“Time” and “materials” do not appear in Homer Key’s contracts to run a Milwaukee County education program, but the county’s chief auditor said Monday omitting the words did not justify the contractor’s pattern of billing.
Auditor Jerome Heer testified Monday about his investigation into invoices and payments related to the county’s Capacity Building Program, which offered educational seminars for disadvantaged business enterprises. He said he believes the contracts are time-and-materials, not lump-sum, agreements with a cap on how much money Key, a Milwaukee contractor, could bill the county for running the DBE education program.
Heer said the contracts do not have the words “time” or “materials” in them, but Key identified an hourly rate in each. That qualifies as a time-based billing agreement, and Key’s permission to seek reimbursement for upfront costs qualifies as a materials-based billing agreement, Heer said.
Key faces four felony charges in a trial that began last week for his alleged role in a conspiracy to steal federal grant money. He is charged with two counts of theft by fraud and one count each of forgery and of conspiracy to commit the crime of having a public interest in a private contract. Those charges carry a maximum of $70,000 in fines and 29 ½ years in prison.
[box type=”info” align=”alignright” width=”300px” ]Court denies motions to dismiss Key felonies
Milwaukee County Circuit judge William Brash denied motions Monday to dismiss four felony charges against contractor Homer Key.
Key’s attorney, Richard Hart Jr. of Milwaukee-based Hart Law Offices, made the motions to dismiss after the state rested its case against Key in a trial that began with jury selection May 6.
The county’s auditor testified Friday and Monday that, based on paperwork, he believes Key habitually overbilled for services such as updating a brochure for the program and preparing for classroom instruction.
During the hearing on the dismissal motions, Hart argued that the state had not proven its case. The 2011 contract alleged to be a forgery was backdated to circumvent difficulty paying instructors, he said, but was not designed to deceive Milwaukee County, which approved the contract.
“It’s only a crime,” Hart said, “if you do it with intent to deceive.”
Furthermore, he said, the state has not proved that a conspiracy existed for Key to kick back $2,700 of the 2011 contract payout to Freida Webb. If any fraud existed, he said, it stemmed from Webb’s own corrupt behavior.
But Assistant District Attorney Kurt Benkley argued that hiding behind a corrupt public official was not a valid excuse. Instead, he said, by acknowledging Webb’s actions, Key has undermined his case.
“It shows collusion,” Benkley said. “It is not a defense, but rather, further evidence of wrongdoing.”
Brash decided the state has presented an argument credible enough to warrant continuing the trial. He said he did not need to be convinced of Key’s guilt to allow the trial to continue. Rather, he said, he needed only be convinced the jury could find the state’s case plausible and could potentially find Key guilty based on the evidence presented thus far.
— Beth Kevit[/box]
He is accused of colluding with Freida Webb, the former director of the county office that ran the program, to steal at least $40,000 in grants from the U.S. Department of Housing and Urban Development. Webb pleaded no contest to a misdemeanor theft charge in September in exchange for the state’s dropping felony charges.
Webb hired Key to run the program from 2005 through 2010 and sought his help in 2011 when she attempted to run the program herself.
Key’s attorney, Richard Hart Jr., of Milwaukee-based Hart Law Office, claimed Monday that his client’s contracts entitled him to the exact amounts he was paid, making the contracts lump-sum agreements. Furthermore, Hart said, Webb was to blame for alleged fraudulent billing in 2011, when she sought Key’s help creating a retroactive contract.
Webb had tried to run the program herself but did not have contracts with her instructors and, as a result, was not able to pay them. So Webb and Key created a retroactive contract, allowing them to circumvent the contract problems.
Afterward, she emailed Key a list of charges, Hart said, and then directed the contractor to invoice her for those same amounts.
Heer, however, objected to Hart’s characterization that Key was following orders and therefore absolved of responsibility.
“When he puts that on an invoice,” Heer said, “he’s responsible for the accuracy of that invoice.”
Furthermore, Heer said, the county has a rigorous process, including review by the Milwaukee County Board of Supervisors, for approving a retroactive contract. Webb did not go through those channels.
Finally, Heer said, he discounted Hart’s suggestion that other county employees who signed Key’s contracts should have noticed the alleged fraud.
For example, the county’s office of risk management would review the contract to ensure it included liability insurance, and a representative would sign the contract, Heer said, but it is not fair to say that each person who signed is equally responsible for preventing fraud.
Rather, he said, that onus falls to the director of the department that drafts and negotiates the contract. That person, at the time, was Webb.
“I think she made such huge mistakes in managing this contract,” Heer said.
One of the biggest mistakes, he said, was depositing a $2,700 check from Key. That check, Heer said, was made out to Webb about a week after Key was paid for services allegedly provided in 2011 under the retroactive contract.
Hart, however, argued that the $2,700 payment was a reimbursement.
When Webb struggled to pay her instructors, she sought help from Damon Dorsey, one of her superiors in Milwaukee County government who oversaw her invoices, Hart said. He cited an email from Dorsey to Webb telling her to pay out of her own “funds” while waiting for the grant money.
Webb paid out of her own pocket, Hart said, and then Key reimbursed her.
But those “funds” are not defined in the email, Heer said, and it is unlikely Dorsey meant anything other than Webb’s department budget.
“I don’t read this to say, ‘Take it out of your own checking account,’” Heer said.
Regardless of the intent, Heer said, money should flow only one way in a contractual relationship or, he said, “It creates a dynamic that is unhealthy and leads to illegal acts and corruption.”
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