A draft report from a former Inspector General office investigator into the construction of Palm Beach County’s convention hotel was killed.
WEST PALM BEACH – The Palm Beach County Convention Center hotel, a $121 million project completed in 2016, has booked hundreds of thousands of room nights, boosted the convention center into the black for the first time in its 16-year history and helped generate $30 million annually for the county.
But a never-released inspector general investigator’s draft report obtained by The Palm Beach Post documented that the project that generated so much wealth was built by many workers paid well below county and federal minimum wages for as little as $4.92 an hour.
Workers’ criminal backgrounds went unchecked, the report added, dozens of their Social Security numbers were faked and safety training requirements were skipped, violating contracts among the developer, builder, subcontractors and Palm Beach County, which orchestrated the project and contributed $27 million as an incentive to the chosen developer, The Related Cos.
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But after an October 2017 falling-out between Palm Beach County Inspector General John A. Carey and his top investigator – largely unrelated to the hotel investigation – Carey fired Director of Investigations Jeff Himmel and never released the information from the draft report.
It was scuttled just as Himmel and his second-in-command were whittling a final draft into more readable shape.
“We didn’t get a chance to finish because I was forced out,” Himmel said.
>> PHOTOS: Hilton’s grand opening of the convention center hotel in 2016
Himmel’s investigator quit within a day in protest of the firing. Both retired.
The draft, which The Palm Beach Post obtained through a public information request, never was deemed official.
“We don’t put reports out based on suspicions,” Carey said, dismissing the draft as “an investigator’s first report.”
Carey never presented – to the county commission, county administrator or the public – conclusions extensively documented by his veteran, federally trained investigators, including that contractors never performed work for which they were paid and that the county Living Wage Ordinance went unenforced.
No company that benefited from the alleged violations was penalized or barred from future county projects, which means there’s nothing to stop it from happening again. Related Cos., meanwhile, is planning a second convention center hotel near the first.
Former County Commissioner Priscilla Taylor said that when county minimum wage laws are not enforced, it hurts the community.
“You need to be able to take care of your family. We’re living in a very expensive area,” said Taylor, who, the year hotel construction began, pressed for a measure that increased the county minimum wage to $11.64 for unskilled workers.
If it’s not enforced, she said, “the people who need the money the most are the ones who are suffering.”
Draft report reveals numerous violations
Among the draft’s conclusions:
– Certified payroll records provided to the Office of Inspector General by subcontractor Global Drywall Services (GDS) were inaccurate and fraudulent. Seventy percent of workers on the site were paid $10 an hour or less. Some were paid less than the 2015 federal minimum wage of $8.05.
– Of the 181 people subcontractor GDS said worked for it on the hotel, it could only document that 30 had valid Social Security numbers, raising questions about whether taxes were properly collected. The company came up with only 123 of the employees’ W-2 tax forms. Thirty-nine of the Social Security numbers turned out to be not used or found in the United States. Fifty-four numbers were assigned to someone other than the worker.
– Two GDS officials who investigators sought to question about that declined to speak to them on advice of lawyers. In one case, that was because of a pending criminal investigation in Georgia by the IRS and Department of Labor “for the same reasons the OIG wishes to talk to him about,” the report said. The second official was under indictment for conspiracy to commit federal tax fraud. He was later sentenced to eight years in prison.
– Subcontractor FC Background Inc. did not perform a background screening or issue a security badge to each worker, including criminal check and Social Security verification, the report said.
– Many workers failed to receive a required 10-hour Occupational Safety and Health Administration safety training course.
– The site was not secured or monitored, leading security gate turnstile records to be inaccurate and incomplete and the job site unsafe while workers, visitors, or possibly unauthorized people, came and went without being checked.
– Subcontractor The Mosaic Group failed to vet or maintain workers’ employment application records. Based on the records provided by Mosaic, the report found, there was no way applicants could be reached by phone or have references or job experience checked.
The absence of enforcement of contract requirements made it hard to ensure that county, state and federal laws were followed and that firms did the work for which taxpayers paid them, the report concluded.
Developer, contractor stand by their work
The developer and general contractor of the four-star, 400-room Hilton at 600 Okeechobee Blvd., both big names in South Florida, stand by their work and suggest that any errors took place below their level, among the ranks of sub- or sub-sub-contractors, of which there were dozens.
“Related Companies requires the highest standards of accountability and due diligence in all of our development projects to ensure compliance with all agreements and regulations and that minimum goals are exceeded whenever possible,” a statement from the company said, adding that Related hired a “third-party verification company” to inspect work by its contractors. “All contractors and subcontractors are responsible for following county and federal requirements in addition to terms outlined in the development agreements,” the statement said. GDS, a Related spokeswoman said, was “a subcontractor of a subcontractor” on the project.
Related’s retail, residential and office buildings have changed the face of the city’s downtown since 2000, when shopping and entertainment center CityPlace, now known as Rosemary Square, opened on the former site of a crime-infested neighborhood. Related’s current projects include the 360 Rosemary offices and a planned apartment tower, both across from Rosemary Square, and the One Flagler luxury office tower planned near the waterfront.
