due.
c. Evans issued occasional checks throughout the fiscal year from the Authority
account at Northwest Savings Bank to the Corporation account at National
City Bank representative of the transfer of administrative fees due.
1. Evans did not issue the checks to the Corporation on any set
schedule (i.e. monthly, bi- monthly, quarterly, etc.).
d. Evans maintained sole custody and control of the Authority's account at
Northwest Savings Bank and the Corporation's account at National City
Bank.
84. From April 2001 through January 2005, transfers of funds between the Authority
accounts at Citizen's Bank and Northwest Savings Bank, and transfers of funds
between the Authority account at Northwest Savings Bank and the Corporation's
account at National City Bank.
01 -02 -04
91,682.00
93193
01 -01 -04
91,682.00
286
01 -02 -04
64,084.00
287
01
-08 -04
7,578.75
02 -02 -04
91,682.00
93559
02 -01 -04
91,682.00
288
02 -01 -04
79,192.00
-
-
03 -03 -03
-
03 -01 -04
91,682.00
93953
03 -01 -04
91,682.00
289
03 -02 -04
102,503.00
-
-
91,628.00
-
04 -01 -04
59,729.00
94335
04 -01 -04
59,729.00
290
04 -01 -04
88,208.00
-
-
89767
-
05 -03 -04
91,682.00
94732
05 -01 -04
91,682.00
291
05 -01 -04
89,090.00
-
-
* **
-
06 -01 -04
91,682.00
95307
06 -01 -04
91,682.00
292
06 -01 -04
89,135.00
-
-
91,693.00
-
07 -01 -04
86,146.00
95756
07 -01 -04
86,146.00
293
07 -01 -04
84,951.00
294
07
-01 -04
7,578.75
08 -02 -04
86,146.00
96206
08 -01 -04
86,146.00
295
08 -02 -04
69,389.00
297
08
-26 -04
7,578.75
09 -01 -04
24,236.00
96639
09 -01 -04
86,146.00
296
09 -01 -04
91,270.00
-
-
73,293.00
-
10 -01 -04
86,146.00
97111
10 -01 -04
86,146.00
298
10 -01 -04
82,600.00
-
-
-
-
11 -01 -04
86,146.00
97518
11 -01 -04
24,236.00
299
11 -01 -04
58,159.00
300
11
-01 -04
7,578.75
12 -01 -04
86,146.00
97907
12 -01 -04
86,146.00
301
12 -01 -04
89,036.00
-
-
-
Total
973,105
973,105
987,617
30,315
01 -03 -05
86,146.00
98374
01 -01 -05
86,146.00
302
01 -03 -05
57,129.00
303
01
-03 -05
7,578.75
Total
86,146
86,146
57,129
7,578.75
01 -02 -03
91,628.00
88169
01 -01 -03
91,628.00
269
01 -01 -03
60,435.00
270
01 -22 -03
7,415.50
02 -03 -03
91,628.00
88560
02 -01 -03
91,628.00
271
02 -01 -03
85,895.00
-
-
-
03 -03 -03
91,628.00
88957
03 -01 -03
91,628.00
272
03 -03 -03
89,635.00
-
-
-
04 -01 -03
91,628.00
89342
04 -01 -03
91,628.00
273
04 -01 -03
80,302.00
-
-
-
05 -01 -03
91,628.00
89767
05 -01 -03
91,628.00
274
05 -01 -03
95,698.00
-
-
-
06 -02 -03
91,628.00
* **
* **
* **
275
06 -01 -03
88,500.00
-
-
-
07 -01 -03
91,693.00
90658
07 -01 -03
91,693.00
276
07 -01 -03
91,404.00
277
07 -01 -03
7,578.75
08 -01 -03
91,682.00
91114
08 -01 -03
91,682.00
278
08 -01 -03
68,290.00
279
08 -08 -03
5,000.00
09 -02 -03
91,682.00
91523
09 -01 -03
91,682.00
280
09 -02 -03
80,769.00
281
09 -24 -03
7,578.75
10 -01 -03
91,682.00
91930
10 -01 -03
91,682.00
282
10 -01 -03
73,293.00
-
-
-
11 -03 -03
91,682.00
92404
11 -01 -03
91,682.00
283
11 -01 -03
95,032.00
-
-
-
12 -01 -03
91,682.00
93060
12 -01 -03
91,682.00
284
12 -01 -03
81,681.00
285
12 -02 -03
7,578.75
Total
1,099,871
1,008,243
990,934
35,151.75
HUD Deposits
Citizen's Bank*
Transfers to Northwest
Savings Bank **
Payment From Northwest
Savings Bank to Evergreen
Arbors ** <
Admin Fee Transfer From
Northwest Savings Bank To
Corporation **
Date
Evergreen
Check
Date
Amt
Check
Check
Amt
Check
Check
Amt
Arbors
No
No
Date
No
Date
Total
912,392
1,004,020
1,013,848
34,671.50
Kearney, 06 -027
Page 20
*HUD deposit dates are dates posted on the bank statement
* *Other dates represent dates on actual checks
* * *No check to NWSB in June 2003 —Catch up for check issued in October 2002 when no
EA monies received from HUD
a. Evans transferred a total of $129,992.00 in administrative fees received by
the Authority for the administration of Evergreen Arbors to the Corporation
spanning the time frame of April 2001 through January 2005.
1. A balance of $3,741.84 existed in the Corporation account as of April
1, 2001.
b. Evans affixed both his name stamp and Kearney's name stamp to all of the
checks noted above.
1. Kearney did not object to Evans's use of Kearney's name stamp.
85. In addition to the transfer of administrative fees received by the Authority for the
administration of Evergreen Arbors to the Corporation, Evans transferred /deposited
at least $58,626.12 into the Corporation account at National City Bank from the
Authority account at First National Bank from May 2002 through January 2005 as
shown below:
Check
No.
Check
Date
Check
Amount ',
Payee
Signatories
Deposit
Date
Description
Check
Origin
Check
No.
Check
Date
Check
Amount
Payee
Signatory
Evans
Computer Purchase
Deposit
Date
05/22/01
American Express
Acct 12005
5122
05/22/01
$2,000.00
Venango Housing Corp.
National Grange
Mutual Ins. Co.
7038377
07/04/01
2,433.42
Venango Housing Corp.
N/A
07/16/01
Pa Assoc. of Notaries
51239
05/29/01
36.73
Venango Housing Corp.
N/A
08/02/01
A. Crivelli Chevrolet
012686
07/18/01
20.00
Venango Housing Corp.
