Today, The Journal News is reporting that the auditing firm that has been annually checking St. Lawrence’s books for many years wants out. “Ramapo’s outside auditors say they are quitting their work for the town, apparently spooked by a federal indictment accusing Supervisor Christopher St. Lawrence and others of “cooking the books” to make it appear the town was in healthy financial shape when it actually was hemorrhaging millions of dollars. PKF O’Connor Davies, one of the region’s biggest accounting firms, said it was dropping Ramapo — effective immediately — in an April 28 letter to St. Lawrence and Town Board members.” What is not addressed in the letter is O’Connor Davies’ possible complicity in allowing fraud to continue under their watch, despite being told of its existence by a whistleblower from within the town finance department. On October 3, 2013, Preserve Ramapo reported on Ramapo’s final hearing on the Melissa Reimer whistle-blower case. During that hearing, a partner of the Auditing firm O’Connor Davies, under oath, asserted that detecting fraud is not really part of his job as auditor for the town. We have reprinted below that portion of the hearing. (A link to coverage of the complete hearing appears at the end.
Domenick Consolo Partner O’Connor Davies
An Accountant, an Auditor, and the Attorney with Amnesia
Oct. 3, 2013
The first witness was Domenick Consolo, a partner from O’Connor Davies, the accounting firm that does the financial audits for Ramapo. What he testified to was remarkable. In brief, Mr. Consolo admitted, under oath, that Ms. Reimer had made complaints and allegations of fraud to his firm, while they were in the process of auditing the town books, and he, as manager of the audit, did nothing to question her about her claims, did not investigate nor did he follow up on the charges she alleged. At the time, Reimer not only worked in the finance department, she was the Supervisor of Fiscal Services at Town Hall with a relatively unobstructed view of most financial transactions.
There were two gentlemen who accompanied Consolo to the meeting, but after listening to his testimony it’s doubtful they were attorneys for the firm. Otherwise they would likely have prevented him from creating a sworn account that he will now have to justify as the larger federal investigation into town finances goes forward.
Reimer’s attorney, Fred Lichtmacher, established early in his questioning that she, Reimer, did make allegations to one of the O’Connor Davies reps, Marci Moskowitz. Two specific complaints involved the sale of land to St. Lawrence’s Ramapo Local Development Corporation (the RLDC that built the ballpark and the Elm Street development), and the listing of assets, particularly one $3,080,000.00 receivable that kept getting carried forward on the town books from year to year without any funds justifying the listing. Moskowitz, apparently very upset by the allegations, contacted Consolo about the problem.
Lichtmacher then asked what sort of follow-up Consolo employed about the situation.
We had one conversation, Consolo answered, during which I asked her (Reimer) to stop harassing our rep.
There was a sign-off sheet that Reimer had to fill out for the O’Connor Davies audit, and it included specific questions about fraud and or improper accounting procedures. Lichtmacher turned his attention to the check-off section of the sheet. His client, Reimer, testified that she had been warned by her superior, Nate Oberman Deputy Director of Finance, to “fill out the form nicely.” At this point the Supervisor and Oberman were aware of Reimer’s allegations. On the form, she gave indications of where the problems existed, even though she knew she was doing so at the risk of losing her job.
Replying to a question about where fraud might occur, she answered the risk of fraud could be inappropriate transactions and the invoicing of funds.
Lichtmacher asked Consolo, Did you call Reimer to ask her about that?
Consolo, No.
Lichtmacher, You saw this, you read it, and you did nothing?
Consolo, No. (Recall, this was after Reimer’s initial notification of fraud to the O’Connor Davies field rep.
Lichtmacher then asked, “Is it part of your job to detect fraud?”
Consolo, “Not really.”
After going through a number of other items in the sign-off questionnaire, Lichtmacher followed each entry with questions about Consolo’s response to her answers: did you look into that, did you take any action about that, did you investigate that, did you call Ms. Reimer to ask her about that? The consistent response to each inquiry was No.
Lichtmacher concluded with a rhetorical, “So she is there all year round, and you are not, and she is much more familiar [with the problems]. And bottom line is you took no actions?”
One number, a phantom asset, came up again and again. The sum of $3,080,000.00 was owed to the Town by St. Lawrence’s RLDC three years ago, and the number was entered on the town books as a receivable year after year, and yet the RLDC did not pay the town the three million owed. What the town, and its bookkeepers saw was a letter from Town Attorney Michael Klein that it was OK to carry the number forward and that the sum would be paid. It has not, the listing is fraudulent, and the accounting practice of carrying the fake asset to balance the books involves inappropriate accounting. All of which raises the question about the legitimacy of the town records and the books of the RLDC, O’Connor Davies’ audits, Michael Klein’s approval of the practices, and the legitimacy of the numbers for the bond applications made by the town. With bonding procedings you have moved into territory ruled by federal laws, the SEC, and federal penalties. When Consolo was shown the numbers for one of those bond applications, he said he had never seen it and had little to say about the specific assets Lichtmacher pointed to in the papers.
Several other points from Domenick Consolo’s testimony:
- He admitted that he told Supervisor St. Lawrence of Ms. Reimer’s allegations of fraud around May or June 2012. Asked if St. Lawrence began a consequent investigation, he said he didn’t know.
- He admitted that Town Attorney Michael Klein reassured him that the $3+ million owed but not paid would be paid and come off the books. Klein put those reassurances in writing each year the same asset was listed. Consolo admitted that he did not investigate that.
- Consolo said he did discuss the FBI raid on the Town’s offices with St. Lawrence. He also said the FBI contacted O’Connor Davies and asked for Ramapo records. When asked if he related those requests to Melissa Reimer’s allegations, he said no.
- About the fact that this year’s Ramapo Audit for 2012 is eight months late, he didn’t havde much to say. He did however say that audit would “be out the door this week.” The fiscal year closed on December 31, 2012. Does not speak well for a firm that has been paid by the Town more than a half-million dollars for financial audits for the last four years.
You can read the entire story on the third hearing, and find links to the other sessions on our archive here.
The Journal News story today: “Financial auditor quits Ramapo, cites federal indictment” can be read here.