The Dearborn Heights City Council discusses filing a lawsuit against Mayor Daniel Paletko after he declined to sign an order that would hire a local law firm to conduct a forensic audit over $1.4 million in missing PEG funds.
By ZEINAB NAJM
Times-Herald Newspapers
HEIGHTS — The City Council voted 4-2 May 9 to file a complaint against Mayor Daniel Paletko after he refused to sign a contract approved by the council to conduct a forensic audit.
Council members Bill Bazzi, Tom Wencel and Lisa Hicks-Clayton and Council President Denise Malinowski-Maxwell, voted yes while Councilmen Dave Abdallah and Robert Constan opposed and Councilman Ray Muscat abstained.
The council is seeking answers for questions surrounding almost $1.4 million missing for the city’s Public, Educational and Governmental fund.
With the vote during the special meeting, the council authorized the law firm of Ottenwess, Taweel & Schenk, PLC — which also was hired to find an audit firm — to file the complaint in Wayne County Circuit Court.
Muscat, Hicks-Clayton and Wencel agreed that they don’t know what other course of action the council can take to have the mayor sign the contract and wanted to get the forensic audit done in the best interest of the residents.
Corporation Counsel Gary Miotke said he spoke with attorney Matthew Schenk about whether there was going to be an agreement with the city council and law firm.
Miotke said that if there is going to be an agreement, the city charter requires the mayor to be able to review the agreement before it is sent to the council. He added that the agreement was apparently sent to Maxwell and then it came up for a vote at a council meeting.
“I am duty bound to advise you on how you could go about what you are hoping to achieve in terms of a financial review without going through ligation,” Miotke said.
Paletko said there were three aspects to his veto and complaints: that Miotke told the council on numerous occasions they were not following the charter rules, that the council needs to investigate the law firm they were looking to hire, and that he believes the audit was politically motivated.
Abdallah said he wanted answers on who hired the firm to file the lawsuit on behalf of the council, because he said he was not involved in the conversation.
He did not receive an answers and said there must have been meetings or conversations behind their backs to have the council get to this point with the lawsuit.
Another resolution passed by the council during the special meeting was to waive the client-attorney privilege related to the opinion email from Miotke on May 9.
Maxwell said the purpose for the resolution was so council members could share the opinion email with anyone, including their individual attorneys.
The resolution passed 5-1 with Constan voting no and Muscat abstaining.
Constan raised the question of who would pay for the refiling of the lawsuit and the dismissed lawsuit first filed by Maxwell which could cost $7,000 to $8,000.
Circuit Court Judge Muriel Hughes ruled May 7 that Maxwell could not sue Paletko on behalf of the entire council and that a vote to approve the lawsuit would have to take place first.
At the council’s April 9 meeting, the council voted 5-2 to override Paletko’s veto of the appointment of the Ottenwess, Taweel & Schenk PLC law firm for a forensic audit.
Before the veto, the council again voted 5-2 to reintroduce the law firm appointment resolution for possible reconsideration. The retainer agreement also was passed 5-2 after the override. All three votes were opposed by Adballah and Constan.
Paletko’s veto came after the city council passed the law firm appointment resolution at a March 26 meeting, also with a 5-2 vote. He said in an eight-page veto letter to the council that the forensic audit “is a political witch hunt that will waste city money and violate the law.”
The city council first voted on a resolution to seek a forensic audit to provide an explanation for the almost $1.4 million missing for the city’s PEG Fund during a meeting Feb. 26.
Adballah and Constan voted against the proposal for the third party audit resulting in another 5-2 vote. Funds to fire the legal firm come from a $35,000 budget the city council has for legal use, according to the city charter.
The resolution said some city records listed are administrative and employment practices, financial and accounting records, taxation, contracts, mismanagement of city funds, unfair negotiation of city labor contracts, cable franchise or PEG fees.
At the April 9 meeting, Miotke spoke before the council voted, saying that if the two agenda items relating to appointing the law firm were adopted they would violate section 5.13 of the city charter. He added that the charter section does not provide for any designated general legal counsel to the city council.
In his letter to the council, Paletko said he intends to exercise every legal option available to him if the city council majority were to override his veto.
“I will refuse to sign any agreement with the Law Firm of Ottenwess, Taweel & Schenk, PLC,” he wrote. “Further, I shall not authorize any payments to the law firm of Ottenwess, Taweel & Schenk, PLC or any of its agents. Consistent with the oath I took years ago, I will continue to protect the city, its citizens, and its future to the very best of my ability.”
During a Feb. 19 study session, Muscat said he and Dearborn Heights resident Zouher Abdel-Hak researched past budgets, looking through every page.
Muscat said his research into Plante Moran audits and budgets from 2003-04 led him to see that was the time when PEG funds were shown as restricted, then there was a seven-year period where they were intermingled with transportation, and again the funds showed up in the audits for PEG fees.
He also said PEG funds were set aside for public, educational and governmental access channels including the equipment or facility upgrade purchases needed for filming videos broadcasted on the PEG channels and that those fees show up on residents’ cable bills.
Paletko said during the study session there was a lot of time spent looking at the money and audits going back to 2003 and that he knows why questions are being asked by the city council so acting quickly on upgrading the equipment is important.
He added that PEG fees can be used toward salaries and fringe benefits for employees working on the city’s cable programs, which Muscat had questioned. Paletko said the city is doing everything right, and if not it will correct it.
Maxwell said if that amount of missing money was spent then why is the city buying cameras off of eBay that need to have “Band-Aids” put on them.
During the meeting, Hicks-Clayton said the council should look into an external auditor being hired, but Abdallah said that because a fee was already paid to Plante Moran for an audit, it should present to the city council before another auditor is hired.
(Zeinab Najm can be reached at [email protected].)