By ZEINAB NAJM
Times-Herald Newspapers
HEIGHTS — Mayor Daniel Paletko informed the city council that he was willing to compromise and potentially settle their disagreement on how a forensic audit of the city’s finances should be completed nearly a year after the discussion began.
“I think you’re in error but we’ll just incur more attorney fees to continue,” he said Jan. 14. “I was hoping in the new year — and I would certainly look forward to discussing with you a resolution of this matter.”
In a Jan. 17 press release Paletko laid out his proposal for compromise and has instructed his lawyers to send a proposal to city council’s lawyers for getting this matter settled while also following the city charter.
Under Paletko’s proposal, the audit would cover only the $1.4 million in Public, Educational and Governmental funds that Council Chairwoman Denise Malinowski-Maxwell has said to be at issue; city council can hire any outside auditor of its choice, but it must hire the auditor directly, not through a law firm.
Under the mayor’s proposal:
• The audit would cover only the $1.4 million in PEG funds that Chairwoman Maxwell has finally revealed to be at issue.
• City Council can hire any outside auditor of its choice, but it must hire the auditor directly, not through a law firm. “When lawyers hire accountants, audit findings can be kept from the public under the attorney-client privilege,” the mayor explained. “The City Charter says City Council investigations must be public—and that means the audit findings, too.”
• City Council must receive the audit findings at a public meeting.
• Council members must ask any questions they have for the auditors, city staff, the mayor, or anyone else, in public at a public meeting. “You have a right to see what your government is doing in your name and to judge the evidence for yourself,” the mayor said.
• City Council can hire a law firm to help council members ask questions if they don’t feel capable of asking questions on their own, but the law firm must be hired in the way the City Charter requires: as of counsel to the city attorney. “This is important,” the mayor explained, “because it means the law firm would represent the City’s interest in a search for the truth, not Councilwoman Maxwell’s interest in political grandstanding.”
During the council meeting, Councilman Dave Abdallah suggested the council make an amendment to pay the law firm $37,680.91 of the total $47,680.91 owed with an additional $10,000 held on the side by the city until such time that the attorneys provide the council with a new bill excluding the first and initial lawsuit brought forward. The motion was passed unanimously.
“A concern that I had is so far what’s been spent for attorney fees for this audit is $47,680 on behalf of the council, which we had allotted up to $70,000 and then for the mayor’s — which I know we’re not addressing it today — but that amount is $31,488,” he said.
“So, the concern I have as a resident and councilman, so far we have right around $80,000 spent on attorney fees going back and forth. All I’m asking for is as a council and as an administration and as a mayor is let’s sit down, find some resolution to this thing — even if we’re going forward with the audit.”
When Abdallah suggested doing a sitdown between both parties to get the lawsuit resolved, Malinowski-Maxwell responded that the case is in the appeals court.
“It’s out of our hands, we can’t do that now,” she said. “We are not able to do that, it’s — I’d love to do that. We should’ve done that in the beginning, it should’ve happened in the beginning but it didn’t. It’s in the court system now.”
Councilman Robert Constan said that in the court of appeals there is a specific procedure where a settlement conference could take place.
“So, we can settle it even though the issue of the granting of the third lawsuit is being appealed and stayed,” he said.
Paletko’s press release said that on Nov. 22 the Michigan Court of Appeals issued an order that stopped the city council from forcing him to sign a contract with a law firm that he claims is contrary to the city’s charter.
“The case involves a certain faction of the city council’s attempt to perform a secret audit of the city’s financial records which have already been audited by the city’s audit firm of Plante Moran, PLLC,” the release read. “While Mayor Paletko believes there is nothing to hide, he also believes it is a foolish waste of money to conduct a forensic re-audit of the financial records. He has seen this as a continual political attack by some members of City Council, who do not hide their desires to become mayor.”
After Paletko’s Nov. 22 comments were published, Malinowski-Maxwell responded in a Jan. 16 press release, saying they were misleading and inaccurate.
She sighted five examples of such: A forensic audit is not a re-audit; the findings of the audit will not be secret as council has many times made it clear that the findings will be made public; contrary to Paletko, there was no point in contacting Plant & Moran as they perform an entirety different function; the forensic audit will only cost millions if the mayor continues his efforts to block the audit; and retention of attorneys to assist an audit was necessary because council knew that Paletko would make every effort to block the audit.
On Jan. 17, Part of Paletko’s Jan. 17 press release addressed Malinowski-Maxwell’s press release.
Paletko said he has repeatedly asked city council to identify what irregularities they think exist so that his administration could prove that nothing is amiss.
“Until now, the council has not given him a straight answer,” his press release said. “Chairwoman Maxwell finally decided to give the mayor an answer by making a statement to the press yesterday instead of picking up the phone and speaking with him directly.”
He also said that to make his position clear, he is not trying to stop the audit, and that the PEG funds were spent properly, so he has nothing to hide.
“I do, however, insist that the audit be done in public and in the way our city charter requires,” he said. “The city charter spells out how Chairwoman Maxwell and other council members can conduct an investigation. The city attorney has told her how they can do it. My lawyers have told her how they can do it in their submissions to the courts. She simply refuses to take yes for an answer.”
The city council first voted on a resolution to seek a forensic audit to provide an explanation for the almost $1.4 million missing from the city’s PEG fund during a meeting last February. Abdullah and Constan voted against the proposal for the third party audit resulting in another 5-2 vote.
A series of vetoes and court dates followed between Paletko and the city council. The council voted to file a complaint against Paletko after he refused to sign a contact approved to conduct a forensic audit.
• In April the council voted to override Paletko’s veto of the law firm appointment which came after the city council passed the resolution at a March 26 meeting.
• Circuit Court Judge Muriel Hughes ruled May 7 that Malinowski-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.
• During a May 9 special meeting, the council authorized the law firm — which also was hired to find an audit firm — to file the complaint in Wayne County Circuit Court.
• Another resolution passed by the council during the special meeting was to waive the client-attorney privilege related to the opinion email from corporation counsel.
(Zeinab Najm can be reached at [email protected])