The firm’s majority owner is billionaire Stephen Ross, who also is principal owner of the Miami Dolphins and Hard Rock Stadium.
Related’s main contractor on the Hilton project was Coastal Construction Co. of Palm Beach Inc., an affiliate of an established statewide, family-run firm founded by Thomas P. Murphy Jr. Murphy’s son Patrick represented Palm Beach County in Congress while the project was in progress. He returned to Coastal as vice president in 2017 after losing a run for U.S. Senate.
Like Related, Coastal said it did its best to do it right. Coastal takes compliance with minimum wage, Department of Labor and Palm Beach County regulations “very seriously,” the company said June 12 in a statement.
For the hotel project, “Coastal implemented processes and procedures designed to require compliance with such laws, regulations and requirements,” it said, adding that it cooperated “immediately and fully” with inquiries from the Office of Inspector General.
“It is our understanding that the OIG’s office concluded that there was insufficient information and documentation to support any findings of wrongdoing by Coastal and, therefore, the investigation was closed.”
Subcontractors’ services in question
As for the subcontractors, neither FC Background, Global Drywall Services nor D&D Quality Constructors, which hired GDS, could be reached for comment.
Mosaic Group partner Ann Marie Sorrell told investigators she took at face value the payroll records GDS submitted and did not verify their validity. She told The Palm Beach Post her assignment had been to do community outreach to find workers for the project and that she had done that.
Investigators wrote that because she didn’t verify the payroll records, however, they questioned whether the firm should have received $139,000 paid under her contract. “One would expect Mosaic to perform services that led to accurate and true statistics,” they wrote.
The county’s point person for the project, former Assistant County Administrator Shannon LaRocque, declined comment on the record because she hadn’t seen the report. But LaRocque, now utilities director for the Village of Wellington, told investigators it was Related’s responsibility to ensure that contractor Coastal saw that its subcontractors paid all workers in accordance with the Living Wage Ordinance.
“Ms. LaRocque advised that the county would hold Related responsible if workers were not being paid properly,” the investigators wrote.
But no one held anyone responsible.
Alleging GDS failed to abide by the wage ordinance, the investigators questioned Related’s use of county money to pay nearly $1.9 million “for services that were not rendered in the fashion that was outlined in the contract agreements.” They questioned an additional $6.4 million paid to D&D Quality Constructors Inc., the subcontractor for whom GDS worked.
But their questions went unanswered. The report never saw the light of day.
In six years, four cases result in criminal prosecutions
Carey, who earns $203,000 a year, became Palm Beach County inspector general in June 2014 after serving as inspector general for the Defense Intelligence Agency. A retired Marine Corps Colonel and former Indiana police officer, he joined an office created out of public outrage in 2009 after the convictions of four county commissioners and two West Palm city commissioners earned Palm Beach the moniker “Corruption County.”
The office oversees 39 municipalities and a handful of independent agencies, which total 13,000 civil service employees, and budgets that come to $8 billion.
In his six years, four cases resulting from OIG audits or investigations have led to criminal prosecutions of six individuals, for alleged theft of government money. The biggest involved three Delray Beach employees arrested for alleged involvement in defrauding the city of $158,000. The smallest: A county Risk Management employee was arrested for falsifying claims for $6,000 in Supplemental Nutritional Assistance Program (SNAP) benefits. The highest-level official arrested was a sewage treatment plant director.
In June, the OIG also referred to the State Attorney’s Office findings that Pahokee City Manager Chandler Williamson allegedly used a city credit card for $5,800 in “inappropriate” expenses and failed to properly document an additional $15,900 in card charges.
Asked about criticism that he shies from higher level cases that might ruffle feathers, Carey said criminal cases are just one measure of an inspector general’s effectiveness. The OIG’s job also involves identifying wasteful spending and recommending measures to reduce fraud and waste and operate more efficiently. His office has identified millions that should have been better accounted for or recouped and has issued hundreds of recommendations for improving efficiency, he said.
The office’s hotline has referred hundreds of complaints to law enforcement and ethics agencies, which otherwise may never have come to light, he said. Finally, the office’s presence as a monitor promotes best practices and reduces the number of cases referred for criminal prosecution, he said.
There are good reasons the hotel investigation went nowhere, Carey said.
“We did not have sufficient, consistent evidence to issue findings here,” he wrote in response to questions from The Post. “Because of the serious nature of our work, the potential impact of our findings, the fundamental principles and standards applicable to OIGs require professional care and high quality assurance review. Further, it would be irresponsible (and a violation of the county IG ordinance) to publish a report without allowing the subjects of the investigation (e.g. Coastal Construction) the opportunity to review the draft report and provide more evidence, a response or rebuttal that may alter the findings prior to issuing a final report.”