N/A
08/02/01
American Express
Acct 81008
9012
03/28/02
2,500.00
Venango Housing Corp.
Evans
03/28/02
Total
1052
04/27/04
$6,990.15
Venango Housing Corp.
Evans /Kearney
04/27/04
1002
05/10/02
$1,521.12
Venango Housing Corp.
Evans /Kearney
05/10/02
Computer Purchase
1009
11/04/02
1,500.00
Venango Housing Corp.
Evans /Kearney
04/09/03
Alloc Plan 2002 Housing
1028
04/01/03
1,500.00
Venango Housing Corp.
Evans /Kearney
04/09/03
Alloc Plan Fiscal Yr 2003
1047
03/20/04
995.00
Venango Housing Corp.
Evans /Kearney
04/02/04
Acct 2004 Adm Plan
1050
03/02/04
995.00
Venango Housing Corp.
Evans /Kearney
04/02/04
Acct 2004 Adm Plan
1049
04/02/04
1,500.00
Venango Housing Corp.
Evans /Kearney
04/27/04
Bond Restructure 2004
1052
04/27/04
1,500.00
Venango Housing Corp.
Evans /Kearney
04/27/04
Bond Restructure 2004
1053
05/13/04
900.00
Venango Housing Corp.
Evans /Kearney
05/13/04
Housing Allocation Plan
1055
05/13/04
900.00
Venango Housing Corp.
Evans /Kearney
05/13/04
Housing Allocation Plan
1069
12/14/04
30,315.00
Venango Housing Corp.
Evans /Kearney
12/15/04
Acct 200511
1074
12/21/04
17,000.00
Venango Housing Corp.
Evans /Kearney
01/06/05
Tr 112005
Total
$58,626.12
Ck Date
Ck No
Ck Amt.
Payee
Description
Signatories*
Check Disposition
12/21/2001
2283
$ 172.00
Gary H. Kearney
Account Info
Evans /Kearney
Cashed Out
2/27/2002
2332
$ 750.00
Gary H. Kearney
Corp Acct Fee 750#
Evans /Kearney
Deposit (064061187)
3/1/2002
2334
$ 750.00
Gary H. Kearney
Corp Acct Fee #2 -750
Evans /Kearney
Deposit (064061187)
8/31/2003
2592
$ 750.00
G. H. Kearney
Acct 2003
Evans /Kearney
Deposit (064061187)
9/2/2003
2594
$ 750.00
G. H. Kearney
Acct 2003
Evans /Kearney
Deposit (064061187)
Total
$3,172.00
Kearney, 06 -027
Page 21
a. Authorizing signatures were affixed to all of the checks noted above with
facsimile stamps of Evans's and Kearney's signatures.
1. Evans affixed both his name stamp and Kearney's name stamp to all
of the checks noted above.
2. Kearney posed no objection to Evans's use of Kearney's facsimile
stamp.
b. Interest accrued on the account is not included in the deposit totals.
86. Remaining deposits into the Corporation account at National City Bank totaling
$6,990.15 spanning the time frame of May 2001 through January 2005 consist of
American Express convenience checks and refund checks issued as shown below:
a. Evans signed both American Express convenience checks as the authorizing
signatory.
b. Interest accrued on the account is not included in the deposit totals.
87. From at least April 2001 through January 2005, Evans routinely utilized the
Corporation account at National City Bank (Account No. 901) to issue payments to
Kearney without specific board approval totaling $3,172.00 as shown below:
*Signature Stamps utilized to authorize checks
Ck Date
Ck No
Ck Amt.,'
Payee
Description
Signatories*
Check Disposition
Deposit (064061187)
5/29/2002
1004
$750.00
G H Kearney
None
Evans /Kearney
6/5/2002
1006
$750.00
G H Kearney
None
Evans /Kearney
Deposit (064061187)
12/20/2002
1020
$400.00
G H Kearney
None
Evans /Kearney
Deposit (064061187)
2/7/2003
1023
$750.00
G H Kearney
None
Evans /Kearney
Deposit (064061187)
2/28/2003
1025
$750.00
G H Kearney
None
Evans /Kearney
Deposit (064061187)
12/17/2003
1040
$500.00
G H Kearney
Accounting (Illegible)
Evans /Kearney
Deposit (064061187)
2/6/2004
1044
$750.00
G H Kearney
Admin Plan 5555
Evans /Kearney
Deposit (064061187)
3/3/2004
1046
$750.00
G H Kearney
Admin Plan 5555
Evans /Kearney
Deposit (064061187)
8/25/2004
1060
$750.00
G H Kearney
Plan Acct A004
Evans /Kearney
Deposit (064061187)
9/7/2004
1063
$750.00
G H Kearney
Plan Acct A004
Evans /Kearney
Deposit (064061187)
12/15/2004
1067
$250.00
G H Kearney
Acct 200411
Evans /Kearney
Deposit (064061187)
12/14/2004
1068
$250.00
G H Kearney
Acct 200412
Evans /Kearney
Deposit (064061187)
Total
$7,400.00
Kearney, 06 -027
Page 22
a. None of the five checks received by Kearney were approved by the
Corporation board or the Authority board at any official board meeting.
1. Although in existence since July 1982, minutes of only two official
Corporation meetings exist.
aa. Corporation minutes note no official action by the respective
board members to approve any checks issued by Evans from
the Corporation account.
b. No minutes of Authority board meetings document Corporation meetings
held concurrently with Authority meetings.
1. No official votes by the Corporation board to approve checks issued
from Corporation accounts are present in Authority minutes.
c. Four of the five checks were deposited into Kearney's personal bank
account at Northwest Savings Bank (Account No. 187).
1. The remaining check was cashed by Kearney.
88. In addition to checks issued /received from the Corporation account at National City
Bank, from at least May 2002 through December 2004, Evans routinely utilized the
Authority account at First National Bank (Account No. 92) to issue payments to
Kearney without specific board approval totaling $7,400.00 as shown below:
None of the twelve checks received by Kearney were approved by the
Corporation board or the Authority board at any official board meeting.
1. Although in existence since July 1982, minutes of only two official
Corporation meetings exist.
aa. Corporation minutes note no official action by the respective
board members to approve any checks issued by Evans from
the Corporation account.
b. No minutes of Authority board meetings document Corporation meetings
held concurrently with Authority meetings.
a.
