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Hot tub highwaymen




November/December 2012

 NovDec-hot-tub    
 
An elaborate web of bid-rigging and kickback schemes in a district of the Ohio Department of Transportation, spanning more than a decade, cost the state at least $11 million. Eighteen were convicted, which included six ODOT officials and 12 vendors. Follow the complex tale of institutionalized corruption as investigators nab the fraudsters.


This article is excerpted and adapted from the "Bribery and Corruption Casebook: The View from Under the Table," edited by Dr. Joseph T. Wells, CFE, CPA, and Laura Hymes, CFE, published by John Wiley & Sons Inc. ©2012 Used with permission. Some of the names in this case have been changed.

As companions, William Lassiter and Larry Evans appeared to be an unlikely pair. An urbane, college-educated entrepreneur, Lassiter had carved out a lucrative niche in the domestic snow-removal market by patenting a durable, carbide snowplow blade guard that extended the blade's cutting edge, thereby increasing its life span. In contrast, Evans was a high-school dropout — a crude, overweight, uncultured laborer who liked to hunt and fish. Evans' grooming habits included a weekly toilette that he conducted in the privacy of his dingy office at the Ohio Department of Transportation (ODOT) in which he would cut his fingernails and toenails, leaving the yellowed clippings strewn under his desk.

Dissimilar as Lassiter and Evans were, fortune had cast them into an economic symbiosis that made them fast friends: Evans, the equipment superintendent at ODOT's Cleveland district office, awarded millions of dollars in business to the Lassiter Blade Company. In turn, Lassiter treated Evans to all-expenses-paid trips to Las Vegas and spent thousands of dollars on fishing excursions aboard "Captain Larry's" private Lake Erie charter fishing boat, the Walleye Warrior.

As the men bobbed together in Lassiter's hot tub on a warm summer night, surrounded by other ODOT vendors and dancers from Lips & Sips, a Cleveland strip club, they toasted to their mutual success. Lassiter's summertime soirees, dubbed "Fat Man Soup" parties by some of the dancers, were blue-collar bacchanalias that included other people who were feeding off of ODOT's largesse: Craig Horford, a germaphobic information technology whiz whose climate-control company had a lock on all of the ODOT district office's HVAC work; Dennis Pfister, the ODOT facilities manager who managed Horford's contract and worked down the hall from Evans; and Jennifer Moore, a young Lips & Sips dancer who had clawed her way into Pfister's wallet by duping him into believing that he had sired her four-year-old daughter. As Pfister often boasted to his ODOT colleagues, not bad for a 63-year-old.

Missing on this evening was Fred Waxman, another ODOT vendor who had helped furnish an apartment for Moore and had picked up bar tabs for Pfister all over northeast Ohio in exchange for hundreds of thousands of dollars in unbid ODOT garage-door contracts. Waxman had been invited but had been unable to attend. Also missing was Evans' top purchasing official, Rick Rogers, who was working his own side deals with the Lassiter Blade Company and some of Evans' other vendors.

"Where's Dennis?" Lassiter asked Evans.

"I think he's in the house with Ruby," Evans responded. Ruby was another Lips & Sips employee. Lassiter, a divorced father who had left his wife for a stripper and now shared custody of their two daughters, had learned long ago that Evans and Pfister were a matched pair. But as fond as he was of Evans, he considered Pfister to be untrustworthy and a lecherous boor. Lassiter stalked into the house, quickly found the missing couple and escorted them outside. Sliding back into the hot tub, Lassiter hissed into Evans' ear: "They were in my daughter's bedroom!"

BUILDING AN EMPIRE

District 12 of the ODOT is headquartered in the Cleveland suburb of Garfield Heights. One of 12 ODOT district offices that operated as virtual fiefdoms, it spanned three counties, employed nearly 500 people and had an annual budget of $50 million.

Two of the district's largest divisions were facilities and equipment, headed, respectively, by Pfister and Evans. The men ruled an empire that included the maintenance and repair of all buildings and structures as well as the purchase and maintenance of all trucks, snowplows, garage equipment and supplies — ranging from chain saws and Weed Eater trimmers to light bulbs and bug spray.

Pfister, Evans and their subordinates worked in a warren of offices down the hill from the district headquarters, where the white-collar bureaucrats were ensconced. The men's mandate was simple: plow the roads in the winter and cut the grass and remove the roadkill from the highways in the summer. If you could accomplish that agenda, you could have the distinction of winning a rare public-sector award for organizational excellence from the Ohio Partnership for Excellence, which ODOT District 12 did receive — twice. But unfortunately for the taxpayers, you could also have carte blanche to commandeer ODOT's entire purchasing and procurement apparatus for personal gain.

Thus it was that vendors who wanted maintenance contracts from ODOT were told by Pfister to pony up: out-of-state hunting trips, vacation junkets, bar tabs and cash — lots of it. Down the hall, vendors who sought ODOT equipment contracts were told by Evans that Lake Erie walleye and perch charter bookings aboard the Walleye Warrior — at $300 to $500 a day and up to $1,000 a day for "executive charters" that included strippers — were going fast.

Pfister's and Evans' various business enterprises were aided by the fact that ODOT empowered the two men with direct-purchasing authority, which allowed them to choose the companies from which they sought competitive bids. ODOT's regulations regarding obtaining items that weren't on contract were simple: purchases up to $1,000 required one quote, purchases up to $2,500 required two quotes, and purchases above $2,500 required three. ODOT also treated subsidiary companies as unrelated enterprises as long as they had unique tax identification numbers. Thus, three companies could share the same business address and the same corporate officers and still bid against one another as long as they had separate tax ID numbers.

This unusual practice gave Pfister and Evans wiggle room when dealing with the State Controlling Board's mandate that Ohio agencies could spend no more than $50,000 per vendor per fiscal year for supplies and services that weren't covered by existing contracts. The purpose of the $50,000 cap was to enable as many small businesses as possible to compete for State of Ohio business. Under ODOT's tax ID policy, circumventing the cap was easy: As soon as Company A hit the $50,000 ceiling, subsidiary Company B would take over. For purposes of meeting the three-quote regulation, ODOT even accepted throwaway quotes from ineligible companies that had already reached the $50,000 cap.

As part of its fiscal oversight of its 12 districts, ODOT headquarters seemingly went to great lengths to track the vast quantity of supplies and equipment that the districts purchased by requiring that all purchases be entered into one of two computerized inventory-tracking systems. There was only one problem: ODOT had no method of ensuring that the products it was buying were actually entered into the two systems. 


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Bribery and Corruption Casebook
2012 CFE Exam Prep Course, US Edition
2012 Fraud Examiners Manual, US Edition
Corporate Fraud Handbook: Prevention and Detection, Fourth Edition

 

 

 
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