Two and a half years into the inquiry, Himmel “did not feel confident enough in the reliability and sufficiency of the information” to submit the draft to his supervisor for an initial review, let alone to auditors, contract experts, the office counsel or the inspector general, all part of the office’s required vetting process, Carey said.
“The ‘report’ you have in possession is better characterized as an investigator’s working document or notes,” he said. “It was found in the investigator’s file after the director of investigation’s departure.”
An exit and then a fresh set of eyes on draft report
After Himmel left, the new director, Stu Robinson, looked over the case. He is a retired former FBI supervisory special agent with expertise in investigating public corruption and fraud. Robinson and Carey determined “there was insufficient and conflicting evidence to support administrative findings at that time,” Carey said.
So they sent the referral memo to the FBI and left it at that. “The FBI is a criminal justice agency (we are not), which has more tools at its disposal than we have,” Carey said. Himmel also had presented the case to the U.S. Department of Labor, Carey added.
Himmel and his top investigator counter that Carey dropped the ball.
The facts were solid and supported by “boxes and boxes and boxes” of documents, Himmel told The Palm Beach Post. He and his former second-in-command question whether Carey is gun shy when it comes to going after big targets and rattling the chain of command.
“This rigorous investigation was conducted and supervised by three veteran law enforcement officers with a combined experience of almost 90 years. It also involved an experienced contract oversight specialist,” Himmel said.
Carey hired Himmel in 2015, after Himmel spent 31 years in law enforcement, as a special agent for 16 years and assistant special agent in charge for 15, with the U.S. Department of Labor Inspector General’s Office, Division of Labor Racketeering and Fraud Investigations. Throughout his career, he trained federal and state law enforcement officers on construction industry fraud.
The hotel project evidence included many interviews and tens of thousands of pages of documents. Some were obtained voluntarily, some with subpoenas, Himmel said. That evidence was neither stale nor incomplete, he insisted.
“The investigation was done. There were no more records to get.”
Himmel: ’Preponderance of evidence existed’
As for it being unvetted, the case was reviewed by the office’s investigations supervisor, director of investigations, and a member of its Contract Oversight Division as it progressed, Himmel said.
“I don’t understand how Carey and Robinson could not determine a preponderance of evidence existed, when the initial draft report of 70-plus pages identified elaborate fraud and contract violations committed by some of the companies hired to work on the Hilton Hotel. The documented violations also included criminal offenses.”
The report stated that the lack of valid Social Security numbers called for “referral to the IRS (Payroll taxes), Social Security IG (SS withholding), Department of Health and Human Services IG (Medicare), Department of Homeland Security (Immigration), and the State of Florida Department of Revenue (Employment Tax).” But the office never contacted those agencies, which the investigators felt would be more likely to take action than the FBI on a case like this.
During the course of the investigation, Himmel notified a Department of Labor agent to let him know the West Palm investigators were looking into a company and individuals that department was investigating in a separate federal case in Georgia. But after Himmel left, the office never sent the findings to the Department of Labor.
‘Why did you kill the case?’
Carey said privacy regulations prevented him from discussing reasons for Himmel’s departure in October 2017. He did confirm Himmel was fired and said, “we decided that it was not a good fit.”
Himmel said Carey’s explanation for the firing had to do with an unrelated investigation. Himmel notified a law enforcement agency about that case, and Carey was angry because he felt he should have been the one to decide whether to notify them. But Himmel said that, while notifying law enforcement was the inspector general’s responsibility, Carey regularly delegated that.
“My employment was severed for political reasons and nothing more. To claim otherwise would be patently false.”
Himmel’s second-in-command quit the next business day, after Carey told him why he fired Himmel. The second-in-command told Carey he felt obligated to quit because he would have handled the notification the same way Himmel did.
In an interview June 11, Carey dismissed the hotel report as “suspicions,” not findings. “There are no investigator general findings or conclusions,” he said. “This is an investigator’s first report.”
That’s just deflection, countered Himmel’s second-in-command, who spoke on the condition his name not be released.
“Everything was backed up. It’s not supposition. It’s not conjecture,” he said.
“There’s clearly evidence the Living Wage Ordinance was violated. There’s clearly evidence people were misusing Social Security numbers. And to turn that over to the FBI instead of some other federal agency that might actually have handled the case…. I have to wonder now: Why did you kill the case?”
To Himmel’s mind, the case mattered not just because of what it revealed about the hotel project but what it says about county procedures going forward and their potential impact on future projects.
“It highlights the lack of oversight and procedural defects concerning the Living Wage Ordinance,” he said. “It could have also opened the door for the debarment of those companies that violated county ordinances, state and federal laws and regulations.”
Meanwhile, though, Palm Beach County got its four-star hotel and a second one is on the drawing board.
And Carey says his office, with its new chief of investigations, with 25 years of FBI experience, and expertise in public corruption and fraud, is ready to watchdog its construction.
“I am very comfortable with him and his quality control, that we can provide that,” the inspector general said. “Everybody in the Contract Division are people I hired, so I can personally vouch for their expertise in oversight in this area.”
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