Kearney, 06 -027
Page 23
1. No official votes by the Corporation board to approve checks issued
from Corporation accounts are present in Authority minutes.
c. All twelve checks were deposited into Kearney's personal bank account at
Northwest Savings Bank (Account No. 187).
89. Funds available in the Authority account at First National Bank (Account No. 92)
from May 2002 through December 2004 were transferred from the Authority
Mellon /Citizens Bank Account (for the Section 8 Choice Voucher Program) and the
Authority National City Bank Account (for the Public Housing Program).
a. On April 12, 2002, check number 084761, dated April 11, 2002, in the
amount of $53,976.90 from the Authority Mellon /Citizens Bank account was
deposited into the Authority First National Bank Account.
1. The check bore the facsimile stamps of Kearney and Evans as
authorizing signatories.
aa. The existing balance prior to the deposit was approximately
$36.62.
b. On July 9, 2004, check number 4540, dated July 9, 2004, in the amount of
$31,066.00 from the Authority National City Bank account was deposited into
the Authority First National Bank account.
1. The check bore the facsimile stamps of Kearney and Evans as
authorizing signatories.
90. Kearney received compensation from the Authority First National Bank account not
allowable by law per conflict of interest regulations encompassed in HUD ACC
contracts associated with the Public Housing Program and HUD Section 8 Choice
Voucher HAP contracts.
a. Funds received by Kearney from the Authority First National Bank account
originated in accounts established for the Public Housing Program and
Section 8 Choice Voucher Program.
91. Kearney appeared as a witness at Evans's Civil Service Commission hearing
conducted in Room 1511 Qf the State Office Building located at 300 Liberty Street,
Pittsburgh, PA on July 18 and 19 2005.
a. The purpose of the hearing was to assist the Civil Service Commission in
determining if Evans had been properly removed in accordance with Section
807 of the Civil Service Act and whether Evans's removal was due to
discrimination.
92. At the Civil Service hearing on July 18, 2005, Kearney provided testimony under
oath regarding the following:
a. Kearney received no compensation from the Corporation while serving as an
appointed financial advisor.
b. Kearney was appointed as Vice - President of the Corporation after Albert's
death.
c. Kearney was allowed an administrative fee once appointed as the
Corporation Vice - President.
Kearney, 06 -027
Page 24
d. Kearney received $3,000.00 per year for serving as the Corporation Vice -
President.
93. Corporation By -Laws prohibit officers of the Corporation [from] being compensated
in their officer position.
94. Kearney, as Vice - President of the Corporation, realized a financial gain of
$10,572.00 as the result of accepting Corporation and Authority checks not
specifically approved by the Corporation or Authority boards for service as an
officer on the Corporation board of directors, an action prohibited by Corporation
By -Laws.
a. Kearney received five checks totaling $3,172.00 from the Corporation
National City Bank account between the dates of December 21, 2001, and
September 2, 2003.
b. Kearney received twelve checks totaling $7,400.00 from the Authority First
National Bank account between the dates of May 29, 2002, and December
14, 2004.
c. Kearney's facsimile name stamp was utilized to affix one of two authorizing
signatures to all seventeen checks received.
THE FOLLOWING FINDINGS RELATE TO ALLEGATIONS THAT KEARNEY RECEIVED
COMPENSATION NOT PERMITTED BY LAW WHEN HE WAS EMPLOYED WITH THE
AUTHORITY AND LISTED AS AN INDEPENDENT CONTRACTOR WHILE SERVING ON
THE AUTHORITY BOARD OF DIRECTORS
95. From January 2001 into January 2005, the Authority employed Jane White and
Rick Myers at various times in addition to Evans, Ross, and Terrill.
a. Terrill and White were both employed in Civil Service positions as
Management Aides until approximately September 26, 2001.
1. In their position as Management Aides, Terrill and White were
responsible for various clerical /administrative duties and HQS
inspections.
aa. White resigned from employment with the Authority effective
September 26, 2001.
bb. Terrill was promoted to Section 8 Coordinator subsequent to
White's resignation.
cc. One Management Aide position remained vacant until
approximately July 2005.
dd. The second Management Aide position is currently vacant.
b. Myers was employed as an independent contractor in the position of
Maintenance Supervisor with the Authority (a non -civil service position)
during the above listed time frame.
1. Evans initially hired Myers into the position in approximately 1989.
aa. Myers did not complete an application for employment.
Kearney, 06 -027
Page 25
2. Myers was responsible for maintenance of the Cherry Hill complex
including painting, minor repairs, landscaping, grounds maintenance
(landscaping), etc.
c. Evans, as Executive Director, was responsible for the ultimate supervision of
all Authority employees.
96. As the Maintenance Supervisor, Myers initially reported to Evans regarding his work
assignments.
a. Myers began reporting to Ross for work assignments in the late 1990s.
97. Evans established Myers's salary at the rate of $8.00 per hour in 1989.
a. Myers' salary had increased to $8.50 per hour by 2001.
98. As a contract employee, Myers received his salary on a weekly basis.
a. Myers was paid from the National City Account (Account No. 6801677)
established for the Public Housing program.
1. Myers's salary originated from a line item in the Cherry Hill Public
Housing budget which provided for contract services.
2. Myers was issued an IRS Form 1099 annually to document his wages
received.
99. Myers routinely worked forty hours per week at the Authority from his initial hiring
until approximately September 2001.
a. Myers's weekly hours were reduced to an average of twenty hours per week
as of September 2001.
b. Myers's hours were reduced as a result of Kearney gaining employment with
the Authority.
100. Prior to obtaining employment with the Authority, Kearney was employed by
Pennzoil /Pennzoil - Quaker State Company from approximately May 24, 1976, to
approximately July 1, 2001.
a. Kearney was employed at the Rouseville Pennzoil location for the majority of
his career.
b. Kearney held positions of Clerk, Clerk/Senior, Clerk VII,
Supervisor /Production, and Supervisor /Packaging during his tenure.
101. On July 5, 2000, Kearney received correspondence documenting his separation
from employment by Pennzoil - Quaker State Company and /or any affiliated
company.
a. In connection with his separation, Kearney was offered an opportunity to
participate in the Company's Involuntary Separation Benefit Plan No. 888 in
exchange for execution of a Waiver and Release.
b. Kearney signed the Severance Benefit Plan Waiver and Release on July 5,
2000.
Kea�rne , 06 -027
Page 26
102. Through the Company's Involuntary Separation Benefit Plan No. 888, Kearney was
entitled to receive a severance benefit equal to two weeks of base pay for each
year of service with the Company with any partial year rounded up.
a. Kearney was entitled to receive fifty weeks of base pay based on his years
of service with the Company.
b. Severance benefits were to be paid on a bi- weekly basis.
