State Auditor Probes Pine Water Finances

Generator contracts, conflicts of interest, credit card misuse all scrutinized

Gary Lovetro

Gary Lovetro

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The Arizona State Auditor General is investigating a flood of charges involving the Pine Strawberry Water Improvement District, including its 2011 purchase of 13 generators, an alleged conflict of interest by one board member and alleged misuse of a district credit card by another board member.

In a Nov. 28 letter to CH2MHILL District Manager Brad Cole, Special Investigative Unit Manager George Graham directed Cole to provide 16 documents related to the issues under investigation.

CH2MHILL is the firm the district hired to run the water company.

Documents Graham seeks include those related to the purchase of the generators, contracts with Hat Creek Electric, payments made to former PSWID treasurer Michael Greer and lists and statements of all credit and debit cards carried by PSWID. In addition, Graham asked for documents concerning district purchases made at Uncle Tom’s Kwik Stop in Pine.

Late in 2011, the district governing board awarded $80,000 in contracts without competitive bidding for work to install 13 generators to provide backup power for well pumps. The district contracted to install 13 generators through 13 separate contracts, all of which went to Hat Creek Electric. State law would have required competitive bidding had the district awarded a single contract for all 13 generators. State law requires competitive, sealed bids and a public vote of the board on contracts worth more than $25,000.

Critics, including Sam Schwalm, who will become a board member next month, argued the arrangement evaded state and district rules and benefitted a company once owned by Greer, who disclosed after the award of the contracts that he had ended his financial relationship with the company before the contracts were awarded.

PSWID board member Don Smith, whose term expires next month, contended at the time the district awarded the contract to Hat Creek, that the governing board should have approved contracts for the purchase and installation of the backup generators.

“It is my understanding that all purchases should be approved or ratified in open public meeting,” Smith said. “To my knowledge we, as a board, have never publicly approved the purchasing of the compressors (generators).”

Just weeks ago on the watchdog group Water for Pine Strawberry’s Web site, Schwalm wrote, “Mr. Greer was deeply involved in the unethical, and potentially illegal, awarding of the generator installation contract to Hat Creek Electric.

“Among the many violations of PSWID procurement rules in the award of that contract was that the competing bid, from a Valley company, Double “C” Electric, looked like a straw bid. We have learned this year that the owner of Double “C” Electric, a Mr. Scott Crawford, and Mr. Greer owned an electrical contracting company together in the 1970s.”

Greer at one time had owned Hat Creek. On the date the district awarded the generator installation contract to the firm, Greer’s name had not yet been removed from Arizona Corporation Commission contractor records.

Graham’s request for the district’s credit card statements apparently was prompted by Greer’s admission a month ago that he had used a PSWID credit card to make personal purchases. He did not turn in receipts for many purchases. He later paid the district for $2,300 of the roughly $9,000 charged on the card. He said all the rest of the charges were for district projects.

Following his admission, Greer resigned his position first as board treasurer then as a board member.

Questions remain, however, concerning why Greer continued to use the credit card after district bookkeeper Rebecca Sigeti discovered the personal charges in July of 2012. He said in a board meeting that she didn’t report the alleged misuse of the card to Board Chairman Gary Lovetro for some four months.

Greer continued to use the credit card after July piling up more than $2,000 in charges until Lovetro confronted him in October and took the card away.

Sigeti wrote on the Payson Roundup Web site this week that she realized the card was being misused in July when, “Mike, myself and the accountant were the only ones involved.”

She wrote, “I thought Mike Greer would resolve the issue and I would not need to get any others involved in the situation.”

She noted that when the August statement arrived and she saw the misuse had continued, “I waited until Gary returned from vacation in October to inform him of the issue.”

Greer later reimbursed the district $2,299.33 for charges made in August, September and October. District officials have said they still don’t have receipts for individual charges on the card.

Graham’s request for statements of district purchases at Uncle Tom’s gas station probably involve allegations by Lovetro that Tom Weeks, owner of  the Kwik Stop and a PSWID board member, was guilty of conflict of interest because CH2MHILL employees bought gas at the station — one of two gas stations in Pine.

An attorney who works for the board concluded that the district can only do business with a business owned by a board member if the board member discloses his ownership of the business and the board then approves making purchases from that firm. Even then, the total purchase cannot exceed $1,000, the attorney concluded.

Jessica Barnett, Weeks’ daughter, remains convinced company purchases of gas from her father’s gas station didn’t pose a conflict since the board had no say in where the district’s management firm bought gas.

“Who cares where CH2MILL purchases their fuel?” she asked. “Does this mean the PSWID tells CH2MILL where it can and cannot spend their money?”

Barnett also charges that Lovetro had a “personal vendetta against Tom for bringing Mike Greer’s credit card purchases out and not covering them up as you were doing.”

Weeks has also denied any wrongdoing saying he simply sold fuel to whoever wanted to make a purchase.

It was Weeks who at the Nov. 15 board meeting told fellow members and the audience that he had come across the questionable credit card charges after being asked to co-sign some district checks. Just minutes earlier, Greer had admitted to using the credit cards and said he would repay a portion of the charges.

Lovetro did not respond to e-mail requests to comment on this story.

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