103. Kearney's last day of work with Pennzoil - Quaker State Company was July 5, 2000.
a. Kearney's severance package began on July 15, 2000, and ended on June
29, 2001.
b. Kearney's retirement from Pennzoil - Quaker State Company was effective
July 1, 2001.
104. Kearney received correspondence dated March 21, 2001, from Edward Pesso,
Pennzoil - Quaker State Company Benefits Administrator detailing the amounts of
Kearney's retirement benefits at age 65 and at age 59.4 (Kearney's age at the time
of his retirement).
a. Kearney had a total vested retirement benefit of $1,320.32 per month
payable at age 65.
b. Kearney had a total vested retirement benefit of $1,214.69 per month
payable at the early age of 59.4.
c. Kearney opted to begin receiving his retirement early at age 59.4.
105. Kearney received correspondence dated July 19, 2001, from Pennzoil - Quaker State
Company Manager of Benefits, Raymond Fischer, detailing Kearney's retirement
benefit of $1,214.69 (gross) monthly via two checks.
a. Kearney was to receive one check per month from Chase Manhattan Bank in
the gross amount of $849.01 and one check from the Variable Annuity Life
Insurance Company (VALIC) in the gross amount of $365.68.
b. Kearney also elected to obtain retiree medical coverage for himself and his
spouse which resulted in $175.52 being deducted monthly from the Chase
pension check.
106. As a result of Kearney losing his employment with Pennzoil - Quaker State
Company, Evans hired Kearney to act as an Independent Contractor for the
Authority.
a. Kearney began his employment as an Independent Contractor with the
Authority on or about September 10, 2001.
1. Kearney did not complete an application for the position.
b. Evans set Kearney's wage at $8.60 per hour.
1. Kearney's wage was set $.10 per hour higher than Myers' wage
although Myers had been employed with the Authority for
approximately twelve years at the time of Kearney's hiring.
c. The position into which Kearney was hired was not publicly advertised.
Kearney, 06 -027
Page 27
107. At the time of Kearney's hiring, no vacancy existed at the Authority for the
performance of services ultimately provided by Kearney.
a. Two Management Aide positions were available as a result of White
resigning and Terrill being promoted to Section 8 Coordinator.
1. Kearney did not perform the functions of Management Aides during
his employment with the exception of conducting HQS inspections.
b. No vacancy existed for any maintenance type personnel.
1. Myers was completing maintenance type responsibilities for the
Authority at that time.
108. In September 2001, Evans reduced the number of hours Myers was permitted to
work from forty hours per week to twenty hours per week.
a. Evans effectively created a position for Kearney by reducing Myers's hours
from forty to twenty hours per week.
109. Evans did not present Kearney's hiring to the Authority for any vote or approval.
a. Authority meeting minutes from March 2001 through September 2004 note
no discussion, vote, or approval for Kearney to perform any services for the
Authority in a compensated capacity.
110. Correspondence dated September 1, 2001, addressed to Evans documented the
subject of Kearney performing services for the Authority and detailed the following
information:
a. Kearney wished to experience the "full spectrum" of the Authority with
Evans's permission.
b. Kearney intended to pass the Civil Service Test so that he would be properly
qualified to perform some of the duties of an employee of the HA, on a part
time basis, as a `temporary employee'."
c. Kearney offered to take temporary leaves of absence from the Authority
board while doing the experiment so that, this is not perceived as a conflict
of interest."
d. Kearney signed the letter in his capacity as the Chairman of the Authority.
e. Kearney delivered the correspondence to the Authority in an envelope with
"Ed (for your files)" written on it.
111. Although the correspondence documented a date of September 1, 2001, the
correspondence and the envelope it was delivered in documented a "Received"
date stamp of October 3, 2002.
a. The letter submitted by Kearney was done so approximately one year and
one month after Kearney began performing services for the Authority in the
capacity as an independent contractor.
b. Kearney dated the letter September 1, 2001, to give the impression that the
letter had been submitted prior to his employment with the Authority.
Kearney, 06 -027
Page 28
112. Kearney performed painting and minor repairs in apartments at the Cherry Hill
Complex (the Public Housing program) and HQS inspections for the Section 8
Choice Voucher program.
a. Kearney reported to Ross and /or Evans in his position.
113. Kearney performed services for the Authority from approximately September 10,
2001, through January 16, 2005, as an independent contractor while serving as a
member of the Authority board.
a. Kearney took no leaves of absence as during his entire tenure as an
Authority board member.
114. Kearney was officially removed from the Authority board by an Order of Court from
the Venango County Court of Common Pleas dated January 16, 2005.
a. The Order documented that Kearney's seat be filled by Steve Eakin effective
January 1, 2005.
115. As a contract employee, Kearney received his salary on a weekly basis.
a. Kearney was paid from the National City Account (Account No. 677)
established for the Cherry Hill Public Housing program.
1. Kearney's salary originated from a line item in the Public Housing
budget which provided for contract services.
2. Kearney was also paid for HQS inspections performed for the Section
8 Choice Voucher program through the Cherry Hill Public Housing
program account.
b. Kearney was issued an IRS Form 1099 annually to document his wages
received.
116. Kearney completed weekly time cards in his position and submitted the time cards
to Ross for processing.
a. Ross did not generate a payroll for Kearney unless Kearney submitted a
time card documenting hours worked.
117. Between the dates of September 10, 2001, and January 14, 2005, Kearney
received approximately $24,071.28 for services performed as an independent
contractor for the Authority while serving as a member of the Authority board.
a. Of the one hundred fifty -four checks issued to Kearney, at least one hundred
fifty -two were authorized with facsimile stamps of Kearney and Evans.
1. Kearney either stamped or permitted Authority employees to stamp
his facsimile signature on payroll checks Kearney received.
aa. Kearney never raised any concern or disputed the use of his
stamp by Authority employees.
2. Check number 3860 could not be located to positively determine the
authorizing signatories.
3. Authorizing signatories for check number 3890 were illegible.
Meeting
Date
Kearney
Present
Kearney's Vote For
Budget Approval
Final Vote For
Budget Approval
Fiscal Year
End Date
03/21/01
Yes
Yes
4 -0
06/30/02
03/20/02
Yes
Yes
3 -0
06/30/03
03/19/03
Yes
Yes
5 -0
06/30/04
03/17/04
Yes
N/A
N/A
06/30/05
Kearney, 06 -027
Page 29
b. Of the one hundred fifty -four checks issued to Kearney, eighty -five were
deposited into Kearney's personal account at Northwest Savings Bank
(Account No. 187) and sixty -eight were cashed.
1. The ultimate disposition of check number 3860 could not be
determined.
118. From at least 2001 through 2003 the Authority board approved the submission of
Form HUD - 52723, Operating Fund Calculation of Operating Subsidy reports to
HUD.
a. The form notes the operating costs of the Authority for the Public Housing
Program and the operating amount the Authority is requesting from HUD for
the upcoming year.
b. The reports were based on the Authority fiscal year of July 1 through June
30.
c. The information in the reports is generated via Authority staff.
119. Once received and reviewed by HUD, HUD amends the figures on the form as
necessary and submits correspondence to the Authority along with the amended
form advising the Authority of the amount allocated for the upcoming fiscal year.
a. Funds for contract services (i.e. independent contractors) are included in the
allotment authorized by HUD.
120. As an authority board member, Kearney participated in board actions approving the
Form HUD - 52723, Operating Fund Calculation of Operating Subsidy report and its
submission to HUD as shown below:
a. Authority minutes note the approval of Form HUD - 52723, Operating Fund
Calculation of Operating Subsidy reports as the approval of the Cherry Hill
budget.
b. Although submitted in 2004, Authority minutes note no specific approval by
the Authority board for the submission of the report to HUD for fiscal year
ending June 30, 2005.
121. Kearney specifically participated in and approved the vote to submit the report to
HUD in 2002 and 2003 while he was employed with the Authority.
a. Kearney participated in the vote and approval of the Cherry Hill budget from
which his wages as an independent contractor with the Authority originated.
122. Attached to Form HUD - 52723, Operating Fund Calculation of Operating Subsidy
reports filed with HUD for fiscal years ending June 30, 2004, and June 30, 2005, is
Form HUD- 52574, PHA/IHA Board Resolution Calculation of Performance Funding
System Operating Subsidy.
Kearney, 06 -027
Page 30
a. The form is required to be certified by the Authority board Chairman.
b. Kearney signed the forms as the Authority Chairman on March 19, 2003, and
March 17, 2004.
123. By signing the form, Kearney certified, among other information, that the following
was true and accurate:
a. All regulatory and statutory requirements had been met;
b. The Authority had sufficient operating reserves to meet the working capital
needs of its developments;
c. Proposed budget expenditures were necessary in the efficient and
economical operation of the housing for the purpose of serving low- income
residents.
d. The budget indicated a source of funds adequate to cover all proposed
expenditures; and
e. All proposed rental charges and expenditures would be consistent with law.
124. Payment of Kearney as an independent contractor from the Cherry Hill operating
fund while serving as an Authority board member was not consistent with provisions
of law.
a. Payment to Kearney was in contradiction to HUD Conflict of Interest
Provisions set forth for the Public Housing Program.
b. HUD warnings on the form indicate possible prosecution under 18 U.S.C.
1001, 1010, 1012; and 31 U.S.C. 3729, 3802 for false claims and
statements.
125. Kearney received approximately $24,075.96 as a result of being hired into an
independent contractor position with the Authority and being compensated from the
Cherry Hill Operating Fund at a time when Kearney was serving as a member of the
Authority board of directors.
a. The position into which Kearney was hired was created specifically for
Kearney.
b. Compensation received by Kearney was not permitted by law per HUD
conflict of interest provisions established for the Public Housing Program
and the Section 8 Choice Voucher Program as well as mandates provided
within Housing Authorities Law.
III. DISCUSSION:
As a member of the Housing Authority of Venango County ( "Authority ") from
December 18, 1982, through December 31, 2004, and Chairman of the Authority Board
from March 18, 1987, through December 31, 2004, Respondent Gary Kearney, hereinafter
also referred to as "Respondent," "Respondent Kearney," and "Kearney," was a public
official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics
Act "), 65 Pa.C.S. § 1101 et seq.
The allegations are that Kearney, as a Member and Chairman of the Housing
Authority of Venango County, violated Section 1103(a) of the Ethics Act, 65 Pa.C.S. §
Kearney, 06 -027
Page 31
1103(a), when he used the authority of his public position as Chairman and a Member of
the Authority and as a Director of the Authority's subsidiary, Venango Housing
Corporation, to participate in the authorization of payments to himself which were not
authorized by the Authority; and when he used the authority of his public office to receive
compensation not provided for by law when he was employed by the Authority while
simultaneously serving as a Board Member.
Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is
prohibited from engaging in conduct that constitutes a conflict of interest:
§ 1103. Restricted Activities
(a) Conflict of interest. —No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
65 Pa.C.S. § 1103(a).
The term "conflict of interest" is defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate family
or a business with which he or a member of his immediate
family is associated. The term does not include an action
having a de minimis economic impact or which affects to the
same degree a class consisting of the general public or a
subclass consisting of an industry, occupation or other group
which includes the public official or public employee, a
member of his immediate family or a business with which he or
a member of his immediate family is associated.
65 Pa.C.S. § 1102.
Section 1103(a) of the Ethics Act prohibits a public official /public employee from
using the authority of public office /employment or confidential information received by
holding such a public position for the private pecuniary benefit of the public official /public
employee himself, any member of his immediate family, or a business with which he or a
member of his immediate family is associated.
As noted above, the parties have submitted a Consent Agreement and Stipulation of
Findings. The parties' Stipulated Findings are reproduced above as the Findings of this
Commission. We shall now summarize the relevant facts as contained therein.
The Housing Authority of Venango County ( "Authority ") was created in 1977
pursuant to the Pennsylvania "Housing Authorities Law." The Authority operates: (1) a
Public Housing Program, consisting of a twenty unit complex known as the "Cherry Hill
Apartments "; (2) a Section 8 Choice Voucher Program; and (3) a Section 8 New
Construction Program, consisting of a one hundred unit, privately owned housing complex
known as "Evergreen Arbors Estates" (also referred to herein as "Evergreen Arbors ").
The Venango Housing Corporation ( "Corporation ") was formed in 1982 at the
direction of the Authority Board. The Corporation was formed to act as an instrumentality
Kearney, 06 -027
Page 32
of the Authority for the purpose of assisting with and financing housing facilities for eligible
tenants and to cooperate with HUD pursuant to its Section 8 program.
The Authority Board of Directors ( "Authority Board ") consists of five Members.
Respondent Kearney served as a member of the Authority Board from December 18, 1982,
through December 31, 2004. Kearney served as the Chairman of the Authority Board from
March 18, 1987, through December 31, 2004. The Housing Authorities Law mandates that
Authority Board Members may not be compensated for their service. Authority Board
Members are entitled to receive necessary expenses incurred in the discharge of their
duties.
The Corporation Board of Directors ( "Corporation Board ") consists of three
members, all of whom are appointed by the Authority Board. Kearney served as a Member
and Vice - President of the Corporation Board from at least March 2, 2000, through
December 31, 2004. Kearney served as a financial advisor to the Corporation from May
30, 1990, through December 31, 2004. Corporation Board members are not compensated
for service on the Corporation Board. Additionally, Corporation By -Laws prohibit officers of
the Corporation from being compensated in their officer positions.
During the time period relevant to these proceedings, Edwin Evans ( "Evans ") served
as Authority Executive Director and as a director and President of the Corporation.
Authority Board members did not normally question or challenge Evans's actions,
explanations, or suggestions at meetings, due to Evans' tenure with the Authority and
Evans reporting that annual audits conducted of the Authority revealed no discrepancies.
From at least January 2001 through approximately January 2005, Kearney and
Evans maintained sole signature authority over Authority accounts. During that time
period, Authority account number 677 at National City Bank was utilized for the Public
Housing Program (Cherry Hill Apartments). Authority account number 651 -6 at Citizens
Bank was utilized for the Section 8 Choice Voucher Program and the Section 8 New
Construction Program (Evergreen Arbors). Authority account number 39 at Northwest
Savings Bank was utilized to segregate HAPS and Administrative Fees issued to the
Authority for the Section 8 New Construction Program from HAPS and Administrative Fees
received for the Section 8 Choice Voucher Program. Authority account number 92 at First
National Bank was initially utilized as an interest generating account for the Authority.
After June 28, 2002, the account was utilized as a general checking account.
Authority Members were not supplied with bill lists or listings of checks issued from
Authority accounts for review nor were checks issued presented to the Authority members
verbally or physically. From at least January 2001 to January 2005, no official motion or
vote was taken by the Authority Members to formally approve checks issued from Authority
accounts.
As Authority Executive Director, Evans prepared or directed the preparation of
Authority checks. Checks issued from Authority accounts required two signatures.
Facsimile signature stamps in the names of Kearney and Evans were utilized to authorize
Authority checks.
From at least January 2001 through approximately January 2005, Kearney and
Evans maintained sole signature authority over Corporation accounts. Checks issued from
the Corporation's primary account, account number 901, required two signatures.
Facsimile signature stamps were utilized to authorize Corporation checks.
Evans had sole control of the checks and check registers for the Corporation
accounts. Evans, as Corporation President, authorized, approved, and issued Corporation
checks of his own volition. Evans utilized Kearney's facsimile stamp with Kearney's
permission. Kearney did not object to Evans's use of Kearney's facsimile stamp.
Kearney, 06 -027
Page 33
Expenditures or transfers of Corporation funds were required to be approved at an
open and public meeting. However, no official motion or vote was taken by the
Corporation directors to formally approve checks issued from Corporation accounts. No
bill lists, invoices received, or checks issued were presented for review or approval at any
Corporation meetings or at any Authority meetings at which Corporation business was
discussed. Per the Stipulated Findings, there have been only two official Corporation
meetings held over the existence of the Corporation, and Kearney did not serve on the
Board when the two official Corporation meetings were held. Additionally, although
Section 3.8 of the Corporation By -Laws in effect during Kearney's tenure allowed that any
action that could be taken by the Board at a meeting could be taken without a meeting
provided that written consent setting forth the action to be taken would be signed by each
director and filed with the Secretary, no such written consents exist to substantiate that any
official action was taken by the Corporation outside of a meeting setting.
The Stipulated Findings detail actions taken in 1989 and 1990 relative to the
Authority's refinancing of Evergreen Arbors. The parties have stipulated that Evans made
factual misrepresentations to the Authority Board, which prompted the Board to approve
the transfer of administrative fees received from HUD by the Authority to the Corporation.
Kearney participated in the Authority Board's unanimous vote approving the issuance of
such compensation to the Corporation. The Corporation Board, which included Evans as
President, unanimously passed a Resolution approving the refinancing of the Evergreen
Arbors project and also took action to designate Kearney to a compensated position as a
"Financial Advisor," even though Kearney had no background that would qualify him as a
Financial Advisor in the bond market.
Evans generated two contracts between the Authority and the Corporation
regarding the refinancing of Evergreen Arbors. The contracts were to serve as evidence
that the Authority would pay to the Corporation the ongoing administrative fee from HUD
for the Evergreen Arbors project for the consecutive years of the Refinancing Agreement
annually. Both contracts were signed by Kearney on behalf of the Authority and by Evans
on behalf of the Corporation. Neither contract was ratified at any meeting of the Authority
or the Corporation.
As detailed in Fact Finding 84, during the time frame of April 2001 through January
2005, Evans transferred a total of $129,992.00 in administrative fees received by the
Authority for the administration of Evergreen Arbors to the Corporation. Evans affixed both
his name stamp and Kearney's name stamp to all of the checks noted in Fact Finding 84
by which these fees were transferred. Kearney did not object to Evans's use of Kearney's
name stamp.
As detailed in Fact Finding 85, from May 2002 through January 2005, Evans also
transferred /deposited at least $58,626.12 into the Corporation account at National City
Bank from the Authority account at First National Bank (account number 92). From May
2002 through December 2004, funds available in the Authority's said account were
transferred from other Authority accounts for the Section 8 Choice Voucher Program and
the Public Housing Program. Evans affixed both his signature stamp and Kearney's
signature stamp to all of the eleven checks by which the aforesaid funds were transferred.
Kearney posed no objection to Evans's use of Kearney's facsimile stamp.
The parties have stipulated that Kearney, as Vice - President of the Corporation,
realized a financial gain of $10,572.00 as the result of accepting Corporation and Authority
checks not specifically approved by the Corporation or Authority Boards for Kearney's
service as an officer on the Corporation Board, an action prohibited by Corporation By-
Laws. Specifically, Kearney received:
• Five checks totaling $3,172.00 from the Corporation National City Bank
account (account number 901) between the dates of December 21, 2001,
and September 2, 2003; and
Kearney, 06 -027
Page 34
• Twelve checks totaling $7,400.00 from the Authority First National Bank
account (account number 92) between the dates of May 29, 2002, and
December 14, 2004.
Per the Stipulated Findings, the above checks were for Kearney's service as Vice -
President of the Corporation and were not for services as a Financial Advisor.
Evans issued all of the aforesaid payments to Kearney without specific approval of
the appropriate Board. Kearney's facsimile name stamp was utilized to affix one of two
authorizing signatures to all of the aforesaid seventeen checks received by Kearney.
Sixteen of the seventeen checks were deposited into Kearney's personal bank account.
The remaining check was cashed by Kearney.
Funds received by Kearney from the Authority First National Bank account
originated in accounts established for the Public Housing Program and Section 8 Choice
Voucher Program. The parties have stipulated that the compensation Kearney received
from the Authority First National Bank account was not allowable by law, per HUD conflict
of interest regulations.
We shall now review the Fact Findings relating to allegations that Kearney received
compensation not permitted by law when he was employed as an independent contractor
with the Authority while serving on the Authority Board.
The Housing Authorities Law prohibits a housing authority member from having a
direct or indirect interest in any contract for services to be furnished or used in connection
with any housing project. (Fact Finding 9). Evans hired Kearney to act as an Independent
Contractor for the Authority. Kearney performed services as an independent contractor for
the Authority from approximately September 10, 2001, through January 16, 2005, while
simultaneously serving as a member of the Authority Board. Kearney took no leaves of
absence during his entire tenure as an Authority Board member.
At the time of Kearney's hiring, no vacancy existed at the Authority for the
performance of services provided by Kearney. Kearney did not complete an application for
the position, and the position was not publicly advertised. Evans created the position for
Kearney by reducing another Authority employee's hours. Evans did not present
Kearney's hiring to the Authority for any vote or approval. Authority meeting minutes from
March 2001 through September 2004 note no discussion, vote, or approval for Kearney to
perform any services for the Authority in a compensated capacity.
Kearney received his salary from the Authority's National City Bank Account
(Account No. 677) established for the Cherry Hill Public Housing program. Kearney's
salary originated from a line item in the Public Housing budget, which provided for contract
services. Kearney was also paid through the Cherry Hill Public Housing program account
for inspections performed for the Section 8 Choice Voucher program.
Between the dates of September 10, 2001, and January 14, 2005, Kearney received
approximately $24,071.28 for services performed as an independent contractor for the
Authority while serving as a member of the Authority Board. Compensation received by
Kearney was not permitted by law per HUD conflict of interest provisions established for
the Public Housing Program and the Section 8 Choice Voucher Program as well as
mandates provided within the Housing Authorities Law. Of the one hundred fifty -four
checks issued to Kearney, at least one hundred fifty -two were authorized with facsimile
stamps of Kearney and Evans. Kearney either stamped or permitted Authority employees
to stamp his facsimile signature on payroll checks Kearney received. Kearney never
raised any concern or disputed the use of his stamp by Authority employees.
Kearney, 06 -027
Page 35
As an Authority Board member, Kearney participated in the vote and approval of the
Cherry Hill budget from which his wages as an independent contractor with the Authority
originated. Kearney participated in approving the submission of HUD reports (Form HUD -
52723) in 2002 and 2003, which formed the basis for HUD allocations including funds for
contract services provided by Kearney. As Authority Chairman, Kearney also signed
related HUD Forms (Form HUD - 52574) in 2003 and 2004, certifying that all regulatory and
statutory requirements had been met and all proposed expenditures would be consistent
with law. Payment of Kearney as an independent contractor from the Cherry Hill operating
fund while serving as an Authority Board member was not consistent with provisions of
law. Payment to Kearney was contrary to HUD Conflict of Interest Provisions set forth for
the Public Housing Program.
Approximately one year and one month after Kearney began performing services for
the Authority in the capacity as an independent contractor, Kearney submitted to Evans a
backdated letter stating that he wished to experience the "full spectrum" of the Authority
with Evans's permission and that he intended to pass the Civil Service Test so that he
would be properly qualified to perform some of the duties of an employee of the HA, on a
part time basis, as a 'temporary employee'," and offering to take temporary leaves of
absence from the Authority Board while doing the experiment so that this is not perceived
as a conflict of interest." Kearney signed the letter in his capacity as Chairman of the
Authority. Kearney backdated the letter to give the impression that the letter had been
submitted prior to his employment with the Authority.
Kearney was officially removed from the Authority Board by a court order dated
January 16, 2005.
Having highlighted the Stipulated Findings and issues before us, we shall now apply
the Ethics Act to determine the proper disposition of this case.
The parties' Consent Agreement sets forth a proposed resolution of the allegations
as follows:
3. The Investigative Division will recommend the following
in relation to the above allegations:
a. That an unintentional violation of Section
1103(a) of the Public Official and Employee
Ethics Law, 65 Pa.C.S. § 1103(a) occurred when
Gary Kearney, in his position as a Member of the
Housing Authority of Venango County, received
compensation not provided for by law when he
was simultaneously employed both as a Member
of the Authority and an employee thereof; and
b. That an unintentional violation of Section
1103(a) of the Public Official and Employee
Ethics Law, 65 Pa.C.S. § 1103(a) occurred when
Gary Kearney as Chairman and a Member of the
Housing Authority of Venango County and as a
Director of the Authority's subsidiary, the
Venango Housing Corporation, received
payments which were not otherwise authorized
by the Authority.
4. Kearney agrees to make payment in the amount of
$5,000.00 in settlement of this matter payable to the
Commonwealth of Pennsylvania and forwarded to the
Pennsylvania State Ethics Commission to be paid over
Kea�rne , 06 -027
Page 36
a period of time to be agreed upon by the parties hereto
commencing within thirty (30) days of the issuance of
the final adjudication in this matter.
5. The Investigative Division will recommend that the
State Ethics Commission take no further action in this
matter; and make no specific recommendations to any
law enforcement or other authority to take action in this
matter. Such, however, does not prohibit the
Commission from initiating appropriate enforcement
actions in the event of Respondent's failure to comply
with this agreement or the Commission's order or
cooperating with any other authority who may so
choose to review this matter further.
Consent Agreement, at 1 -2.
In considering the Consent Agreement, we determine that all elements of the
recommended unintentional violations of Section 1103(a) have been established. With
respect to Kearney's unlawful simultaneous service as an Authority Board member and
compensated independent contractor of the Authority, Kearney used the authority of his
public position as a member and Chair of the Authority Board to facilitate his receipt of
compensation to which he was not entitled. (See, McGuire v. State Ethics Commission,
657 A.2d 1346 (Pa. Cmwlth. 1995)). Specifically, Kearney used the authority of his public
office when he: (1) participated in the vote and approval of the Cherry Hill budget from
which his wages as an independent contractor with the Authority originated; (2)
participated in Board actions approving Form HUD - 52723, which was the basis for HUD
providing funds to the Authority for contract services including Kearney's; (3) signed Form
HUD -52574 in his capacity as Authority Chairman, certifying that all regulatory and
statutory requirements had been met and all proposed expenditures would be consistent
with law; and (4) permitted his signature stamp to be used to affix one of two authorizing
signatures on payroll checks he received from the Authority (see, Futules, Order 1231).
The element of a private pecuniary benefit is established by the unlawful payments totaling
approximately $24,071.28, which Kearney received from the Authority between the dates
of September 10, 2001, and January 14, 2005, for services performed as an independent
contractor for the Authority while serving as a member of the Authority Board. Such
compensation was prohibited by the Housing Authorities Law and HUD conflict of interest
provisions.
Through the Consent Agreement, the parties have agreed to an unintentional
violation of Section 1103(a) as to Kearney's receipt of the aforesaid unauthorized
compensation. Intent is not a requisite element of a violation of Section 1103(a) of the
Ethics Act. Yocabet v. State Ethics Commission, 531 A.2d 536 (Pa. Cmwlth. 1987).
Nevertheless, we accept the Consent Agreement and hold that an unintentional violation of
Section 1103(a) of the Ethics Act occurred when Kearney, in his position as a member of
the Authority Board, received compensation not provided for by law when he
simultaneously served both as a member of the Authority and as an employee /independent
contractor thereof.
The Consent Agreement additionally proposes that an unintentional violation of
Section 1103(a) of the Ethics Act occurred when Kearney, as Chairman and a member of
the Authority and as a Director of the Authority's subsidiary, the Corporation, received
payments which were not otherwise authorized by the Authority.
Per the Stipulated Fact Findings, Kearney, as Vice - President of the Corporation,
realized a financial gain of $10,572.00 as the result of accepting Corporation and Authority
checks not specifically approved by the Corporation or Authority Boards for Kearney's
service as an officer on the Corporation Board. Specifically, Kearney received: (1) five
Kearney, 06 -027
Page 37
checks totaling $3,172.00 from the Corporation National City Bank account (account
number 901) between the dates of December 21, 2001, and September 2, 2003; and (2)
twelve checks totaling $7,400.00 from the Authority First National Bank account (account
number 92) between the dates of May 29, 2002, and December 14, 2004.
Kearney used the authority of his public office as an Authority Board member when
he: (1) permitted his signature stamp to be used to affix his signature as an authorizing
signature to checks by which Authority funds were transferred to the Corporation; and (2)
permitted his signature stamp to be used to affix his signature as an authorizing signature
to all of the Authority and Corporation checks by which he received the aforesaid
compensation for serving as Vice - President of the Corporation. By permitting his signature
stamp to be used as set forth above, Kearney facilitated his receipt of compensation to
which he was not entitled. All such compensation received by Kearney was unauthorized.
The Corporation by -laws prohibit compensation for service as an officer of the
Corporation. Additionally, the compensation received by Kearney included HUD program
funds, which Kearney received contrary to HUD conflict of interest regulations.
Per the Consent Agreement of the parties, we hold that an unintentional violation of
Section 1103(a) of the Ethics Act occurred when Kearney, as Chairman and a member of
the Authority and as a Director of the Authority's subsidiary, the Corporation, received
payments which were not otherwise authorized by the Authority.
Kearney has agreed to make payment in the amount of $5,000.00 in settlement of
this matter, payable to the Commonwealth of Pennsylvania and forwarded to this
Commission to be paid over a period of time to be agreed upon by the parties commencing
within thirty (30) days of the issuance of the final adjudication in this matter.
We determine that the Consent Agreement submitted by the parties sets forth the
proper disposition for this case, based upon our review as reflected in the above analysis
and the totality of the facts and circumstances. Accordingly, Kearney is directed to make
payment in the amount of $5,000.00, payable to the Commonwealth of Pennsylvania and
forwarded to this Commission, to be paid over a period of time to be agreed upon by the
parties, commencing within thirty (30) days of the issuance of this Order.
Compliance with the Consent Agreement and this Order will result in the closing of
this case with no further action by this Commission. Noncompliance will result in the
institution of an order enforcement action.
IV. CONCLUSIONS OF LAW:
1. As a member of the Housing Authority of Venango County ( "Authority ") from
December 18, 1982, through December 31, 2004, and Chairman of the Authority
Board from March 18, 1987, through December 31, 2004, Respondent Gary
Kearney ( "Kearney ") was a public official subject to the provisions of the Public
Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq.
2. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, in his
position as a member of the Authority Board, received compensation not provided
for by law when he simultaneously served both as a member of the Authority and as
an employee /independent contractor thereof.
3. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, as
Chairman and a member of the Authority and as a Director of the Authority's
subsidiary, the Venango Housing Corporation, received payments which were not
otherwise authorized by the Authority.
In Re: Gary Kearney,
Respondent
ORDER NO. 1446
File Docket: 06 -027
Date Decided: 10/23/07
Date Mailed: 11/7/07
1 Gary Kearney ( "Kearney "), a public official as a member of the Housing Authority of
Venango County ( "Authority ") from December 18, 1982, through December 31,
2004, and Chairman of the Authority Board from March 18, 1987, through
December 31, 2004, unintentionally violated Section 1103(a) of the Public Official
and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1103(a), when he, in his
position as a member of the Authority Board, received compensation not provided
for by law when he simultaneously served both as a member of the Authority and as
an employee /independent contractor thereof.
2. Kearney unintentionally violated Section 1103(a) of the Ethics Act when he, as
Chairman and a member of the Authority and as a Director of the Authority's
subsidiary, the Venango Housing Corporation, received payments which were not
otherwise authorized by the Authority.
3. Per the Consent Agreement of the parties, Kearney is directed to make payment in
the amount of $5,000.00, payable to the Commonwealth of Pennsylvania and
forwarded to the Pennsylvania State Ethics Commission, to be paid over a period of
time to be agreed upon by the parties, commencing within thirty (30) days of the
issuance of this Order.
a. Compliance with the Consent Agreement and this Order will result in the
closing of this case with no further action by this Commission.
b. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
Louis W. Fryman, Chair